UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





Form
10-K





(Mark
One)





x           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended December 31, 2008





 ̈           TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from ______   to





Commission
file number: 0-26415





Linkwell
Corporation


(Exact
name of registrant as specified in its charter)





Florida
              65-1053546(State or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)





1104
      Jiatang Road Jiading District, Shanghai China
              201807(Address
      of principal executive offices)
              (Zip
      Code)





Registrant's
telephone number, including area code: (86)  21-
5566-6258





Securities
registered under Section 12(b) of the Act:





Title
      of each class
                Name
      of each exchange on which registeredNone
                not
      applicable


Securities
registered pursuant to section 12(g) of the Act: common stock, par value $0.0005
per share


(Title
of class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes  ̈ No  x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes  ̈ No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x  No  ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.


Yes  ̈ No x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “accelerated filer”, “large
accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large
Accelerated Filer    ̈           Accelerated
Filer    ̈        Non-accelerated
Filer   ̈  (Do not
check if a smaller reporting company)
 Smaller
reporting company x




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





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates as of March 31, 2009, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately
$4,677,329.





The
number of shares outstanding of capital stock as of April 14, 2009 was
77,955,475.





DOCUMENTS
INCORPORATED BY REFERENCE





None.








TABLE
      OF CONTENTSPart IItem
      1.
              Business.
              3Item
      1A.
              Risk
      Factors.
              19Item
      1B.
              Unresolved
      Staff Comments.
              25Item
      2.
              Properties.
              25Item
      3.
              Legal
      Proceedings.
              26Item
      4.
              Submission
      of Matters to a Vote of Security Holders.
              26Part IIItem
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
              26Item
      6.
              Selected
      Financial Data.
              27Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
              27Item
      7A.
              Quantitative
      and Qualitative Disclosures About Market Risk.
              33Item
      8.
              Financial
      Statements and Supplementary Data.
              33Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
              33Item
      9A.
              Controls
      and Procedures.
              33Item
      9B.
              Other
      Information.
              35Part IIIItem
      10.
              Directors,
      Executive Officers and Corporate Governance.
              35Item
      11.
              Executive
      Compensation.
              37Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
              37Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence.
              42Item
      14.
              Principal
      Accounting Fees and Services.
              43Part IVItem
      15.
              Exhibits,
      Financial Statement Schedules.
              43Signatures
              47





List
      of Exhibits Filed Herewith:23.1
              Consent
      of Sherb & Co., LLP31.1
              Section
      302 Certificate of Chief Executive Officer31.2
              Section
      302 Certificate of principal financial and accounting
    officer32.1
              Section
      906 Certificate of Chief Executive Officer


2


CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION





Certain
statements in this annual report contain or may contain forward-looking
statements that are subject to known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.  These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking
statements.  These factors include, but are not limited to, our
ability to increase our revenues, develop our brands, implement our strategic
initiatives, economic, political and market conditions and fluctuations,
government and industry regulation, U.S. and global competition, and other
factors.  Most of these factors are difficult to predict accurately
and are generally beyond our control.





You
should consider the areas of risk described in connection with any
forward-looking statements that may be made in this annual
report.  Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this annual
report in its entirety, including the risks described in Part I, Item 1.
Description of Business - Risk Factors.  Except for our ongoing
obligations to disclose material information under the Federal securities laws,
we undertake no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the occurrence of
unanticipated events.  These forward-looking statements speak only as
of the date of this annual report, and you should not rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business.





OTHER
PERTINENT INFORMATION





As used
herein, the “Linkwell”, “the Company”, “we”, “our”, “us” and similar terms
include Linkwell Corporation and its subsidiaries, unless the context indicates
otherwise.  The information which appears on our web site at
www.linkwell.us is not part of this annual report.   The People's
Republic of China is herein referred to as China or the PRC.





PART
I





ITEM
1. BUSINESS.





We
operate under a holding company structure and currently have one direct
wholly-owned operating subsidiary, Linkwell Tech Group Inc. (“Linkwell Tech”) a
Florida corporation.  Linkwell Tech owns 100% of Shanghai LiKang
Disinfectant High-Tech Company, Limited (“LiKang Disinfectant”) On May 31, 2008,
LiKang Disinfectant sold 100% of Shanghai LiKang International Trade Company,
Limited (“LiKang International”). On February 15, 2008, Linkwell Tech sold 10%
of its issued and outstanding capital stock to Ecolab Inc., a Delaware
corporation (“Ecolab”).  We regard LiKang Disinfectant's business of
hospital disinfectant products as our primary business.





Linkwell
Corporation, through Linkwell Tech’s wholly-owned subsidiary, LiKang
Disinfectant, is engaged in the development, manufacture, sale and distribution
of disinfectant health care products primarily to the medical industry in China.
The Company has a national marketing and sales presence throughout all 22
provinces as well as four autonomous regions and five municipalities in China.
We currently employ 52 full-time sales and marketing people based in
Shanghai.  Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd,
(“ZhongYou Pharmaceutical”) a company 90% owned by Linkwell’s Chairman and Chief
Executive Officer Xuelian Bian, also sells our products using 72 independent
sales representatives in China.





Currently,
we market our products to the medical industry in China, however we are making
efforts to diversify and expand our reach to the retail
market.  Recently, we have made efforts to grow our customer base by
expanding into the civil, industrial, livestock and agricultural disinfection
markets of China.  As of now, we offer a variety of disinfectant
products for the following applications:





·      Skin
and mucous membrane disinfectants;




·      Hand
disinfectants (external);




·      Environment
and surface disinfectants;




3


·      Medical
devices and equipment disinfectants;




·      Machine
disinfectants; and




·      Animal
disinfectants.




LiKang
Disinfectant has 56 marketed products, 50 of which are certified by one or more
government authorities; the Chinese Ministry of Health, State Food and Drug
Administration, or Ministry of Agriculture.  China’s Ministry of
Health approves those products that require the highest level of licensing and
have granted 28 hygiene licenses to Linkwell.  We also sell products
which have been developed and manufactured by third parties.  These
parties manufacture disinfectant products that generated approximately 7.38% of
our revenue for the fiscal year ended December 31, 2008.  Products
that we manufacture account for approximately 91.33% of our total net revenues
for the fiscal year ended December 31, 2008. Products manufactured by third
parties that we distributed accounted for approximately 1.29% of our total net
revenue for the fiscal year ended December 31, 2008.





Prior to
May 31, 2008, Linkwell Corporation owned 100% of Shanghai LiKang International
Trade Co. Ltd., through its subsidiary LiKang Disinfectant. The primary business
of LiKang International is the import and export of a variety of products and
services ranging from small medical equipment and chemical products to
computers.  On May 31, 2008, LiKang Disinfectant sold 100% of the
capital stock of LiKang International to Linkwell International Trading Co.,
Ltd. a company registered in Hong Kong which is 100% owned by Mr. Wei Guan, the
Company’s Vice President, Secretary and Director.




Industry
Background





In 2007,
Frost & Sullivan stated, “The Chinese healthcare industry has been one of
the fastest growing healthcare industries in the world. It is expected to become
the fifth largest by 2010. Its growth is mainly driven by the government’s
initiatives to simplify regulatory procedures, enhance trade relations, and
attract foreign investment through friendly policies.”





According
to the China Federation of Industrial Economics, China’s disinfectant industry
is estimated at well over $6.5 billion.  Other experts believe the
Chinese market demand for biocides will increase by approximately 7.9% annually
to 574,000 metric tons by the year 2010.





The
disinfectant industry in China may be characterized as an emerging industry,
populated by approximately 1,000 small domestic manufacturers and distributors,
and half a dozen large international companies with limited presence and
products.





Major
contributing factors responsible for the vigor of China’s disinfectant industry
growth include the transition to a market economy, increasing health
consciousness in the general population and increasing government health
standards and education.





Increasing Domestic
Demand





Since the
shift to a market economy, the Chinese government has initiated several policies
to improve public health and living standards and improve the Chinese healthcare
industry.  Consequently, these initiatives and traditional market
forces have driven increasing demand for disinfectant
products.  According to Frost & Sullivan, China’s healthcare
expenditures grew from 5.0% of GDP in 1999 to 6.7% in 2005, representing a
growth rate of approximately 5%. During the same period, USA healthcare
expenditures grew from 13.2% to 15.9%, representing a growth rate of
approximately 3%.





After
nearly 30 years of sustaining economic growth in China, both the Chinese
government and the public have become more concerned about the quality and cost
of healthcare in China. A greater public awareness of the health benefits of our
products, as well as these new public concerns have led to a surge in interest
for disinfectant products in China with consumers maintaining stockpiles of
disinfectant products. Other factors that support the growth in demand for
disinfectant products include:




4


·
            China’s
      population of 1.3 billion; a large and rapidly aging population base that
      require better sanitization standards to protect their
      health.  According to a United Nations study released in 2005,
      the number of people aged 60 or over in China is expected to rise to more
      than 430 million people;


·
            Healthcare
      professionals and citizens who want a healthcare system and hygienic
      standards as advanced as western
countries;


·
            Ongoing
      government reforms in hospital sanitation, medical standards and
      disinfectant regulations;


·
            Government
      educational program to increase public awareness of public health and
      hygienic standards; and


·
            An
      increase in government investment in healthcare and medical services to
      achieve sustainable development of the disinfectant
    industry.





Recent Health Concerns in
China





The most
critical factors that triggered health concerns in China are the recent and
recurring health crises that have led to several epidemics (see Table below) and
potential pandemics. In response, the Chinese government has taken initiatives
to improve public health and living standards, including the establishment of
The Ministry of Public Health in China for the disinfectant industry in
China.





Outbreak
      time
                            
                            Location
                            
                            Disease
                            
                            SituationJanuary,
      1988
                            
                            Shanghai
                            
                            Hepatitis
      A
                            
                            310,000
      reported cases of Hepatitis A, 47 deathsApril
      - May, 1998
                            
                            Shenzhen
                            
                            Sub-
      Tuberculosis bacillus disease
                              M.
      chelonae
                            
                            Shenzhen
      Woman and Children Hospital reports an airborne infection. 168 patients
      infected, 46 severe casesNovember
      2002
                            
                            Throughout
      China
                            
                            SARS
                            
                            8,000
      reported cases, 800 deathsJune
      24 - August 20 2005
                            
                            Sichuan
      Province
                            
                            Streptococcus suisin
      swine and humans
                            
                            204
      reported cases of humans infected with the Swine streptococci in Sichuan,
      38 deathsApril
      2005
                            
                            Throughout
      China
                            
                            Pulmonary
      tuberculosis, Hepatitis B
                            
                            Pulmonary
      tuberculosis, Hepatitis B remain top two priorities on the infectious
      disease list in ChinaJune,
      2005
                            
                            Tibet
                            
                            Bubonic
      plague
                            
                            Five
      infected cases reported,  two deathsJuly-September
      2005
                            
                            Hunan,
      Fujian, Zhejiang provinces
                            
                            Cholera
                            
                            638
      cases reported, two deathsAugust,
      2005
                            
                            Guizhou,
      Ningxia, Liaoning, Jilin
                            
                            Anthrax
                            
                            140
      cases reported, one deathOctober,
      2005
                            
                            Inner
      Mongolia , Hunan , Anhui , Liaoning , and Hubei provinces
                            
                            Avian
      Flu
                            
                            Three
      confirmed cases reported, two deathsOctober,
      2005
                            
                            Zhejiang,
      Anhui provinces
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case in each province reportedMarch
      24, 2006
                            
                            Shanghai
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedJune
      16,2006
                            
                            Guangdong
      Province
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedAugust
      14, 2006
                            
                            XinJiang
      Province
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedJanuary
      9, 2007
                            
                            Anhui
      provinces
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedFebruary
      27, 2007
                            
                            Fujian
      provinces
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedMarch
      28, 2007
                            
                            Anhui
      provinces
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedMay
      24, 2007
                            
                            People’s
      Liberation Army X department
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case reportedDecember
      2, 2007
                            
                            Jiangsu
      provinces
                            
                            highly
      pathogenic bird flu
                            
                            One
      confirmed case
reported




5





December
      6, 2007
                  
                  Jiangsu
      provinces
                  
                  highly
      pathogenic bird flu
                  
                  One
      confirmed case reportedJanuary-February
      , 2008
                  
                  Xinjiang
      municipality
                  
                  Measles
      Virus
                  
                  11,000
      cases reported, 21 deathsFebruary,
      2008
                  
                  Guangdong,
      Guangxi and Hunan provinces
                  
                  Avian
      Flu
                  
                  Three
      cases reported, three deathsApril-May,
      2008
                  
                  Nationwide
                  
                  Hand,
      Foot and  Mouth Disease
                  
                  176,321
      cases reported, 40 deathsJanuary-September,
      2008
                  
                  Nationwide
                  
                  HIV
                  
                  44,839
      cases reported, 6,897 deathsOctober-November,
      2008
                  
                  Hainan
      province
                  
                  Cholera
                  
                  42
      cases reported,October-November,
      2008
                  
                  Hainan
      province
                  
                  Diarrhea
                  
                  351
      cases reportedJanuary,
      2009
                  
                  Nationwide
                  
                  Avian
      Flu
                  
                  Eight
      cases reported, five
deaths





SARS
- Severe Acute Respiratory Syndrome





In recent
years, the Severe Acute Respiratory Syndrome (SARS) has threatened the public
community. SARS, which is a viral respiratory illness caused by a corona virus,
called SARS-associated corona virus (SARS-CoV), was first reported in Asia in
November 2002. Over the next few months, the illness spread to more than two
dozen countries in North America, South America, Europe, and Asia before the
SARS global outbreak of 2003 was contained. In April 2004, the Chinese Ministry
of Health reported several new cases of possible SARS outbreaks in Beijing and
the Anhui Province, which is located in east-central China.





According
to the Center for Disease Control of the central government of China, the common
manner in which SARS seems to spread is by close person-to-person
contact.  The virus that causes SARS is thought to be transmitted most
readily by respiratory droplets (“droplet spread”) when an infected person
coughs or sneezes.  Droplet spread occurs as germs from the cough or
sneeze of an infected person are propelled a short distance (generally up to
three feet) through the air and deposited on the mucous membranes of the mouth,
nose, or eyes of nearby persons.  The virus also can spread when a
person touches a surface or object contaminated with infectious droplets and
then touches his or her mouth, nose, or eye(s).  Ultimately, there is
much the global community does not know about SARS, and it is possible that the
SARS virus might spread more broadly through the air (airborne spread) or by
other ways that are not yet known.





In the
fiscal year ended 2008, there were no confirmed cases of SARS reported in
China.





Avian
Influenza





In 2005,
the threat of a global pandemic as a result of the avian flu began to capture
the attention of the global community.  The avian flu is a type of the
A strain virus that infects birds.  Typically, it is not common for
humans to be infected with the virus via contact with birds, however a few
bird-to-human outbreaks have been reported and most have been in
Asia.  Humans were infected when they came into contact with sick
birds or contaminated surfaces.  In most cases, infected persons
reported flu-like symptoms, but some had more serious complications, including
pneumonia and acute respiratory distress.  The avian flu has led to
increased concerns for improved health conditions.





Up to
February 5, 2009, there were 405 confirmed cases of highly pathogenic bird flu
reported throughout the world, that resulted in 254 deaths. Within China there
were 11 confirmed cases resulting in eight deaths during 2008.





China
Health Standards





In July
2002, the Chinese Ministry of Public Health issued the 27th order of Ministry of
Health of the People's Republic of China establishing national standards for the
disinfection industry.  The first criterion of the new order
stipulated that disinfectant manufacturers in China must obtain a license to
manufacture hygiene disinfectants.  Secondly, prior to release, all
disinfectant instruments must obtain the official hygiene permit document of
both the local provincial hygiene administrative department and the Ministry of
Public Health.




6


The table
below details the 28 licenses issued to LiKang Disinfectant by the Ministry of
Public Health of the central government of China.





#
                      
                      Products
                      
                      Date1
                      
                      An’erdian
      Skin Disinfectant
                      
                      2003.2.132
                      
                      An’erdian-type
      2nd skin disinfectant
                      
                      2002.11.223
                      
                      An’erdian-type
      3rd skin and mucous membrane disinfectant
                      
                      2005.1.194
                      
                      Dian’erkang
      Aerosol Disinfectant
                      
                      2004.3.225
                      
                      Dian’erkang
      2% glutaraldehyde disinfectant
                      
                      2002.11.226
                      
                      Aiershi
      disinfectant tablets
                      
                      2004.2.97
                      
                      Aiershi
      disinfectant
                      
                      2004.2.98
                      
                      Dian’erkang
      PVP-I disinfectant
                      
                      2005.3.309
                      
                      Dian’erkang
      Iodophor disinfectant
                      
                      2004.2.1910
                      
                      Jifro
      disinfectant gel
                      
                      2005.1.1911
                      
                      Dian’erkang
      alcohol disinfectant
                      
                      2003.12.2312
                      
                      Dian’erkang
      compound iodine disinfectant
                      
                      2004.4.2813
                      
                      Lvshaxing
      disinfectant granule
                      
                      2004.2.1914
                      
                      Lvshaxing
      disinfectant tablets
                      
                      2004.3.2915
                      
                      LiKang
      test paper of chlorine
                      
                      2004.1.1616
                      
                      Jifro
      4% Chlorhexidine gluconate surgical hand scrub
                      
                      2004.9.717
                      
                      JifroSongning
      disinfectant
                      
                      2004.9.718
                      
                      Lineng
      glutaraldehyde disinfectant
                      
                      2005.2.1719
                      
                      LiKang
      121 steam pressure sterilization chemical indicator
                      
                      2005.3.3020
                      
                      LiKang
      132 steam pressure sterilization chemical indicator
                      
                      2005.3.3021
                      
                      LiKang
      steam pressure sterilization chemical indicator
                      
                      2005.4.122
                      
                      LiKang
      84 disinfectant
                      
                      2005.6.2723
                      
                      LiKang
      Glutaraldehyde Monitors (Strip)
                      
                      2005.12.1424
                      
                      PuTai
      Skin Disinfectant
                      
                      2007.1.1125
                      
                      PuTai
      washless surgical hand scrub
                      
                      2007.1.1126
                      
                      PuTai
      washless surgical hand foam disinfectant
                      
                      2007.1.1127
                      
                      LiKang
      disinfectant detergent
                      
                      2007.4.1928
                      
                      JifroTaixin
      disinfectant
                      
                      2007.6.4





Product
Lines





We market
56 products, which range from air disinfection machines to hot press bags,
disinfection swabs, and disinfection indicators.  Our products fall
into five categories and six product types.





Five
Product Categories:





·      Skin
and Mucous Membrane Disinfectants – 8 Products




·      Hand
Disinfectants – 8 Products




·      Environment
and Surface Disinfectants  – 10 Products




·      Medical
Devices and Equipment Disinfectants – 5 Products




·      Air
disinfection equipment – 7 Products




·      Other
products – 18 Products




7


Six
Product Types:





·      Liquids
- gel




·      Tablets
- powder




·      Aerosol




·      Chemical
indicator




·      Disinfectant
appliance




·      Liquids
- foam




We
believe our varied product line gives us a marketing advantage to build a
national customer base for our products and services.  Approximately
91.33% of our sales are derived from products we have internally developed and
produced and 7.38% of sales are produced by outside companies, and the remaining
1.29% of sales are distribution of other’s products. The tables below offer a
summary of our current product offerings:





Skin
and Mucous Membrane Disinfectants





Skin and
mucous membrane disinfectants target both external and internal
applications.  Prior to operations, incisions, or injections the
products are used to clean the skin surface.  Mucous membrane
disinfectants target internal germs located in the mouth, eye, perineum, and
other internal sources.  This product group accounted for
approximately 51.7% of our fiscal year 2008 sales, and approximately 57% of our
fiscal year 2007 sales.  The table below lists our skin and/or mucous
membrane disinfectants.





Product
      Names
                          
                          Ingredients
                          
                          Application
                          
                          Industry
      StandardAn’erdian
      Skin Disinfectant
                          
                          iodine,
      alcohol
                          
                          Skin
      disinfectant
                          
                          Q/SUVE
      20-2003An’erdian-type
      3rd skin and mucous membrane disinfectant
                          
                          iodine,
      chlorhexidine
                          
                          Skin
      & mucous membrane disinfectant
                          
                          Q/SUVE
      22-2003Dian’erkang
      PVP-I disinfectant
                          
                          Povidone-iodine
                          
                          Skin
      & mucous membrane disinfectant
                          
                          Q/SUVE
      28-2004Dian’erkang
      alcohol disinfectant
                          
                          alcohol
                          
                          Skin
      disinfectant
                          
                          Q/SUVE
      08-2004PuTai
      Skin disinfectant
                          
                          Chlorhexidine
      gluconate, alcohol
                          
                          Skin
      disinfectant
                          
                          Q/SUVE
      37-2006





Hand
Disinfectants





These
disinfectants target the skin surface.  Products are applied to the
skin prior to medial procedures.  This product group accounted for
approximately 18.7% of our fiscal year 2008 sales and approximately 15% of our
fiscal year 2007 sales.  The table below lists our hand
disinfectants.





Product
      Names
                          
                          Ingredients
                          
                          Application
                          
                          Industry
      StandardJifro
      antimicrobial hand washing
                          
                          Chlorhexidine
                          
                          Hand
      washing
                          
                          Q/SUVE
      04-2003Jifro
      disinfectant gel
                          
                          DP300
      (Triclosan)
                          
                          Hand
      disinfectant
                          
                          Q/SUVE
      02-2003Jifro
      4% Chlorhexidine gluconate surgical hand scrub
                          
                          Chlorhexidine
      gluconate
                          
                          Surgical
      hand disinfectant
                          
                          Q/SUVE
      09-2004PuTai
      washless surgical hand scrub
                          
                          Chlorhexidine
      gluconate, alcohol
                          
                          Hand
      disinfectant
                          
                          Q/SUVE
      39-2006PuTai
      washless surgical hand foam disinfectant
                          
                          Chlorhexidine
      gluconate, alcohol
                          
                          Hand
      disinfectant
                          
                          Q/SUVE
      38-2006




8


Environment
and Surface Disinfectants





These
disinfectants target a variety of surfaces, such as floors, walls, tables, and
medical devices.  Additionally the products can be applied to cloth
materials including furniture and bedding.  This product group
accounted for approximately 17.7% of our fiscal year 2008 sales and
approximately 15.0% of our fiscal year 2007 sales.  The table below
lists our environment and surface disinfectants.





Product
      Names
                          
                          Ingredients
                          
                          Application
                          
                          Industry
      StandardAiershi
      disinfectant tablets
                          
                          Trichloroisocyanuric
      acid
                          
                          Environment
      and surface disinfection
                          
                          Q/SUVE
      34-2004Lvshaxing
      disinfectant tablets
                          
                          Dichloro
      dimethylhydantoin
                          
                          Environment
      and surface disinfection
                          
                          Q/SUVE
      33-2003Dian’erkang
      aerosol disinfectant
                          
                          Benzethonium
      Chloride
                          
                          Environment
      and surface disinfection, preventing the spread of airborne viruses such
      as human influenza virus, SARS, and the Bird flu virus.
                          
                          Q/SUVE
      07-2004Lvshaxing
      disinfectant granule
                          
                          Dichloro
      dimethylhydantoin
                          
                          Environment
      and surface disinfection
                          
                          Q/SUVE
      32-2003LiKang
      disinfectant detergent
                          
                          Sodium
      hypochlorite
                          
                          Surface
      disinfectant
                          
                          Q/SUVE
      37-2006





Medical
Devices and Equipment Disinfectants





This line
of disinfectants targets medical equipment, including the sterilization of
thermo sensitive instruments and endoscope equipment.  This product
group accounted for approximately 10.6% of our fiscal year 2008 sales and
approximately 11.0% of our fiscal year 2007 sales.  The table below
lists our medical device and equipment disinfectants.





Product
      Names
                          
                          Ingredients
                          
                          Application
                          
                          Industry
      StandardDian’erkang
      2% glutaraldehyde disinfectant
                          
                          Glutaraldehyde
                          
                          Disinfection
      and sterilization of device
                          
                          Q/SUVE
      10-2003Dian’erkang
      2% glutaraldehyde disinfectant (sales to Olympus
    Corporation)
                          
                          Glutaraldehyde
                          
                          Disinfection
      and sterilization of endoscopes
                          
                          Q/SUVE
      10-2003Dian’erkang
      multi-enzyme rapid detergents
                          
                          Multi-Enzyme
                          
                          Rinsing
      and decontamination of device
                          
                          Q/SUVE
      14-2004





Machine
Series





This line
of disinfectants targets air quality.  This product group accounted
for approximately 1.1% of our fiscal year 2008 sales and approximately 2.0% of
our fiscal year 2007 sales.  The table below lists our machine series
disinfectants.





Product
      Names
                          
                          Ingredients
                          
                          Application
                          
                          Industry
      StandardLvshaxing
      LKQG-1000 air disinfection machine
                          
                          Ozone,
      ultraviolet radiation, electrostatic
                          
                          Air
      disinfection
                          
                          Q/SUPE
      09-2003An’erdian
      disinfection swab
                          
                          An’erdian
                          
                          Skin
      and disinfection
                          
                          Q/NYMN07-2003LiKang
      test paper of chlorine
                          
                          reagent
                          
                          Indicates
      disinfectant concentration
                          
                          Q/SUVE
      40-2003LiKang
      121 steam pressure sterilization chemical indicator (card and adhesive
      tape)
                          
                          Indication
      oil
                          
                          Indicates
      sterilization effect
                          
                          Q/SUVE
      16-2005LiKang
      132 steam pressure sterilization chemical indicator
(label)
                          
                          Indication
      oil
                          
                          Indicates
      sterilization effect
                          
                          Q/SUVE
      17-2005LiKang
      steam pressure sterilization chemical indicator
                          
                          Indication
      oil
                          
                          Indicates
      sterilization effect
                          
                          Q/SUVE
      18-2005





9


Retail
products





In 2005,
we began to expand our distribution reach to the retail market. As a result, our
products have gained access to hotels, schools, supermarkets, and
drugstores.  We have repackaged commercial disinfectant products for
sale to the consumer market.  Since October 1999, we redeveloped four
separate products for distribution to the retail market.  LiKang
Disinfectant redeveloped the following products in the months and years
listed:





·
              Jin
      Zhongda collutory (mouthwash)
              October
      1999·
              Antibacterial
      lubricant
              October
      1999·
              LiKang
      Disinfectant 84
              August
      2005·
              Dian’erkang
      aerosol disinfectant
              October
      2005





Customers





We sell
our products on a wholesale and retail basis to the medical community in
China.  We have approximately 6,000 active and recurring customers
including hospitals, medical suppliers, and distribution companies throughout
China.  We maintain over 20 distribution contracts with wholesale
dealers and agents.  We generally offer payment terms of four to six
months before payment for the products is due.  For the fiscal year
ended December 31, 2008 two affiliated entities that are our customers, ZhongYou
Pharmaceutical and Shanghai Jiuqing Pharmaceuticals Co. Ltd., represented
approximately 21% of our total net revenues.  For the fiscal year
ended Decmber 31, 2007, our affiliated entities LiKang Pharmaceutical and
Shanghai Likang Meirui Pharmaceuticals High-Tech Co., Ltd. represented
approximately 17% of our total net revenues. We have contracts with all our
dealer and agent customers.





Manufacturing





We
operate two production facilities in Shanghai, one located in the Shanghai
Jiading district and one located in the Shanghai Jinshan
district.  Products are manufactured primarily in liquid, tablet, and
powder form.  Approximately 91.33% of LiKang Disinfectant’s revenues
for fiscal 2008 were derived from products manufactured in these two
factories.





The
Shanghai Jiading district factory is approximately 21,500 square feet, all of
which is used for production.  This factory meets the good
manufacturing practice (GMP) standards established by the central government;
however, the equipment utilized in the factory is not GMP certified for the
production of medical and chemical products.  The main products
produced at the Shanghai Jiading district factory are liquid and index
disinfectant devices.  The manufacturing facility has the capacity to
produce approximately 9 million liters of liquid disinfectant
annually.  The manufacturing cycle for the liquids, from formulation
to finished product, is one day.





The
Shanghai Jinshan district factory is approximately 4,300 square feet and is used
in the manufacture of the tablet and powder forms of
disinfectants.  The manufacturing capacity is 300 metric tons of
tablet and 180 metric tons of powder disinfectant annually.  The
average manufacturing cycle for the tablets and powder, from formulation to
finished product, is one day.





Products
which represent approximately 7.38% of our fiscal year 2008 revenues are
manufactured by third parties.





During
fiscal 2007, following GMP certification for both the factory and the equipment;
we began utilizing the services of LiKang Biological, a related party, to
manufacture some of our products including our An'erdian and Dian'erkang lines
of disinfectants.  On March 25, 2008, Linkwell Tech bought 100% of the
issued and outstanding stock of LiKang Biological.  See Part III, Item
12. Certain Relationships and Related Transactions, and Director Independence
appearing later in this annual report.





We have
found in our experience that products manufactured at GMP certified facilities
utilizing GMP certified equipment can be sold at higher prices than similar
products manufactured at non- GMP certified facilities.  While GMP
certified products cost more to produce, we are able to increase our selling
prices proportionally.  Our product packaging varies to meet different
needs of the market. We package our liquid and gel disinfectants in popular
sizes ranging from 40 ml to 5 liters. We package these tablets in 50 tablet, 100
tablet and 200 tablet bottles. Finally, we package our powder disinfectants in
250 gram and 500 gram containers.




10


We
maintain an inventory of finished products equal to approximately 1 month of
average sales.  Currently, we are manufacturing at about 50% of full
capacity based upon our current product demand, and we have the ability to
increase to full capacity if demand continues to increase.





We have
an in-house fulfillment and distribution operation, which is used to manage our
supply chain, beginning with the placement of the order, continuing through
order processing, packaging and shipping the products to each
customer.  We maintain inventory and fill customer orders from both
the Jiading factory and the Jinshan factory.





Raw
Materials





We
purchase raw materials from six primary suppliers, including a related party,
and we have signed purchase contracts with these suppliers in an effort to
ensure a steady supply of raw materials.  We have maintained stable
business relations with these suppliers for over 10 years, and believe that our
relationships with these primary suppliers will remain stable.  In the
event the relationships falter, there are many suppliers with the capability to
supply our company.  We purchase raw materials on payment terms of 30
days to three months.  Some of the suppliers import from foreign
countries, as listed below, and we purchase directly from these
suppliers.





The table
below details the supply relationships for raw materials





Raw
      materials
                      
                      Suppliers
                      
                      OriginIodine
                      
                      Shanghai
      Wenshui Chemical Co., Ltd
                      
                      USAPotassium
      iodide
                      
                      Shanghai
      Wenshui Chemical Co., Ltd
                      
                      HollandGlutaraldehyde
                      
                      Shanghai
      Jin an tang Hygienical Product Factory
                      
                      GermanyTriclosan
                      
                      Ciba
      Specialty Chemicals (China)LTD
                      
                      DomesticAlcohol
                      
                      Shanghai
      Jangbo Chemical Co., L td
                      
                      DomesticTrichloroisocyanuric
      acid
                      
                      Xuzhou
      Keweisi Disinfectant Co., Ltd
                      
                      Domestic





Customer Service and
Support





We
believe that a high level of customer service and support is critical in
retaining and expanding our customer base.  Customer care
representatives participate in ongoing training programs under the supervision
of our training managers.  These training sessions include a variety
of topics such as product knowledge and customer service tips.  Our
customer care representatives respond to customers’ e-mails and calls that are
related to order status, prices and shipping.  If our customer care
representatives are unable to respond to a customer’s inquiry at the time of the
call, we strive to provide an answer within 24 hours.  We believe our
customer care representatives are a valuable source of feedback regarding
customer satisfaction.  Our customer returns and credits average
approximately 1% of total sales.





New Product
Development





We are
committed to research and development.  LiKang Disinfectant was
created as a research and development organization by the Second Military
Medical University (SMMU) of the Chinese Army in 1988.  We develop our
products internally and own all rights associated with these
products.





We
commercialized four new disinfectant products in 2007, including PuTai Skin
Disinfectant, PuTai washless surgical hand scrub, PuTai washless surgical hand
foam disinfectant and LiKang disinfectant detergent, which is an environmental
and surface disinfectant.  In 2008, 8 products were in development and
licensing applications were filed for 4 of these products.





For the
fiscal years ended December 31, 2008 and 2007, we spent approximately $137,588
and approximately $61,452, respectively, on research and
development.





Marketing and
Sales





We were
formed in 1988 as a research and development organization by the Second Military
Medical University (SMMU) of the Chinese Army.  Our CEO, Mr. Xuelian
Bian, was a member of the staff of SMMU.  We believe that his
relationships with alumni and business persons associated with SMMU provide us
with certain marketing advantages.  The university is a well
recognized, prestigious institution in China and many of its graduates work at
hospitals, medical suppliers, and distribution companies throughout China in
senior positions, which places them in the decision making process for
purchasing the kind of products we sell.  In addition, the students
and faculty at the university provide a pool of talent from which we draw, both
as potential employees or summer interns who go on to work at other companies,
many of whom are customers or potential customers for our
products.  In marketing our products, we seek to leverage these
relationships.




11


During
the 2007 fiscal year, we expanded our distribution capability in the
PRC.  We have a national marketing and sales presence throughout all
22 provinces, as well as four autonomous regions, and four municipalities of
China.  We currently employ 52 full-time sales and marketing people
based in Shanghai.  ZhongYou Pharmaceutical, an affiliate, also sells
our products using 72 independent sales representatives in other provinces of
China.





Approximately
26.3% of our sales are achieved by our proprietary sales force, while the
remaining 73.7% are outsourced to independent dealers and agents. We compensate
our proprietary salesman with a base salary plus commission. The sales
representatives are located in each of China’s provinces.  The
external sales network currently covers hospitals in the following 22 provinces
including: Beijing, Guangdong, Tianjin, Fujian, Yunnan, Hainan, Jiangsu,
Zhejiang, Anhui, Shandong, Henan, Hebei, Liaoning, Heilongjiang, Shanxi, Gansu,
Ningxia, Guizhou, Hunan, Sichuan, Xinjiang, Neimenggu.  The
independent sales representatives sell directly to the end-users.





Disinfectant Educational
Center





On May
25, 2006, we entered into an agreement with China Pest Infestation Control and
Sanitation Association, an association governed by the Chinese central
government, to establish and operate a disinfectant educational center in
Beijing, China.  We will be responsible for the establishment and
development of the disinfectant educational center, as well as its management
and funding.  The China Pest Infestation Control and Sanitation
Association will be responsible for establishing a job training base in
Beijing.  We believe we were selected to participate in this program
based upon our reputation and experience in the disinfectant
industry.





It is
anticipated that the disinfectant educational center will offer a job training
program to educate and train professionals to work in the disinfectant
field.  The disinfectant educational center will be a tuition based
education program for which graduates will receive a license from the China Pest
Infestation Control and Sanitation Association.  After completion of
the program, it is envisioned that a personnel exchange service center of the
Chinese central government's Health Department will function much like a
placement office and assist the center's graduates in securing positions with
companies seeking to fill positions in the PRC.  From time to time we
may also recruit graduates from the disinfectant educational center to join our
company.





In June
2006, we entered into an oral arrangement with Beijing JinMeiHua Sterilizing
Technology Development Company, Limited ("JinMeiHua"), an unrelated party, to
act as our agent to operate the disinfectant educational center and to be
responsible for the job training program specifics. However, during the 2007
fiscal year, we terminated this contract and now control the operation of the
disinfectant educational center and job training program independently of
JinMeiHua.





We
believe the China Pest Infestation Control and Sanitation Association and LiKang
Disinfectant will share the profits of the disinfectant educational center with
us; however the precise revenue share has not been determined.  It is
also expected that the China Pest Infestation Control and Sanitation Association
will receive at a maximum 50% of the profits from the disinfectant educational
center.  JinMeiHua will not receive any profits for operating the
disinfectant educational center because our arrangement with JinMeiHua has been
terminated. We advanced JinMeiHua $249,797 to begin the development of the
disinfectant educational center. The investment made by LiKang Disinfectant of
$249,797 in JinMeiHua was returned to LiKang Disinfectant in December 2006
because JinMeiHua was no longer involved in this program.





In 2006,
LiKang Disinfectant entered into an agreement with the China Pest Infestation
Control Association, the Ministry of Health and the Beijing Olympic Game
Committee to establish and operate a disinfectant educational center in Beijing,
China.  In accordance with the agreement, LiKang Disinfectant is
responsible for the establishment of the disinfectant educational center, as
well as its management and funding.  As of December 31, 2007, we had
provided the text books and technical standards for training. In 2008, prior to
the Bejing Olympic Games starting,  we  held the first class
for training the 2008 Beijing Olympic Staff. There were 46 staff were qualified
among total 51 participants




12


After the
Wenshuan Earthquake occurred, LiKang Disinfectant entered into an agreement with
the Ministry of Health, the National Patriot and Sanitation Committee, and the
Dujiangyan National Disaster Headquarters to provide service to stricken areas.
On June 6, 2008, Likang Disinfectant sent its own teams to Sichuan to provide
sanitation technical training for over 270 staff as well as providing a
qualification course and examinations to over 100 national
disinfectors.  On June 27, 2008, 76 national disinfectors had taken
professional qualification exams and 67 national disinfectors were qualified.
The passage rate was 88%.





In 2008,
there were 325 participants that attended the Likang Disinfectant training
course, of which 117 became qualified.





Intellectual
Property





We have
received eleven patents and have one pending patent application with National
Property Right Administration of the PRC.  The patent approval process
can take up to 36 months.  The following is a list of LiKang
Disinfectant’s patents and pending patent applications:




Patent
                                    Category
                                  
                                  Patent
      name
                                  
                                  Patent
      No
                                  
                                  NotesNew
      invention
                                  
                                  Low
      smell and stimulus contain chlorine disinfectant tablet, powder
      etc
                                  
                                  ZL
      200410068135.8
                                  
                                  Approved,
      expires August 2026New
      invention
                                  
                                  A
      new skin & mucous membrane disinfectant including preparation
      methods
                                  
                                  Application
      # 200410025305.4
                                  
                                  Pending.
      Applied on 2004-11-12Appearance
      design
                                  
                                  Bottle
      (with the wing stretch)
                                  
                                  ZL
      00 3 14391.0
                                  
                                  Approved,
      expires April 2010Appearance
      design
                                  
                                  Packaging
      bottle
                                  
                                  ZL
      2003 3 0108274.5
                                  
                                  Approved,
      expires November 2013Appearance
      design
                                  
                                  Bottle
                                  
                                  ZL
      200530034239.2
                                  
                                  Approved,
      expires December 2015Appearance
      design
                                  
                                  Test
      paper box of chlorine
                                  
                                  ZL
      2004 3 0022740.2
                                  
                                  Approved,
      expires May 2014Product
      Improvement
                                  
                                  Improved
      heavy duty bottle
                                  
                                  ZL
      03 2 29616.9
                                  
                                  Approved,
      expires March 2013Product
      Improvement
                                  
                                  High
      strength water sterilizer with Model H ultraviolet
    lamp
                                  
                                  ZL
      03 2 10513.4
                                  
                                  Approved,
      expires September 2013Product
      Improvement
                                  
                                  Sewage
      application
                                  
                                  ZL
      2004 2 0037013.8
                                  
                                  Approved,
      expires June 2014Product
      Improvement
                                  
                                  Container
      with the vacuum pump
                                  
                                  ZL
      200420090682.1
                                  
                                  Approved,
      expires June 2016Product
      Improvement
                                  
                                  Multifunctional
      air disinfectant
                                  
                                  ZL
      200420037010.4
                                  
                                  Approved,
      expires August 2015Product
      Improvement
                                  
                                  Bracket
      for heavy duty bottle
                                  
                                  ZL
      200520039668.3
                                  
                                  Approved,
      expires
October 2016





We have
nine product trademarks, of which four are registered trademarks with the China
State Administration for industry and commerce trademark
office.  These trademarks cover our four major product lines,
An’erdian, Jifro, Dian’erkang and Lvshaxing.





We are
not a party to any confidentiality or similar agreement with any of our
employees or any third parties regarding our intellectual
property.  It is possible that a third party could, without
authorization, utilize our propriety technologies without our
consent.  We can give no assurance that our proprietary technologies
will not otherwise become known or independently developed by
competitors.




13


Competition





We
operate in a fragmented, competitive national market for healthcare disinfectant
products.  According to a survey conducted in 2004 by the China
Federation of Industrial Economics (CFIC), the disinfectant market in the PRC
was approximately $6.25 billion (USD).  While the disinfectant
industry in China is an emerging industry, and the industry is populated with
small regional players, we estimate that there are over 1,000 manufacturers and
distributors of disinfectant products in China and certain of our major
competitors distribute products similar to ours, including those which also
prevent the spread of airborne viruses such as avian flu and SARS.





We
compete with foreign companies, including 3M, who are marketing a limited line
of disinfectant products in China, as well as smaller, domestic
manufacturers.  Most domestic competitors offer a limited line of
products and there are few domestic companies with a nationwide
presence.  We believe that our national marketing and sales presence
throughout all 22 provinces, as well as four autonomous regions, and four
municipalities of China gives us a competitive advantage over many other
disinfectant companies in China.





In
addition, prior to the adoption of industry standards in July 2002 by the
central government of China, disinfectant products were generally marketed and
sold based on pricing factors.  We believe the recent standards
implemented by the government and a growing middle income class will shift the
customer demand from price to quality.





As a
result of this heightened license and permit system, all disinfectant
manufacturers must comply with "qualified disinfection product manufacturing
enterprise requirements” established by the Ministry of Public
Health.  The requirements include standards for both hardware and
software.  Hardware would include facilities and
machinery.  Software would include the technology to monitor the
facilities.  Furthermore the requirements will encompass the knowledge
and capability of both the production staff and quality control
procedures.





Furthermore
we estimate the new government standards adopted in July 2002 are increasing the
barriers to entry in the disinfectant industry.  We believe that the
new standards may lead to fewer competitors as companies falter in their efforts
to adhere to the new standards.  The implementation of these improved
production standards and licenses have effectively decreased the competitiveness
of small and mid-size manufacturers.  The new standards are especially
difficult for companies with limited product offerings and inferior technical
content.





Competitive
Advantages





We
believe that the following are the principal competitive strengths that
differentiate our company from the majority of our competition:





·
            Strong
      sales and distribution network in China – enables us to compete
      effectively with domestic competitors, as well as larger foreign-owned
      competitors.





·
            Product
      selection and availability –A number of our
      competitors are smaller, regional companies with a limited number of
      product offerings.  We offer our customers a wide variety of
      disinfectant products and ability to ship products to our customers on a
      timely basis throughout the PRC.





·
            Research
      and development –Our efforts to
      respond to market demand for new products have resulted in the issuance to
      us of 28 hygiene licenses by the Ministry of Public Health of the central
      government of China.  Based upon our knowledge of our
      competitors, we do not believe any of our competitors have received as
      many licenses since the enactment of the licensing standards in July
      2002.





·
            Strong
      product pipeline–We have a history
      of introducing 3 or 4 new products to the market each year. We have filed
      applications for 4 new products and have 8 additional products in
      development.




·
            Manufacturing
      capacity –We
      are operating at 91% capacity to produce GMP certified products and we
      have the ability to increase capacity significantly at moderate
      costs.





·
            Customer
      services – Our sales personnel are thoroughly educated about our products,
      which enable them to better understand the needs of our
      customers.  Our customer service representatives strive to
      answer questions immediately and no later than 24 hours after a customer’s
      inquiry.




14


·
            Reliability
      and speed of delivery.  We believe our products have developed a
      reputation of good quality and effectiveness and our manufacturing
      capabilities enable us to produce and ship products to our customers
      promptly.





·
            Customer
      service –Our
      customer service representatives participate in ongoing product training
      programs and we strive to respond to all customer inquiries within 24
      hours.





·
            Price
      –We have
      developed relationships with a number of raw material suppliers which
      enables us to keep our costs low and thereby offer prices to our customers
      which are very competitive.





Our
primary competitors in the sale of chemical disinfectants are 3M and Ace
Disinfection Factory Co., Ltd.  The primary competitors for instrument
disinfectants are Chengdu Kangaking Instrument Co., Ltd. and Hangzhou Yangchi
Medicine Article Co., Ltd. and the primary competitors for chemical indicators
are 3M and Shandong Xinhua Medical Instrument Co., Ltd.  Domestic
competition comes from regional companies which tend to offer products in small
geographic areas and do not distribute their product lines throughout
China.





Our
primary competitors include:





Competitor
                    
                    Products3M
      Company
                    
                    Hand
      disinfectant, skin and mucous disinfectantAce
                    
                    Skin
      and mucous disinfectantChengdu
      Kangaking
                    
                    Medical
      equipment and devicesHangzhou
      Yangchi
                    
                    Sterilized
      Q-tipShandong
      Xinhua
                    
                    Chemical
      indicators





Our
primary foreign competitor is 3M Company which has had a presence in China for
more than 20 years.  3M Company entered the hand disinfection market
at the end of 2004 and primarily offers products in the areas of index and
control devices and disinfectant machines.  At present, 3M Company has
five products for use in operating rooms and its products are found in
provincial capital cities of China such as Shanghai, Beijing, Guangzhou,
Hangzhou, Nanjin, Chengdu and Xi’an.  3M Company’s product line in
China is relatively narrow, with few overlapping products between 3M Company and
our company.





Another
foreign competitor is Johnson & Johnson, established operations in China in
1994.  In China, Johnson & Johnson offers a variety of skin, hand,
and medical equipment disinfectants.  Prior to the recent initiatives
by the government, disinfectant products were marketed based on pricing and
despite the brand awareness of Johnson & Johnson; its products did not have
widespread reception among the community.  Furthermore, Johnson &
Johnson does not offer a wide variety of disinfectant products in
China.





Government
Regulations





Our
business and operations are located in the PRC.  We are subject to
local food, drug, environmental laws related to certification of manufacturing
and distributing of disinfectants.  We are also licensed by the
Shanghai City Government to manufacture and distribute
disinfectants.  We are in substantial compliance with all provisions
of those licenses and have no reason to believe that they will not be renewed as
required by the applicable rules of Shanghai.  In addition, our
operations must conform to general governmental regulations and rules for
private companies conducting business in China.





Pursuant
to the July 2002 Ministry of Public Health 27th Order of Ministry of Health of
the People's Republic of China, all disinfectant manufacturers in China must
obtain a license to manufacture hygiene disinfectants.  Prior to
release, all disinfectant instruments must obtain the official hygiene permit
document of Ministry of Public Health and the approval of the provincial hygiene
administrative department.  The implementation of these improved
production standards and licenses has effectively decreased the competitiveness
of small to mid size manufacturers with single product and inferior technical
content.  Presently we meet all standards initiated by this ordinance
and we have been granted 28 hygiene licenses by the Ministry of Public
Health.





We are
also subject to various other rules and regulations, including the People’s
Republic of China Infectious Disease Prevention and Cure Law, Disinfection
Management Regulation, Disinfection Technique Regulation, Disinfection Product
Manufacturer Sanitation Regulation, and Endoscope Rinse and Disinfection
Technique Manipulation Regulation.  We believe we are in material
compliance with all of the applicable regulations.




15


PRC
Legal System





Since
1979, many laws and regulations addressing economic matters in general have been
promulgated in the PRC. Despite development of its legal system, the PRC does
not have a comprehensive system of laws.  In addition, enforcement of
existing laws may be uncertain and sporadic, and implementation and
interpretation thereof inconsistent.  The PRC judiciary is relatively
inexperienced in enforcing the laws that exist, leading to a higher than usual
degree of uncertainty as to the outcome of any litigation.  Even where
adequate laws exist in the PRC, it may be difficult to obtain swift and
equitable enforcement of such laws, or to obtain enforcement of a judgment by a
court of another jurisdiction.  The PRC's legal system is based on
written statutes and, therefore, decided legal cases are without binding legal
effect, although they are often followed by judges as guidance.  The
interpretation of PRC laws may be subject to policy changes reflecting domestic
political changes.  As the PRC legal system develops, the promulgation
of new laws, changes to existing laws and the preemption of local regulations by
national laws may adversely affect foreign investors.  The trend of
legislation over the past 20 years has, however, significantly enhanced the
protection afforded foreign investors in enterprises in the
PRC.  However, there can be no assurance that changes in such
legislation or interpretation thereof will not have an adverse effect upon our
business operations or prospects.





Economic
Reform Issues





Since
1979, the Chinese government has reformed its economic systems.  Many
reforms are unprecedented or experimental; therefore they are expected to be
refined and improved.  Other political, economic and social factors,
such as political changes, changes in the rates of economic growth, unemployment
or inflation, or in the disparities in per capita wealth between regions within
China, could lead to further readjustment of the reform measures.  We
cannot predict if this refining and readjustment process may negatively affect
our operations in future periods.





Over the
last several years, China's economy has registered a high growth
rate.  Recently, there have been indications that rates of inflation
have increased. In response, the Chinese government recently has taken measures
to curb this excessively expansive economy.  These measures have
included devaluations of the Chinese currency as the result of
inflation.  This relative Renminbi (“RMB”) devaluation places some
restrictions on the availability of domestic credit, reducing the purchasing
capability of customers, and limiting re-centralization of the approval process
for some foreign product purchases.  These austerity measures alone
may not succeed in slowing down the economy's excessive expansion or control
inflation, and may result in severe dislocations in the Chinese
economy.  The Chinese government may adopt additional measures to
further combat inflation, including the establishment of freezes or restraints
on certain projects or markets.





To date
reforms to China's economic system have not adversely impacted our operations
and are not expected to adversely impact operations in the foreseeable future;
however, there can be no assurance that the reforms to China's economic system
will continue or that we will not be adversely affected by changes in China's
political, economic, and social conditions and by changes in policies of the
Chinese government, such as changes in laws and regulations, measures which may
be introduced to control inflation, changes in the rate or method of taxation,
imposition of additional restrictions on currency conversion and remittance
abroad, and reduction in tariff protection and other import
restrictions.





Employees





LiKang
Disinfectant employs approximately 160 full time employees, including our
executive officers, as follows:




Department
            
            Number of EmployeesAdministrative
      center
            
            11Accounting
            
            11Production
            
            45Logistics
            
            22Sales
      and Marketing Staff in Shanghai
            
            52Training
            
            6Research
      and Development
            
            13Total
            
            160




16


U.S.
Advisors





On
January 10, 2006 and effective January 1, 2006, the Company entered
into a three year agreement with China Direct Investments, Inc. to provide
business development and management services. In connection with this agreement,
the Company issued China Direct Investments, Inc. 4,700,000 shares of the
Company's common stock. The Company valued the service using the fair value of
common shares on grant date at $0.18 per share and recorded deferred consulting
expenses of $846,000 to be amortized over the service period. In July 2007,
the Company terminated the service contact with China Direct Investments, Inc,
and the remaining deferred consulting expenses associated with this agreement
amounted to $564,000, which were expensed for the year ended December 31,
2007.





In
September 2006, the Company entered into a three-year agreement with a Zhiyan
Shi to provide business development and management services. In connection with
this agreement, the Company issued Zhiyan Shi 500,000 shares of the Company's
common stock. The Company valued these services using the fair value of common
shares on grant date at $0.185 per share and recorded deferred consulting
expense of $92,500 to be amortized over the service period. For the year ended
December 31, 2008, amortization of consulting compensation amounted to
$30,833.





On June
6, 2007, the Company entered into a twelve month agreement with FirsTrust Group
Inc. to provide business development and management services. In connection with
this agreement, on July 12, 2007, the Company issued 450,000 shares of its
restricted common stock. The Company valued the service using the fair value of
common shares on grant date at $0.17 per share and recorded deferred consulting
expense of $76,500 to be amortized over six months of the service period. On
December 6, 2007, the Company terminated the service contract with FirsTrust
Group Inc. On October 6, 2008, FirsTrust Group Inc. began providing advisory
services to the Company again. The Company issued 450,000 shares of its
restricted common stock to FirsTrust Group Inc.  The Company valued
the service using the fair value of common share on grant date at $0.08 per
share and recorded deferred consulting expense of $36,000 to be amortized over
six months of the service period. For the year ended December 31, 2008,
amortization of consulting compensation amounted to $18,000.





History of Our
Company





We were
incorporated in the State of Colorado on December 11, 1996 as Mizar Energy
Company.  From our inception through December 28, 1999, we were
involved in the business of acquiring, developing and operating oil and gas
properties.  On December 28, 1999, we sold 60% of our issued and
outstanding common stock to HBOA.Com, Inc., a District of Columbia corporation
("HBOA-DC").  Pursuant to this stock sale, there was a change in our
business and management team and we began to focus on HBOA's business, which was
related to the sale of products and services to the owners of home based
businesses through its Internet web site.





On May
31, 2000, HBOA-DC was merged with and into our wholly owned subsidiary,
HBOA.Com, Inc., a Florida corporation ("HBOA-FL").  In June 2000, we
began to develop our application service provider business, in addition to
HBOA's web site.  We focused on development of an Internet portal
through which home based business owners, as well as commercial private label
businesses, obtain the products, services, and information necessary to start,
expand and profitably run their businesses.  On November 10, 2000, our
shareholders approved our proposal to change our name from Mizar Energy Company
to HBOA Holdings, Inc. and to change our state of incorporation from Colorado to
Florida and recorded a loss of approximately $258,000.  On December
28, 2000, we formed a new subsidiary, Aerisys, Incorporated, a Florida
corporation, to handle commercial private business.  Effective as of
July 18, 2003, we changed our name to Kirshner Entertainment & Technologies,
Inc.





On May 2,
2005, we closed a share exchange with all of the shareholders of Linkwell Tech
in which we acquired 100% of the issued and outstanding shares of Linkwell
Tech’s common stock in exchange for 36,273,470 shares of our common stock, which
at closing represented approximately 87.5% of the issued and outstanding shares
of our common stock.  As a result of the transaction, Linkwell Tech
became our wholly owned subsidiary.  Linkwell Tech was founded in June
2004.  On June 30, 2004, Linkwell Tech acquired 90% of LiKang
Disinfectant through a stock exchange with Shanghai LiKang Pharmaceuticals
Technology Company, Limited, the then 90% shareholder of LiKang
Disinfectant.  Shanghai Shanhai Group, an unaffiliated third party,
owned the remaining 10% of LiKang Disinfectant.  Shanghai Shanhai
Group is owned by Shanghai Shanhai Group Employee Share-holding Committee
(16.25%) and Shanghai Baoshan District Dachang Town South Village Economic
Cooperation Club (83.75%).  LiKang Disinfectant's officers and
directors, Mr. Xuelian Bian and Wei Guan, own Shanghai LiKang Pharmaceuticals
Technology Company, Limited, owning 90% and 10%, respectively, of that
company.  The transaction in which Linkwell Tech acquired the 90%
interest in LiKang Disinfectant resulted in the formation of a U.S. holding
company by Mr. Bian and Guan as it did not result in a change in the underlying
ownership interests of LiKang Disinfectant.




17


Our then
officers and directors resigned at the closing of the share exchange and Mr. Wei
Guan and Xuelian Bian, who were the officers and directors of Linkwell Tech,
were appointed our officers and directors.  In connection with the
share exchange and to satisfy all outstanding obligations and indebtedness owed
by our company to our former CEO and certain third parties, Linkwell Tech
provided us $175,000 which we provided to our former CEO to be used by him to
satisfy these obligations.  We also issued our former CEO 1,400,000
shares of our common stock.





In July
2005, we changed our name to Linkwell Corporation.





In
February 2006, we sold 100% of the stock of Aerisys to Mr. Gary Verdier, our
former CEO, in exchange for the assumption of all liabilities and obligation of
Aerisys.  Prior to the share exchange agreement with Linkwell Tech in
May 2005, Aerisys had represented our sole operations. Aerisys marketed and sold
the Aerisys Intelligent Community (TM), a web-based software program and
private, browser-based intranet product that allows schools to collaborate with
parents and faculty each day on classroom homework, assignments, critical dates,
team priorities and school news in a private forum, primarily to K through 12
private schools.  We had not been able to improve sales or business
opportunities for Aerisys since May 2005.





On
February 15, 2008, we entered into a stock purchase agreement (the “Stock
Purchase Agreement”) with Ecolab, pursuant to which Ecolab agreed to purchase
and Linkwell Tech agreed to sell 888,889 of its shares, or 10% of the issued and
outstanding capital stock of Linkwell Tech, for $2 million dollars.





In
connection with and as a condition to closing the Stock Purchase Agreement, on
February 29, 2008, LiKang Disinfectant entered into a series of commercial
agreements with Ecolab, including a Consulting Agreement (“Consulting
Agreement”), two Distributor Agreements, and a Sales Representative
Agreement.





Pursuant
to the Consulting Agreement, LiKang Disinfectant is providing consulting
services to Ecolab Chemicals Ltd., a company of limited liabilities incorporated
under the laws of China and a wholly-owned subsidiary of Ecolab (“Ecolab
Chemicals”), including identifying all regulatory approvals for manufacture,
productions, transport, market, sale distribution and or use for certain of
Ecolab Chemicals’ infection control, cleaning and sanitizing products for the
period the Disinfectant Distribution Agreement (defined below) is
effective.  Pursuant to the first Distribution Agreement, LiKang
Disinfectant is a distributor for the promotion, sale and distribution of
certain of Ecolab Chemicals’ infection control, cleaning and sanitizing products
(the “Disinfectant Distribution Agreement”) for the territory of PRC (excluding
Hong Kong, Taiwan and Macau) for the period of two years unless extended or
terminated early. Pursuant to the second Distribution Agreement, Ecolab
Chemicals is the exclusive distributor for the promotion, marketing, sale and
distribution of certain of certain of LiKang Disinfectant’s infection control
products (the “Ecolab Chemicals Distribution Agreement”) for the territory of
Hong Kong, Taiwan and Macau for the period of two years unless extended or
terminated early. Pursuant to the Sales Representative Agreement, LiKang
Disinfectant is a sales representative for the solicitation of sales of Ecolab
Chemicals’ pest elimination services for the territory of the P.R.C. (excluding
Hong Kong, Taiwan and Macau) for the period of two years unless extended or
terminated early.





On April
6, 2007, our wholly-owned subsidiary Linkwell Tech entered into two material
stock purchase agreements. In one agreement, Linkwell Tech was to acquire a 100%
equity interest in Shanghai LiKang Biological High-Tech Company, Limited, a
Chinese company (“LiKang Biological”) in a related party transaction with
Xuelian Bian, an individual, Wei Guan, an individual, and LiKang Pharmaceutical
(the “Biological Stock Purchase Agreement”). Mr. Bian is Linkwell Corporation's
Chief Executive Officer, President and Chairman of the Board and Wei Guan is
Linkwell Corporation's Vice President, Secretary and Director. Mr. Bian and Mr.
Guan own 90% and 10% of LiKang Pharmaceutical, respectively. Mr. Bian and LiKang
Pharmaceutical owned 60% and 40% of LiKang Biological, respectively. Pursuant to
the terms of the Biological Stock Purchase Agreement, Mr. Bian and LiKang
Pharmaceutical were to receive 1,000,000 shares of Linkwell Corporation
restricted common stock. In the other agreement, Linkwell Tech, which already
owned a 90% equity interest in Shanghai LiKang Disinfectant, was to purchase the
remaining 10% equity interest of LiKang Disinfectant from Shanghai Shanhai
Group, a non-affiliated Chinese entity (“Disinfectant Stock Purchase
Agreement”). Pursuant to the terms of the Disinfectant Stock Purchase Agreement,
Shanghai Shanhai Group was to receive 3,000,000 shares of Linkwell Corporation
restricted common stock.




18


Due to
restrictions under PRC law that prohibited the consideration then contemplated
by the Biological Stock Purchase Agreement and Disinfectant Stock Purchase
Agreement neither of the respective transactions contemplated by those
agreements closed.  As a result of this, on March 25, 2008, the
parties entered into an amendment to the Biological Stock Purchase Agreement
(“Biological Amendment”) and an amendment to the Disinfectant Stock Purchase
Agreement (“Disinfectant Amendment”) in an effort to complete the stock purchase
transactions under those agreements. Pursuant to the terms of the Biological
Amendment, the only material change to the Biological Stock Purchase Agreement
relates to the consideration paid by Linkwell Tech to Xuelian Bian and LiKang
Pharmaceutical which was changed from 1,000,000 shares of the Company’s common
stock to $200,000 and 500,000 shares of common stock. Pursuant to the terms of
the Disinfectant Amendment, the only material change to the Disinfectant Stock
Purchase Agreement relates to the consideration paid by Linkwell Tech to
Shanghai Shanhai Group for the remaining 10% equity interest, which was changed
from 3,000,000 shares of common stock, to $380,000 and 1,500,000 shares of
common stock. The other terms of the Disinfectant Stock Purchase Agreement
remain in full force and effect.





The
Biological Amendment also did not receive governmental approval prompting the
parties to enter into a second amendment to the Biological Stock Purchase
Agreement on March 5, 2009. The second amendment changed the entity purchasing
the capital stock of LiKang Biological from Linkwell Tech to LiKang
Disinfectant. The consideration paid by LiKang Disinfectant for the capital
stock of LiKang Biological was also changed pursuant to the terms of the second
amendment from $200,000 and 500,000 shares of the Company’s common stock to RMB
2,000,000 and 500,000 shares of  the Company’s common
stock.  The Company believes that these changes will make obtaining
government approval of the transaction more likely.





On May
31, 2008, LiKang Disinfectant entered into a stock purchase agreement under
which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang
International to Linkwell International Trading Co., Ltd, a company registered
in Hong Kong which is 100% owned by Mr. Wei Guan, the Company’s Vice President,
Secretary and Director.  Pursuant to the terms of the agreement,
LiKang Disinfectant will receive $291,754 (RMB 2,000,000).





ITEM
1A. RISK FACTORS.





An
investment in our common stock involves a significant degree of risk. You should
not invest in our common stock unless you can afford to lose your entire
investment. You should consider carefully the following risk factors and other
information in this annual report before deciding to invest in our common
stock.





RISKS
RELATED TO OUR COMPANY





We
engage in a number of material transactions with related parties which could
result in a conflict of interest involving our management.





We are
materially dependent on certain related party transactions in the ongoing
conduct of our business.  Sales to our affiliates ZhongYou
Pharmaceutical and Shanghai LiKang Meirui Pharmaceutical High-Tech Co., Ltd.
represented approximately 17% of our total net revenues in the fiscal year of
2007 and approximately 40% of our total net revenues in fiscal
2006.  Sales to our affliates ZhongYou Pharmaceutical, Shanghai LiKang
Meirui Pharmaceutical High-Tech Co., Ltd. and Shanghai Jiuqing Pharmaceuticals
Company Limited represented approximately 21% of our total net revenues in the
fiscal year of 2008. This related party represented approximately 50% and
approximately 42% of our accounts receivable at December 31, 2008 and 2007,
respectively.  In addition, we lease our principal executive officers
from Shanghai Shanhai Group, the minority shareholder of our LiKang Disinfectant
subsidiary, and Shanghai LiKang Meirui Pharmaceutical High-Tech Co., Ltd, an
affiliated company of this minority shareholder, both supplies us with raw
materials and acts as a contract manufacturer for certain of our
products.  We have also engaged in a number of other related party
transactions including extending working capital loans to Shanghai LiKang
Pharmaceuticals Technology Company, Limited and Shanghai LiKang Biological
High-Tech Company, Ltd., purchasing real property from Shanghai LiKang
Pharmaceuticals Technology Company, Limited and utilizing the services of
Shanghai LiKang Biological High-Tech Company, Ltd. to process certain of our
products.  These affiliated transactions may from time to time result
in a conflict of interest for our management.  Because these
transactions are not subject to the approval of our shareholders, investors in
our company are wholly reliant upon the judgment of our management in these
related party transactions.




19


The
management of our company is located in the PRC and we are materially dependent
upon advisory services of  U.S. advisors.





None of
the current members of our management have any experience in U.S. public
companies and these individuals are not fluent in English.





Until
such time as we are able to expand our board of directors to include
English-speaking individuals who have experience with the operation and
regulatory framework applicable to U.S. public companies, we are materially
dependent upon our relationship with our U.S. advisors.  If for any
reason our Advisors should fail to provide the contracted services at the
anticipated levels or fails to extend its services and we have not added members
to our board of directors with the requisite experience we may be unable to
prepare and file reports as required by the Securities Exchange Act of 1934 on a
timely basis which could lead to our common stock being removed from the
OTCBB.  In this event, your ability to liquidate your investment would
be negatively impacted and you could lose your entire investment in our
company.





As is
customary in the PRC, we extend relatively long payment terms to our customers,
including on sales to related parties, which can negatively impact our cash
flows.  Our terms of sale generally require payment within four to six
months, which is considerably longer than customary terms offered in the United
States.  For fiscal 2008, the average time of payment on accounts
receivable from non-related third parties was 121 days and the average time of
payment on accounts receivable from related parties as 380 days, compared to 235
days from related parties in fiscal 2007; an increase of 145
days.  The Company would like to control the average time of payment
on accounts receivable from related parties within 120 days.





We
occasionally offer established customers, including related parties, longer
payment terms of up to 240 days on new products as an incentive to purchase
these products, which has served to further increase the average days
outstanding for accounts receivable.  We maintain a relatively low
reserve for doubtful accounts when compared to a company operating in the
U.S.  Our payment terms may have the effect of adversely impacting our
cash flow and our ability to fund our operations out of our operating cash flow.
Our ability to continue to implement our growth strategy could suffer if our
cash flows are adversely impacted which will have the effect of limiting our
ability to increase our revenues in the future.





Certain
agreements to which we are a party and are material to our operations lack
various legal protections, which are customarily contained in similar contracts
prepared in the United States.





We are a
Chinese company and all of our business and operations are conducted in China.
We are a party to certain material contracts, including an agreement for the
lease for our principal offices and manufacturing facility.  While
these contracts contain the basic business terms of the agreements between the
parties, these contracts do not contain certain provisions which are customarily
contained in similar contracts prepared in the U.S., such as representations and
warranties of the parties, confidentiality and non-compete clauses, provisions
outlining events of defaults, and termination and jurisdictional
clauses.  Because our material contracts omit these types of clauses,
notwithstanding the differences in Chinese and U.S. laws we may not have the
same legal protections as we would if the contracts contained these additional
provisions.  We anticipate that contracts we enter into in the future
will likewise omit these types of legal protections.  While we have
not been subject to any adverse consequences as a result of the omission of
these types of clauses, and we consider the contracts to which we are a party to
contain all the material terms of our business arrangements with the other
party, future events may occur which lead to a dispute under agreements which
could have been avoided if the contracts were prepared in conformity with U.S.
standards. Contractual disputes which may arise from this lack of legal
protections will divert management's time from the operation of our business and
require us to expend funds attempting in settling a possible
dispute.  This possible diversion of management time will limit the
time our management would otherwise devote to the operation of our business, and
the diversion of capital could limit the funds we have available to pay our
ongoing operating expenses.





Each
of our product groups operate in highly competitive businesses.





Each of
our product groups is subject to competition from other manufacturers of similar
products. There are approximately 1,000 manufacturers of similar disinfectant
products in China, but only approximately 30 manufacturers, including our
company, operate on a continuous basis with the remainder of other companies
periodically entering the market in times of increased demand. While we believe
we are one of the leading manufacturers of disinfectant products in the PRC,
from time to time there is a sporadic oversupply of these products which can
adversely impact our market share and competitive position in this product
group.  As a result, we may not be able to effectively compete in our
product segments which could have the effect of limiting our ability to sustain
our current level of operations or grow our revenues in future
periods.




20


Because of the specialized,
technical nature of the business, we are highly dependent on certain members of
management, as well as our marketing, engineering and technical
staff.





The loss
of the services of our current management and skill employees could have a
material and negative effect on our ability to effectively pursue our business
strategy.  In addition to manufacturing high volumes of our products
and developing new products, we must attract, recruit and retain a sizeable
workforce of technically competent employees, including additional skilled and
experienced managerial, marketing, engineering and technical personnel. If we
are unable to do so, our ability to grow our business and increase our revenues
could be limited.





If
we experience customer concentration, we may be exposed to all of the risks
faced by our remaining material customers.





For the
fiscal years ended December 31, 2008 and 2007 revenues from one customer,
ZhongYou Pharmaceutical an affiliate, represented approximately 21% and
approximately 27%, respectively, of our total net revenues.  Unless we
maintain multiple customer relationships, it is likely that we will experience
periods during which we will be highly dependent on a limited number of
customers.  Dependence on a few customers could make it difficult to
negotiate attractive prices for our products and could expose us to the risk of
substantial losses if a single dominant customer stops conducting business with
us.  Moreover, to the extent that we are dependent on any single
customer, we are subject to the risks faced by that customer to the extent that
such risks impede the customer's ability to stay in business and make timely
payments to us.





We
depend on factories to manufacture our products, which may be insufficiently
insured against damage or loss.





We have
no direct business operation, other than our ownership of our subsidiaries
located in China, and the results of operations and our financial condition are
solely dependent on our subsidiaries' factories in China.  We do not
currently maintain insurance to protect against damage and loss to our
facilities and other leasehold improvements.  Therefore, any material
damage to, or the loss of, any of our facilities due to fire, severe weather,
flooding or other cause, would not be shared with an insurance company, and if
large enough, would have a material and negative effect on our financial
condition.  If the damage was significant, we could be forced to stop
operations until such time as the faculties could be repaired.





Our
operations are subject to government regulation. If we fail to comply with the
applicable regulations, our ability to operate in future periods could be in
jeopardy.





We are
subject to various state and local environmental laws related to our business.
We are subject to local food, drug, environmental laws related to certification
of manufacturing and distributing of any disinfectant.  We are also
licensed by the Shanghai City Government to manufacture and distribute
disinfectants.  While we are in substantial compliance with all
provisions of those registrations, inspections and licenses and have no reason
to believe that they will not be renewed as required by the applicable rules of
the Central Government and the Shandong Province, any non-renewal of these
authorities could result in the cessation of our business
activities.





Due to
recent incidents of pollution to milk powder by Melamine and increased medical
accidents and disputes, the government will impose more stringent restrictions
over the quality of products and distributions in markets, given tighter control
over food, drug and disinfectant industries, which would add costs to our
operations from compliance of all provisions of restrictions. Any incompliance
with provisions of these restrictions would jeopardize our ability to operate in
future.





We
may not have sufficient protection of certain of our intellectual
property.





We
utilize certain technologies in the purification of raw material used in our
products which are proprietary in nature.  We are not a party to any
confidentiality or similar agreements with employees and third parties including
consultants, vendors and customers and it not likely that we will enter into
these types of agreements in the future.  It is possible that our
employees or a third party could, without authorization, utilize our propriety
technologies without our consent.  The unauthorized use of this
proprietary information by third parties could adversely affect our business and
operations as well as any competitive advantage we may have in our market
segment.  We may not have adequate remedies for the protection of our
proprietary technologies and these proprietary technologies could become known
or independently developed by competitors, in which event our ability to
effectively compete could be in jeopardy.




21


We
have not voluntarily implemented various corporate governance measures, in the
absence of which, shareholders may have reduced protections against interested
director transactions, conflicts of interest and other matters.





We are
not subject to any law, rule or regulation requiring that we adopt any of the
corporate governance measures that are required by the rules of national
securities exchanges such as independent directors and audit
committees.  It is possible that if we were to adopt some or all of
the corporate governance measures, shareholders would benefit from somewhat
greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct.  Prospective investors should bear consider our
current lack of corporate governance measures in formulating their investment
decisions.





RISKS
RELATED TO DOING BUSINESS IN CHINA





All
of our assets and operations are located in the PRC and are subject to changes
resulting from the political and economic policies of the Chinese
government.





Our
business operations could be restricted by the political environment in the
PRC.  The PRC has operated as a socialist state since 1949 and is
controlled by the Communist Party of China.  In recent years, however,
the government has introduced reforms aimed at creating a "socialist market
economy" and policies have been implemented to allow business enterprises
greater autonomy in their operations.  Changes in the political
leadership of the PRC may have a significant effect on laws and policies related
to the current economic reform programs, other policies affecting business and
the general political, economic and social environment in the PRC, including the
introduction of measures to control inflation, changes in the rate or method of
taxation, the imposition of additional restrictions on currency conversion and
remittances abroad, and foreign investment.  Moreover, economic
reforms and growth in the PRC have been more successful in certain provinces
than in others, and the continuation or increases of such disparities could
affect the political or social stability of the PRC.





Although
we believe that the economic reform and the macroeconomic measures adopted by
the Chinese government have had a positive effect on the economic development of
China, the future direction of these economic reforms is uncertain and the
uncertainty may decrease the attractiveness of our company as an investment,
which may in turn result in a decline in the trading price of our common
stock.





The
Chinese government exerts substantial influence over the manner in which we must
conduct our business activities.





The PRC
only recently has permitted provincial and local economic autonomy and private
economic activities.  The government of the PRC has exercised and
continues to exercise substantial control over virtually every sector of the
Chinese economy through regulation and state ownership.  Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in the PRC or
particular regions thereof.  In such an event, we could be forced to
cease operations.





Restrictions
on currency exchange may limit our ability to receive and use our revenues
effectively.





Because
all of revenues are in the form of Renminbi, any future restrictions on currency
exchanges may limit our ability to use revenue generated in Renminbi to fund any
future business activities outside China or to make dividend or other payments
in U.S. dollars.  Although the Chinese government introduced
regulations in 1996 to allow greater convertibility of the Renminbi for current
account transactions, significant restrictions still remain, including primarily
the restriction that foreign-invested enterprises may only buy, sell or remit
foreign currencies, after providing valid commercial documents, at those banks
authorized to conduct foreign exchange business.  In addition,
conversion of Renminbi for capital account items, including direct investment
and loans, is subject to government approval in China, and companies are
required to open and maintain separate foreign exchange accounts for capital
account items.  We cannot be certain that the Chinese regulatory
authorities will not impose more stringent restrictions on the convertibility of
the Renminbi, especially with respect to foreign exchange
transactions.




22


We
may be unable to enforce our rights due to policies regarding the regulation of
foreign investments in China.





The PRC's
legal system is a civil law system based on written statutes in which decided
legal cases have little value as precedents, unlike the common law system
prevalent in the United States.  The PRC does not have a
well-developed, consolidated body of laws governing foreign investment
enterprises.  As a result, the administration of laws and regulations
by government agencies may be subject to considerable discretion and variation,
and may be subject to influence by external forces unrelated to the legal merits
of a particular matter.  China's regulations and policies with respect
to foreign investments are evolving.  Definitive regulations and
policies with respect to such matters as the permissible percentage of foreign
investment and permissible rates of equity returns have not yet been
published.  Statements regarding these evolving policies have been
conflicting and any such policies, as administered, are likely to be subject to
broad interpretation and discretion and to be modified, perhaps on a
case-by-case basis.  The uncertainties regarding such regulations and
policies present risks which may affect our ability to achieve our stated
business objectives.  If we are unable to enforce any legal rights we
may have under our contracts or otherwise, our ability to compete with other
companies in our industry could be limited which could result in a loss of
revenue in future periods which could impact our ability to continue as a going
concern.





Recent
PRC regulations relating to acquisitions of PRC companies by foreign entities
may create regulatory uncertainties that could restrict or limit our ability to
operate, including our ability to pay dividends.





The PRC
State Administration of Foreign Exchange, or SAFE, issued a public notice in
January 2005 concerning foreign exchange regulations on mergers and acquisitions
in China.  The public notice states that if an offshore company
controlled by PRC residents intends to acquire a PRC company, such acquisition
will be subject to strict examination by the relevant foreign exchange
authorities.  The public notice also states that the approval of the
relevant foreign exchange authorities is required for any sale or transfer by
the PRC residents of a PRC company’s assets or equity interests to foreign
entities for equity interests or assets of the foreign entities.





In April
2005, SAFE issued another public notice further explaining the January
notice.  In accordance with the April 2005 notice, if an acquisition
of a PRC company by an offshore company controlled by PRC residents has been
confirmed by a Foreign Investment Enterprise Certificate prior to the
promulgation of the January 2005 notice, the PRC residents must each submit a
registration form to the local SAFE branch with respect to their respective
ownership interests in the offshore company, and must also file an amendment to
such registration if the offshore company experiences material events, such as
changes in the share capital, share transfer, mergers and acquisitions, spin-off
transaction or use of assets in China to guarantee offshore
obligations.  The April 2005 notice also provides that failure to
comply with the registration procedures set forth therein may result in
restrictions on our PRC resident shareholders and our
subsidiaries.  Pending the promulgation of detailed implementation
rules, the relevant government authorities are reluctant to commence processing
any registration or application for approval required under the SAFE
notices.





In
addition, on August 8, 2006, the Ministry of Commerce (“MOFCOM”), joined by the
State-Owned Assets Supervision and Administration Commission of the State
Council, State Administration of Taxation, State Administration for Industry and
Commerce, China Securities Regulatory Commission and SAFE, amended and released
the Provisions for Foreign Investors to Merge and Acquire Domestic Enterprises,
new foreign-investment rules which took effect September 8, 2006, superseding
much, but not all, of the guidance in the prior SAFE circulars.  These
new rules significantly revise China’s regulatory framework governing
onshore-offshore restructurings and how foreign investors can acquire domestic
enterprises.  These new rules signify greater PRC government attention
to cross-border merger, acquisition and other investment activities, by
confirming MOFCOM as a key regulator for issues related to mergers and
acquisitions in China and requiring MOFCOM approval of a broad range of merger,
acquisition and investment transactions.  Further, the new rules
establish reporting requirements for acquisition of control by foreigners of
companies in key industries, and reinforce the ability of the Chinese government
to monitor and prohibit foreign control transactions in key
industries.





These new
rules may significantly affect the means by which offshore-onshore
restructurings are undertaken in China in connection with offshore private
equity and venture capital financings, mergers and acquisitions.  It
is expected that such transactional activity in China in the near future will
require significant case-by-case guidance from MOFCOM and other government
authorities as appropriate.  It is anticipated that application of the
new rules will be subject to significant administrative interpretation, and we
will need to closely monitor how MOFCOM and other ministries apply the rules to
ensure its domestic and offshore activities continue to comply with PRC
law.  Given the uncertainties regarding interpretation and application
of the new rules, we may need to expend significant time and resources to
maintain compliance.




23


It is
uncertain how our business operations or future strategy will be affected by the
interpretations and implementation of the SAFE notices and new
rules.  Our business operations or future strategy could be adversely
affected by the SAFE notices and the new rules.  For example, we may
be subject to more stringent review and approval process with respect to our
foreign exchange activities.





Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.





We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business.  Corruption, extortion, bribery, pay-offs, theft and other
fraudulent practices occur from time-to-time in the PRC.  We can make
no assurance, however, that our employees or other agents will not engage in
such conduct for which we might be held responsible.  If our employees
or other agents are found to have engaged in such practices, we could suffer
severe penalties and other consequences that may have a material adverse effect
on our business, financial condition and results of operations.





We
may have difficulty establishing adequate management, legal and financial
controls in the PRC.





PRC
companies have historically not adopted a Western style of management and
financial reporting concepts and practices, which includes strong corporate
governance, internal controls and, computer, financial and other control
systems.  In addition, we may have difficulty in hiring and retaining
a sufficient number of qualified employees to work in the PRC.  As a
result of these factors, we may experience difficulty in establishing
management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and
instituting business practices that meet Western
standards.  Therefore, we may, in turn, experience difficulties in
implementing and maintaining adequate internal controls.  Any such
deficiencies, weaknesses or lack of compliance could have a materially adverse
effect on our business.





RISKS
RELATED TO OUR COMMON STOCK





We
have not voluntarily implemented various corporate governance measures, in the
absence of which, stockholders may have more limited protections against
interested director transactions, conflicts of interest and similar
matters.





Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities
markets.  Some of these measures have been adopted in response to
legal requirements.  Others have been adopted by companies in response
to the requirements of national securities exchanges, such as the NYSE or The
NASDAQ Stock Market, on which their securities are listed. Among the corporate
governance measures that are required under the rules of national securities
exchanges are those that address board of directors' independence, audit
committee oversight, and the adoption of a code of ethics.  Although
we have adopted a Code of Ethics, we have not yet adopted any of these other
corporate governance measures and, since our securities are not yet listed on a
national securities exchange, we are not required to do so.  We have
not adopted corporate governance measures such as an audit or other independent
committees of our board of directors as we presently do not have any independent
directors.  If we expand our board membership in future periods to
include additional independent directors, we may seek to establish an audit and
other committees of our board of directors.  It is possible that if we
were to adopt some or all of these corporate governance measures, stockholders
would benefit from somewhat greater assurances that internal corporate decisions
were being made by disinterested directors and that policies had been
implemented to define responsible conduct.  For example, in the
absence of audit, nominating and compensation committees comprised of at least a
majority of independent directors, decisions concerning matters such as
compensation packages to our senior officers and recommendations for director
nominees may be made by a majority of directors who have an interest in the
outcome of the matters being decided.  Prospective investors should
bear in mind our current lack of corporate governance measures in formulating
their investment decisions.




24


Provisions
of our Certificate of Incorporation and bylaws may delay or prevent a takeover
which may not be in the best interests of our stockholders.





Provisions
of our articles of incorporation and bylaws may be deemed to have anti-takeover
effects, which include when and by whom special meetings of our shareholders may
be called, and may delay, defer or prevent a takeover attempt.  In
addition, certain provisions of the Nevada Revised Statutes also may be deemed
to have certain anti-takeover effects which include that control of shares
acquired in excess of certain specified thresholds will not possess any voting
rights unless these voting rights are approved by a majority of a corporation's
disinterested shareholders.





In
addition, our articles of incorporation authorize the issuance of up to
10,000,000 shares of preferred stock with such rights and preferences as may be
determined from time to time by our Board of Directors, of which no shares are
currently outstanding.  Our Board of Directors may, without
shareholder approval, issue preferred stock with dividends, liquidation,
conversion, voting or other rights that could adversely affect the voting power
or other rights of the holders of our common stock.





Our
stock price will fluctuate and could subject our company to
litigation.





The
market price of our common stock may fluctuate significantly in response to a
number of factors, some of which are beyond its control.  These
factors include:





·
            Quarterly
      variations in operating results;


·
            Changes
      in accounting treatments or
principles;


·
            Additions
      or departures of key personnel;


·
            Stock
      market price and volume fluctuations of publicly-traded companies in
      general and Chinese-based companies in particular;
  and


·
            General
      political, economic and market
conditions.





Because
our stock currently trades below $5.00 per share, and is quoted on the OTC
Bulletin Board, our stock is considered a "penny stock" which can adversely
affect its liquidity.





As the
trading price of our common stock is less than $5.00 per share, our common stock
is considered a "penny stock," and trading in our common stock is subject to the
requirements of Rule 15g-9 under the Securities Exchange Act of
1934.  Under this rule, broker/dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements.  The broker/dealer
must make an individualized written suitability determination for the purchaser
and receive the purchaser's written consent prior to the
transaction.





SEC
regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks.  These requirements severely limit the liquidity of
securities in the secondary market because few broker or dealers are likely to
undertake these compliance activities.  In addition to the
applicability of the penny stock rules, other risks associated with trading in
penny stocks could also be price fluctuations and the lack of a liquid
market.





ITEM
1B. UNRESOLVED STAFF COMMENTS.





None.





ITEM
2. PROPERTIES.





Our
facilities include our principal executive offices, located at 1104 Jiatang Road
Jiading District, Shanghai China 201807. We lease our principal executive office
building and warehouse space, which consists of approximately 1,860 square feet,
from Shanghai Shanhai Group, an unaffiliated third party, under leases expiring
in December 2010 for an annual rental of approximately $32,000, increasing
during the lease years beginning in 2008 in amounts ranging from 8% to 10%
annually.





Our other
executive office is located at Room 701-704, No 11 Guotai Road, under leases
entered into on July 16, 2008 for an annual rental of approximately $111,462.
The lease agreement will expire on July 15, 2010.




25


Until
August 2005 we leased approximately 21,500 square feet of manufacturing space
from Shanghai LiKang Pharmaceutical Technology Company, Limited, an affiliate,
under a lease originally expiring December 2006 for an annual rent of
approximately $11,500.  In August 2005 we purchased this building,
which includes an assignment of the land use permit, for
$333,675.  See Part II, Item 12. Certain Relationships and Related
Transactions, and Director Independence appearing later in this annual
report.





We also
lease an additional approximate 2005 square feet of warehouse space from
Shanghai Henglian Industrial Co. Limited, an unaffiliated third party, under a
lease that we entered into on November 1, 2008 for an annual rental of
approximately $41,366. The lease agreement will expire on October 31,
2009.





ITEM
3. LEGAL PROCEEDINGS.





None.





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





None.





PART
II





ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.





Our
common stock is quoted on the Over The Counter Bulletin Board
(“OTCBB”).  On March 24, 2005, our symbol was changed from KSHR to
LWLL in connection with a 1:10 reverse split of our common stock effective on
that date.  The reported high and low closing prices for the common
stock as reported on the OTCBB are shown below for the periods indicated. The
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not represent actual transactions.





High
                  
                  
                  LowFiscal
      2007First
      quarter ended March 31, 2007
                  
                  $
                  0.30
                  
                  
                  $
                  0.18Second
      quarter ended June 30, 2007
                  
                  $
                  0.25
                  
                  
                  $
                  0.14Third
      quarter ended September 30, 2007
                  
                  $
                  0.19
                  
                  
                  $
                  0.10Fourth
      quarter ended December 31, 2007
                  
                  $
                  0.40
                  
                  
                  $
                  0.11Fiscal
      2008First
      quarter ended March 31, 2008
                  
                  $
                  0.23
                  
                  
                  $
                  0.16Second
      quarter ended June 30, 2008
                  
                  $
                  0.28
                  
                  
                  $
                  0.19Third
      quarter ended September 30, 2008
                  
                  $
                  0.25
                  
                  
                  $
                  0.07Fourth
      quarter ended December 31, 2008
                  
                  $
                  0.09
                  
                  
                  $
                  0.04





On March
31, 2009, the last sale price of our common stock as reported on the OTCBB was
$0.06.  As of December 31, 2008, there were approximately 128 record
owners of our common stock.





Dividend
Policy





We have
never paid cash dividends on our common stock.  Payment of dividends
will be within the sole discretion of our Board of Directors and will depend,
among other factors, upon our earnings, capital requirements and our operating
and financial condition.  At the present time, our anticipated
financial capital requirements are such that we intend to follow a policy of
retaining earnings in order to finance the development of our
business.




26


While we
have no current intention of paying dividends on our common stock, should we
decide in the future to do so, as a holding company, our ability to pay
dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiaries.  In addition, our
operating subsidiaries, from time to time, may be subject to restrictions on
their ability to make distributions to us, including as a result of restrictive
covenants in loan agreements, restrictions on the conversion of local currency
into U.S. dollars or other hard currency and other regulatory
restrictions.





Recent
Sales of Unregistered Securities





In March
2008, the Company entered into a two month agreement with SmallCapVoice.Com,
Inc. to provide the Company with financial public relations services. In
connection with this agreement, the Company will pay $3,500 per month and issues
a total of 35,000 shares of the Company’s common stock. On March 11, 2008, the
Company issued 35,000 shares to SmallCapVoice.Com, Inc. The Company valued these
services using the fair value of common shares on the grant date at $0.19 per
share and recorded consulting expense of $6,650.





On May 1,
2008, the Company entered into a two year agreement with China Health Capital
Group, Inc. (“CHC”) to provide the Company with financial and investment
services. In connection with this agreement, on June 24, 2008, the Company
issued 2,000,000 shares of Common Stock valued at $0.21 per share to CHC and
recorded $420,000 as deferred compensation. For the fiscal year ended December
31, 2008, amortization of consulting compensation amount to
$140,000.





On June
27, 2008, Monarch Capital Fund, Ltd. exercised a warrant to purchase 100,000
shares of common stock with price of $0.20 per share. The Company received
proceeds from this warrant exercise of $20,000 on June 24, 2008.





ITEM
6.  SELECTED FINANCIAL DATA.





N/A.





ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.





The
following discussion contains forward-looking statements. Forward looking
statements are identified by words and phrases such as “anticipate”, “intend”,
“expect” and words and phrases of similar import. We caution investors that
forward-looking statements are only predictions based on our current
expectations about future events and are not guarantees of future performance.
Our actual results, performance or achievements could differ materially from
those expressed or implied by the forward-looking statements due to risks,
uncertainties and assumptions that are difficult to predict, including those set
forth in Item 1A below. We encourage you to read those risk factors carefully
along with the other information provided in this report and in our other
filings with the SEC before deciding to invest in our stock or to maintain or
change your investment. We undertake no obligation to revise or update any
forward-looking statement for any reason, except as required by
law.





You
should read this MD&A in conjunction with the Consolidated Financial
Statements and related Notes in Item 1.





In August
2006, the Company incorporated a new subsidiary, Shanghai LiKang International
Trade Co., Ltd. (“LiKang International”). Since its inception, LiKang
International has primarily served as an agent for third parties who desire to
export goods from China, including computers, computer components, small medical
equipment and instruments, meters and electromechanical devices. In October
2006, LiKang International expanded its business to include light weight
construction materials, textile crafts, furniture, and raw chemical
materials.





On May
31, 2008, LiKang Disinfectant entered into a stock purchase agreement under
which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang
International to Linkwell International Trading Co., Ltd, a company registered
in Hong Kong.  Pursuant to the terms of the agreement, LiKang
Disinfectant will receive RMB 2,000,000 once the agreement is approved by the
Ministry of Commerce, the People’s Republic of China and such approval was
obtained on March 27, 2008. The amount due from Linkwell International Trading
is expected to be paid to us in July, 2009.




27


OVERVIEW





Since
1988 we have developed, manufactured and distributed disinfectant health care
products primarily to the medical industry in China.  In recent years,
China has witnessed a variety of public health crises, such as the outbreak of
SARS, which demonstrated the need for increased health standards in
China.  In response, beginning in 2002, the Chinese government has
undertaken various initiatives to improve public health and living standards,
including continuing efforts to educate the public about the need for proper
sanitation procedures and the establishment of production standards for the
disinfectant industry in China.  As a result of this heightened
license and permit system, all disinfectant manufacturers must comply with
"qualified disinfection product manufacturing enterprise requirements”
established by the Ministry of Public Health.  The requirements
include standards for hardware (including facilities and machinery), software
(including the technology to monitor the facilities), and for the knowledge and
capability of both the production staff and quality control
procedures.  Following the adoption of the industry standards in 2002,
we have been granted 31 hygiene licenses by the Ministry of Public
Health.





We
believe that the government standards adopted in July 2002 have increased the
barriers to entry for competitors in the disinfectant industry in
China.  The implementation of these higher production standards and
license requirements has effectively decreased the competitiveness of small to
mid size manufacturers since the new standards are especially difficult for
companies with limited product offerings and inferior technical
content.  In addition, prior to the adoption of industry standards,
disinfectant products were generally marketed and sold based on price as opposed
to quality.  We believe that as a result of these new industry
standards, the marketplace has become focused on product quality, which we
believe has enabled us to increase our commercial customer base and
subsequently, our revenues.





Historically,
our focus has been on the commercial distribution of our
products.  Our customers include hospitals, medical suppliers and
distribution companies throughout China. Recently we have made efforts to expand
our distribution to reach to the retail market.  We have repackaged
select commercial disinfectant products for sale to the mass consumer market and
have begun to expand our customer base to include hotels, schools, supermarkets,
and drugstores.  By virtue of the Chinese government's continuing
focus on educating the Chinese population about the benefits of proper
sanitation procedures, we believe that one key to increasing our revenues is the
continued expansion of the retail distribution of our products.





The
disinfectant industry in China is an emerging industry that is populated with
small, regional companies.  We estimate that there are in excess of
1,000 manufacturers and distributors of disinfectant products in China; however,
most domestic competitors offer a limited line of products and there are few
domestic companies with a nationwide presence.  We believe that our
national marketing and sales presence throughout all 22 provinces, four
autonomous regions, and four major municipalities of China gives us a
competitive advantage over other disinfectant companies in China and enables us
to leverage our brand awareness for products with commercial customers to the
retail marketplace.





Our
present manufacturing facilities and production capacities are sufficient for
the foreseeable future, and we believe that we have the necessary assets and
capital available to us to enable us to increase our revenues in future periods
as the overall market for disinfectant products in China continues to
increase.  For the coming future, we will continue to focus our
efforts on developing a retail market for our products, as well as expanding our
traditional base of commercial customers.  In addition, we may also
consider the possible acquisition of independent sales networks which could be
used to increase our product distribution as well as smaller, regional companies
in our industry.





Results
of Operations





The table
below sets forth the results of operations for fiscal year ended December 31,
2008 as compared to fiscal year ended December 31, 2007 accompanied by the
change amount and percentage of changes. We recasted numbers for the fiscal year
ended December 31, 2007 by subtracting the results of operations of LiKang
International from the Company’s fiscal year ended December 31, 2007
consolidated statement of operation to give a more accurate presentation of
comparative figures in the consolidated financial statements in
2008.





Fiscal
year ended December 31, 2008 as compared to the fiscal year ended December 31,
2007





2008
                
                
                2007
                
                
                Change
                
                
                % of
                  ChangeNet
      revenues
                
                $
                11,985,924
                
                
                $
                8,127,717
                
                
                $
                3,858,207
                
                
                
                47
                %Cost
      of sales
                
                
                5,963,830
                
                
                
                4,259,128
                
                
                
                1,704,702
                
                
                
                40
                %Selling
      expenses
                
                
                1,083,431
                
                
                
                848,489
                
                
                
                234,942
                
                
                
                28
                %G&A
      expenses
                
                
                2,432,327
                
                
                
                2,629,006
                
                
                
                (196,679
                )
                
                
                -8
                %Total
      operating expenses
                
                
                3,515,758
                
                
                
                3,477,494
                
                
                
                38,264
                
                
                
                2
                %Operating
      income
                
                
                2,506,336
                
                
                
                391,095
                
                
                
                2,115,241
                
                
                
                541
                %Total
      other (expense) income
                
                
                (405,320
                )
                
                
                80,827
                
                
                
                (486,147
                )
                
                
                -601
                %Gain
      from discontinued operations
                
                
                65,083
                
                
                
                21,137
                
                
                
                43,946
                
                
                
                208
                %Income
      taxes
                
                
                (387,324
                )
                
                
                -
                
                
                
                (387,324
                )
                
                
                -Minority
      interest
                
                
                (149,505
                )
                
                
                (132,924
                )
                
                
                (16,581
                )
                
                
                12
                %Net
      income
                
                $
                1,629,270
                
                
                $
                360,135
                
                
                $
                1,269,135
                
                
                
                352
                %





Other
key indicators





2008
                
                
                2007
                
                
                % ofchangeCost
      of revenues as a percentage of revenues
                
                
                50
                %
                
                
                52
                %
                
                
                -2
                %Gross
      profit margin
                
                
                50
                %
                
                
                48
                %
                
                
                2
                %Selling
      expenses as a percentage of revenues
                
                
                9
                %
                
                
                10
                %
                
                
                -1
                %G&A
      expenses as a percentage of revenues
                
                
                20
                %
                
                
                32
                %
                
                
                -12
                %Total
      operating expenses as a percentage of revenues
                
                
                29
                %
                
                
                43
                %
                
                
                -14
                %





Net
revenues





Net
revenues for the fiscal year ended December 31, 2008 increased $3,858,207, or
approximately 47%, to $11,985,924, compared with $8,127,717 for the fiscal year
ended December 31, 2007.We believe this increase in demand was due to an
increase in our sales staff and customer recognition of our high-quality,
competitively priced disinfectant products.





Approximately
78% of our total net revenues were attributable to sales to non-related parties
and approximately 22% were attributable to sales to related parties for the
fiscal year ended December 31, 2008, as compared to approximately 67% and 33%,
respectively, for the fiscal year ended December 31, 2007.  While
sales to unrelated parties increased by $3,876,338 approximately 71% for the
fiscal year ended December 31, 2008 from the comparable period in fiscal year
2007, sales to related parties decreased $18,131, or approximately 1%. This
change in sales distribution reflects management’s desire to diversify and grow
its customer base through own distribution channel and to obtain greater
independence and market shares.





Our net
revenues for the fiscal year ended December 31, 2008, included revenues from
ZhongYou Pharmaceutical, an affiliated entity, of $2,553,602 compared to
$2,354,010 from sales during the same period in 2007. This represents an
increase of $199,592 or approximately 8%. Included in our net revenues for the
fiscal year ended December 31, 2008 were revenues of $51,702 from sales of our
products to Shanghai LiKang Meirui Pharmaceuticals High-Tech Co., Ltd., an
affiliate, for an increase of $16,995 or approximately 49%, from $34,707 for the
fiscal year ended December 31, 2007. Also for the fiscal year ended December
31,2008 there were revenues of $18,255 from sales of our products to Shanghai
Jiuqing Pharmaceuticals Company, Limited, an affiliate entity, for an increase
of $4,867 or approximately 36%, from the fiscal year ended December 31,
2007.





Cost
of revenues





Cost of
revenues includes raw materials and manufacturing costs, such as labor, rent and
an allocated portion of overhead expenses including utilities directly related
to the production activities.  For the fiscal year ended December 31,
2008, cost of revenues amounted to $5,963,830 or approximately 50% of net
revenues as compared to cost of revenues of $4,259,128, or approximately 52% of
net revenues for the fiscal year ended December 31,
2007.  Historically, our cost of revenues has been comprised as
follows: approximately 65% to raw material costs and 35% to manufacturing
costs.  The decrease in cost of revenues as a percentage of net
revenues for the fiscal year ended December 31, 2008 as compared to the fiscal
year ended December 31, 2007 is attributable, primarily, to price decreases of
raw materials during our 2008 fiscal year.  We also experienced a
decrease in overhead costs, including utilities and transportation during the
fiscal year ended December 31, 2008 as compared to the fiscal year ended
December 31, 2007 because we outsourced part of our production to a third party
which represented 16% and 14% of total cost of sales for the fiscal years ended
December 31, 2008 and 2007, respectively. We have gained the benefits of the
majority of these decreased costs in order to increase our market share in the
disinfectant industry.




28


We
purchase raw materials from six primary suppliers and we have purchase contracts
with these suppliers in an effort to ensure a steady supply of raw
materials.  We purchase raw materials and finished products from
Shanghai LiKang Meirui Pharmaceutical High-Tech Co. Ltd., an
affiliate.  These purchases totaled $0 and $8,544 for the fiscal years
ended December 31, 2008 and 2007, respectively. We made purchases from ZhongYou
Pharmaceutical, an affiliate entity, in the amount of $84,833 and $233,478 for
the fiscal years ended December 31, 2008 and 2007, respectively. We also
purchased from Shanghai LiKang Biological High-Tech Company, Ltd., an affiliate,
raw materials totaling $160,395 and $57,032 for the fiscal years ended December
31, 2008 and 2007, respectively.





Gross
profit





Gross
profit for the fiscal year ended December 31, 2008 was $6,022,094 or
approximately 50% of net revenues, as compared to $3,868,589 or approximately
48% of net revenues for the fiscal year ended December 31, 2007.  The
increase in gross margin reflects an overall decrease in the price of raw
materials and overhead, the proportionally larger increase in revenues from
sales of new products, and overall increase in sales volume and selling price
for some products. Sales of new productsincreased gross profit
for the fiscal year ended December 31, 2008 by 14% as compared to fiscal year
2007. An increase in both sales volume and selling price of certain existing
products increased gross profit for the fiscal year ended December 31, 2008 by
70% as compared to fiscal year 2007. Sales of products which increase in sales
volume but had a decreased selling price contributed an increase in gross profit
of 16%.





Operating
expenses





Total
operating expenses for the fiscal year ended December 31, 2008 were $3,515,758,
an increase of $38,264, or approximately 2%, from total operating expenses in
the fiscal year ended December 31, 2007 of $3,477,494.  For the fiscal
year ended December 31, 2008, this increase included the following:





·
            Selling
      expenses in 2008amounted to $1,083,431 as compared to $848,488 for the
      fiscal year ended December 31, 2007, an increase of $234,943 or
      approximately 28%.  This increase is primarily attributable to
      increase in sales and marketing staff in order to building out our sales
      and service division to improve future
growth;





·
            Shipping
      costs amounted to $269,518 compared to $274,086 for the fiscal year ended
      December 31, 2007 ,a decrease of $4,568 or
2%;





·
            Advertising
      costs amounted to $2,943 compared to $5,069 for the fiscal year ended
      December 31, 2007, a decrease of $2,126 or
42%;





·
            Repair
      and maintenance costs amounted to $23,006 as compared to $11,733 for the
      fiscal year ended December 31, 2007, an increase of $11,273 or 96%;
      and





·
            General
      and administrative expenses were $2,432,327 as compared to $2,629,006 for
      the fiscal year ended December 31, 2007, a decrease of $196,679, or
      approximately 8%.  These expenses included the
      following:





o
            We
      incurred consulting fees during the fiscal years ended December 31, 2008
      and 2007 of $418,688 and $764,050, respectively.  These fees
      were substantially related to the issuance of common stock for business
      development and management services related to our administrative
      operations in the United States;
and





o
            For
      the fiscal year ended December 31, 2008, salaries and wages and related
      benefits decreased to $545,718 as compared to $696,693 for the fiscal year
      ended December 31, 2007, a decrease of approximately $150,970 or
      approximately 22%.


29


Income
from operations





We
reported income from operations of $2,506,336 for the fiscal year ended December
31, 2008 as compared to income from operations of $391,095 for the fiscal year
ended December 31, 2007, an increase of $2,115,241 or approximately
541%.  This increase in income from operations is due primarily to an
increase in sales revenue and better control over the cost of sales, selling
expenses and general and administrative expenses, thus resulting in better
efficiency and profitability of the operation.





Other
income (expenses)





For the
fiscal year ended December 31, 2008, the total other expenses amounted to
$(405,320) as compared to total income amount to $80,827 for the fiscal year
ended December 31, 2007, a decrease of $486,147. This change is primarily
attributable to:





§
            Put
      option expenses of $281,030 compare to $0 for fiscal year ended December
      31, 2007. This put option expenses results from the Stockholders Agreement
      with Ecolab (“Stockholders Agreement”). Ecolab also has an option (“Put
      Option”) to sell the 888,889 shares (“Shares”) of common stock, par value
      $0.001, of Linkwell Tech that Ecolab purchased under the Stock Purchase
      Agreement, back to Linkwell Tech in exchange for, as determined by
      Linkwell Corp., cash in the amount of $2,400,000,or the lesser of
      (a) 10,000,000 shares of our common stock, or (b) such number of shares of
      Linkwell Corp. common stock as is determined by dividing (i) 3,500,000 by
      (ii) the average daily closing price of the Company’s common stock for the
      twenty days on which our shares of common stock were traded on the OTC
      Bulletin Board prior to the date the Put Option is exercised. The Company
      recognized the maximum expenses of the Put Option and a call option also
      provided for in the Stockholders Agreement as $400,000. Deducting the
      minority interest in December 2008 of $118,970, total put option expenses
      shown in the Statement of Operation is
$281,030.





§
            A
      decrease in other income/(expenses) of $211,449 resulting in other
      expenses of $(66,554) for the fiscal year ended December 31, 2008 as
      compared to other income to $144,895 for the fiscal year ended December
      31, 2007. This decrease was attributable to the increased expenses in
      donation and penalty in the fiscal year ended December 31,
      2008.





Income
before discontinued operations, income taxes and minority interest





For the
fiscal year ended December 31, 2008 our income before discontinued operations,
income taxes and minority interest was $2,101,016 as compared to $471,922 for
the fiscal year ended December 31, 2007, an increase of $1,629,094 or
approximately 345%.





Discontinued
operations





In March
2008, we sold 100% of the capital stock of our fully owned subsidiary LiKang
International Trading to Linkwell International Trading Co., Ltd (“Linkwell
Trading”), a company registered in Hong Kong and 100% owned by our Vice
President, Secretary and Director, Wei Guan. The total gain from discontinued
operations of $65,083 includes gain from the sale of LiKang International amount
of $25,322 in the fiscal year ended December 31, 2008. For the fiscal year ended
December 31, 2007, the operating income from discontinued operations was
$21,137.





Minority
interest





For the
fiscal year ended December 31, 2008, we reported a minority interest expense of
$149,505 as compared to $132,924 for the fiscal year ended December 31, 2007.
The minority interest is attributable to Linkwell Tech's 10% minority
shareholder, Ecolab after March 31, 2008 and Shanghai Shanhai prior March 25,
2008.





Net
income





We
reported net income of $1,629,270 for the fiscal year ended December 31, 2008,
as compared to net income of $360,135 for the fiscal year ended December 31,
2007.  Net income for Linkwell’s subsidiary, LiKang Disinfectant,
increased approximately 102%, with net income of $2,456,427 for the year end
December 31, 2008 compared to $1,217,455 in 2007.




30


The
primary causes for the increase in net income for the year ended 2008 was
attributable to three key factors; (1) the increase in sales revenue; (2) the
decrease in cost of sales and selling expenses as percentage to sales revenue;
(3) the decrease in general and administrative expenses.





As
described in the “Gross profit” paragraph above, we experienced a decrease in
the price of raw materials.  Our management had worked with raw
material suppliers to minimize any additional price increases during
2008.





Liquidity
and Capital Resources




As shown
in the accompanying financial statements, our working capital increased
$4,386,121, or approximately 79%, from $5,565,804 on December 31, 2007 to
$9,951,925 on December 31, 2008.  With the expansion of our
businesses, we anticipate a strong demand on our capital resources in the near
future. In addition to our working capital on hand, we intend to obtain required
capital through a combination of bank loans and the sale of our equity
securities. Although there are no commitments or agreements on the part of
anyone at this time to provide us with additional bank financing or to purchase
securities, we are optimistic we will be able to obtain additional capital
resources to fund our business expansions.




We
currently have no material commitments for capital expenditures. At December 31,
2008, we had approximately $744,069 in short term loans. Other than our working
capital and loans, we presently have no other alternative capital resources
available to us. We plan to build additional product lines and upgrade our
manufacturing facilities, in order to expand our producing capacity and improve
the quality of our products. Based on our preliminary estimates, it will require
additional capital of approximately $1 million.




We
need to raise additional capital resources to meet the demands described above.
We may seek to raise additional capital through the sale of equity securities.
There can be no assurances that any additional debt or equity financing will be
available to us on acceptable terms, if at all. The inability to obtain debt or
equity financing could have a material adverse effect on our operating results,
and as a result we could be required to cease or significantly reduce our
operations, seek a merger partner or sell additional securities on terms that
may be disadvantageous to shareholders.




NET
CASH FROM OPERATING ACTIVITES




Net cash
provided by operating activities for the year ended December 31, 2008 was
$204,377 as compared to net cash used in operating activities of $633,394 for
the year ended December 31, 2007, an increase of $837,771 or 132%. For the year
ended December 31, 2008, we used cash to fund a net increase in accounts
receivable of $1,108,415, increase of $1,633,398 in accounts receivable -
related parties, an increase of $391,443 in inventories, and an increase of
$46,645 in other receivables, and an increase of $339,378 in prepaid and other
current assets. These decreases were offset by our net income, an increase in
advances from customers of $66,682, an increase of $127,170 in tax payable, and
an increase of $493,029 in accounts payable, accrued expenses and other
payables.




NET
CASH FROM INVESTING ACTIVITIES




Net cash
used in investing activities for the year ended December 31, 2008 was $508,045
as compared to net cash used in investing activities of $99,349 for the same
period in 2007, an increase of $408,696 or 441%. This change is attributable to
an increase of $399,057 cash paid in acquisition, and a purchase of $108,988 in
property, plant and equipment.




NET
CASH FROM FINANCING ACTIVITIES




Net cash
provided by financing activities was $1,153,088 for the year ended December 31,
2008, as compared to net cash used in financing activities of $388,855 for the
year ended December 31, 2007, a increase of $1,541,943 or 397%. The increased
cash flow from financing activities is chiefly a result of an increase of
proceeds from warrants exercised of $20,000, an increase of $2,000,000 from
issuance of shares of our common stock, and an increase of $52,782 in proceeds
from a related party. The increases were offset by an increase of $919,694 due
from related parties.




31




CRITICAL
ACCOUNTING POLICIES




The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and
liabilities.




We base
our estimates and judgments on historical experience and on various other
assumptions we believe to be reasonable under the circumstances. Future events,
however, may differ markedly from our current expectations and assumptions.
While there are a number of significant accounting policies affecting our
consolidated financial statements; we believe the following critical accounting
policies involve the most complex, difficult and subjective estimates and
judgments: allowance for doubtful accounts; income taxes; stock-based
compensation; and asset impairment.




ALLOWANCE
FOR DOUBTFUL ACCOUNTS




We
maintain an allowance for doubtful accounts to reduce amounts to their estimated
realizable value. A considerable amount of judgment is required when we assess
the realization of accounts receivables, including assessing the probability of
collection and the current credit-worthiness of each customer. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, an additional provision for doubtful accounts
could be required. We initially record a provision for doubtful accounts based
on our historical experience, and then adjust this provision at the end of each
reporting period based on a detailed assessment of our accounts receivable and
allowance for doubtful accounts. In estimating the provision for doubtful
accounts, we consider: (i) the aging of the accounts receivable;
(ii) trends within and ratios involving the age of the accounts receivable;
(iii) the customer mix in each of the aging categories and the nature of
the receivable; (iv) our historical provision for doubtful accounts;
(v) the credit worthiness of the customer; and (vi) the economic
conditions of the customer's industry as well as general economic conditions,
among other factors.




INCOME
TAXES




We
account for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS 109 prescribes the use of the liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred
tax assets and liabilities are measured using the enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. We then assess the likelihood that our
deferred tax assets will be recovered from future taxable income and to the
extent we believe that recovery is not likely, we establish a valuation
allowance. To the extent we establish a valuation allowance, or increase or
decrease this allowance in a period, we increase or decrease our income tax
provision in our statement of operations. If any of our estimates of our prior
period taxable income or loss prove to be incorrect, material differences could
impact the amount and timing of income tax benefits or payments for any period.
In addition, as a result of the significant change in the Company's ownership,
the Company's future use of its existing net operating losses may be
limited.




The
Company currently operates in the PRC, however, our operations could change in
the near future and we could be subject to tax liability involving a
consideration of uncertainties in the application and interpretation of complex
tax regulations in a multitude of jurisdictions across operations in other
countries.




We
recognize potential liabilities and record tax liabilities for anticipated tax
audit issues in the U.S. and other tax jurisdictions based on our estimate of
whether, and the extent to which, additional taxes will be due. The tax
liabilities are reflected net of realized tax loss carry forwards. We adjust
these reserves upon specific events; however, due to the complexity of some of
these uncertainties, the ultimate resolution may result in a payment that is
different from our current estimate of the tax liabilities. If our estimate of
tax liabilities proves to be less than the ultimate assessment, an additional
charge to expense would result. If payment of these amounts ultimately proves to
be less than the recorded amounts, the reversal of the liabilities would result
in tax benefits being recognized in the period when the contingency has been
resolved and the liabilities are no longer necessary.




Changes
in tax laws, regulations, agreements and treaties, foreign currency exchange
restrictions or our level of operations or profitability in each taxing
jurisdiction could have an impact upon the amount of income taxes that we
provide during any given year.




32




STOCK-BASED
COMPENSATION




We
account for share-based payments in accordance with SFAS No. 123(R),
Share-Based Payment. Under the fair value recognition provisions of this
statement, share-based compensation cost is measured at the grant date based on
the value of the award and is recognized as expense over the vesting period.
Determining the fair value of share-based awards at the grant date requires
judgment, including estimating expected volatility. In addition, judgment is
also required in estimating the amount of share-based awards that are expected
to be forfeited. If actual results differ significantly from these estimates,
stock-based compensation expense and our results of operations could be
materially impacted.




ASSET
IMPAIRMENT




We
periodically evaluate the carrying value of other long-lived assets, including,
but not limited to, property and equipment and intangible assets, when events
and circumstances warrant such a review. The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flows from
such asset is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair value of the
long-lived asset. Fair value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Significant
estimates are utilized to calculate expected future cash flows utilized in
impairment analyses. We also utilize judgment to determine other factors within
fair value analyses, including the applicable discount rate




OFF-BALANCE
SHEET ARRANGEMENTS




There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources, that are material to
investors.




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





N/A.





ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





Our
financial statements are contained in pages F-1 through F-26 which appear at the
end of this annual report.
 
 ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.





None.





ITEM
9A. CONTROLS AND PROCEDURES.





Disclosure
Controls and Procedures





Our
management, with the participation of our principal executive officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31,
2008. The term “disclosure controls and procedures,” as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure
controls and procedures as of December 31, 2008, our principal executive officer
concluded that, as of such date, our disclosure controls and procedures were not
effective at the reasonable assurance level.




33


Internal
Control Over Financial Reporting





Management’s
Annual Report on Internal Control over Financial Reporting





The
management of the company is responsible for establishing and maintaining
adequate internal control over financial reporting for the company. Internal
control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a process designed by,
or under the supervision of, the company’s principal executive and principal
financial officers and effected by the company’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principals and
includes those policies and procedures that:





•   Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the
company;





•   Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and





•   Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a
material effect on the financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





The
company’s management assessed the effectiveness of the company’s internal
control over financial reporting as of December 31, 2008. In making this
assessment, the company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework.





Based on
our assessment, management concluded that, as of December 31, 2008, our internal
control over financial reporting is not effective due to a material weakness.
This material weakness is that all of our employees and accounting staff are
located in the PRC and we do not presently have a chief financial officer,
comptroller or similarly titled senior financial officer who is bilingual and
experienced in the application of U.S. GAAP.  We have taken the steps
to eliminate this material weakness including the hiring of additional
accounting consulting staff to review and oversee our application of generally
accepted accounting principles in the United States to bring additional
financial expertise to our organization and to facilitate the flow of
information to our independent accountants.  This accounting
consulting staff has assisted us in implementing additional practices to ensure
that we (i) properly accrue undeclared and unpaid dividends, (ii) properly
record related party transactions, and (iii) properly account for changes in
loans payable.  However, until we expand our full time staff to
include a bilingual senior financial officer who has the requisite experience
necessary, as well as supplement the accounting knowledge of our staff,
notwithstanding the guidance provided to us by the accounting consulting staff
we could continue to have material weaknesses in our disclosure controls that
may lead to restatements of our financial statements.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management’s report
in this annual report.




34


ITEM
9B. OTHER INFORMATION.





None.





PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVRNANCE.





Directors and Executive
Officers




Name
                  
                  Age
                  
                  PositionsXuelian
      Bian
                  
                  43
                  
                  Chief
      Executive Officer, President and Chairman of the BoardWei
      Guan
                  
                  43
                  
                  Vice
      President and
Director




Mr.
Xuelian Bian – has served as our Chairman of the Board, Chief Executive Officer
and President since May 2, 2005.  Simultaneously, he has served as
Chief Executive Officer, President and a Director of Linkwell Tech since its
inception in June 2004 and as General Manager of LiKang Disinfectant since
1993.  From 1990 to 1993, he was a project assistant in charge of
science and technology achievement application in the Second Military Medical
University, Shanghai, China. From 1986 to 1990, Mr. Bian was a member of the
technical staff in the Epidemiological Institute in the Second Military Medical
University.  Mr. Bian contributed to the compilation of "Disinfection
- Antiseptic - Anticorrosion - Preservation" and "Modern Disinfection Study" of
which the first book laid the foundation for Chinese disinfectant
study.  Mr. Bian started related research with his colleagues on the
microbiology sterilization effect examination, high strength ultraviolet lamp
tube and decontaminating apparatus prior to the inception of LiKang
Disinfectant.  Mr. Bian graduated from the China Army Second Military
Medical University in 1990 with a bachelor degree in public health.





Mr. Wei
Guan – has served as our Vice President and a member of our Board of Directors
since May 2, 2005.  He has served as Vice President of Linkwell Tech
since its inception in June 2004 and vice General Manager of Shanghai LiKang
Disinfectant Company, Limited since 2002.  From 1987 to 1990, Mr. Guan
worked at Hunan Machinery Importing & Exporting Corporation as a member of
management.  From 1990 to 2002, he worked for the Division of
Importing and Export at Worldbest Group as a general manager.  Mr.
Guan graduated from Hunan University in Changsha, Hunan Province with a bachelor
degree in Industry Foreign Trading in 1987.





There are
no family relationships between any of the executive officers and
directors.  Each director is elected at our annual meeting of
stockholders and holds office until the next annual meeting of stockholders, or
until his successor is elected and qualified.





Key
Employees





Mr. Chun
Ming Huang, age 40, has served as COO of Linkwell Corporation since 2005. From
2001 until joining Linkwell in 2005, Mr. Huang served as the Associate
Director of the Analytical Department of WuXi Pharma Tech. Mr Huang received his
master degree in pharmaceuticals from the Second Military Medical University in
1992.





Ms. Gendi
Li, age 56, has served as LiKang Disinfectant's Controller since
2003.  From 1996 to 2003, Ms. Li was employed as an Executive
Accountant and Financial Manager for QiaoFu Construction Holding Company
(Shanghai).  From 1993 to 1996, Ms. Li was employed as an Executive
Accountant and Head of the Finance Department at Shanghai Yuxin Machinery Co.,
Ltd.  From 1968 to 1993, Ms. Li was employed in various financial
positions, including Executive Accountant, and Head of the Finance Department at
First Plastic Machinery Factory.  Ms. Li graduated from the Shanghai
Finance and Economics Institute.





Mr.
Wensheng Sun, age 40, has been LiKang Disinfectant's Vice-General Manager for
Production since 1995 and has held the same position at LiKang Disinfectant
since 1995 following completion of his Masters degree in Medicine at the Second
Military Medical University School of Pharmacy.





Mr. Rick
Wang, age 33, currently serves as Linkwell Corporation's Secretary.
Mr. Wang joined LiKang Disinfectant in 1999 and received his bachelor
degree from the Public Health Department of Xinjiang Medical College in
1997.




35


Code of Business Conduct and
Ethics





In
December 2005, we adopted a Code of Business Conduct and Ethics applicable to
our Chief Executive Officer, principal financial and accounting officers and
persons performing similar functions.  A Code of Business Conduct and
Ethics is a written standard designed to deter wrongdoing and to
promote:





·
            Honest
      and ethical conduct,


·
            Full,
      fair, accurate, timely and understandable disclosure in regulatory filings
      and public statements, compliance with applicable laws, rules and
      regulations,


·
            The
      prompt reporting violation of the code,
and


·
            Accountability
      for adherence to the Code.





We will
provide a copy, without charge, to any person desiring a copy of the Code of
Business Conduct and Ethics, by written request to, 1104 Jiatang Road Jiading
District, Shanghai China 201807, Attention: Corporate Secretary.





Committees of the Board of
Directors





Our Board
of Directors has not established any committees, including an Audit Committee, a
Compensation Committee or a Nominating Committee or any committees performing a
similar function.  The functions of those committees are being
undertaken by the entire board as a whole.  Because we do not have any
independent directors, our Board of Directors believes that the establishment of
committees of the Board would not provide any benefits to our company and could
be considered more form than substance.





We do not
have a policy regarding the consideration of any director candidates which may
be recommended by our stockholders, including the minimum qualifications for
director candidates, nor has our Board of Directors established a process for
identifying and evaluating director nominees.  We have not adopted a
policy regarding the handling of any potential recommendation of director
candidates by our stockholders, including the procedures to be
followed.  Our Board has not considered or adopted any of these
policies as we have never received a recommendation from any stockholder for any
candidate to serve on our Board of Directors.  Given that all of our
operations are located in the PRC and our lack of directors and officers
insurance coverage, we do not anticipate that any of our stockholders will make
such a recommendation in the near future.  While there have been no
nominations of additional directors proposed, in the event such a proposal is
made, all members of our Board will participate in the consideration of director
nominees.





None of
our directors is an “audit committee financial expert” within the meaning of
Item 401(e) of Regulation S-B.  In general, an “audit committee
financial expert” is an individual member of the audit committee or Board of
Directors who:





·
            Understands
      generally accepted accounting principles and financial
      statements,


·
            Is
      able to assess the general application of such principles in connection
      with accounting for estimates, accruals and
  reserves,


·
            Has
      experience preparing, auditing, analyzing or evaluating financial
      statements comparable to the breadth and complexity to our financial
      statements,


·
            Understands
      internal controls over financial reporting,
and


·
            Understands
      audit committee functions.





Our Board
of Directors is comprised of individuals who were integral to our formation and
who are involved in our day to day operations.  While we would prefer
that one or more of our directors be an audit committee financial expert, none
of these individuals who have been key to our development have professional
backgrounds in finance or accounting. When we are able to expand our Board of
Directors to include one or more independent directors, we intend to establish
an Audit Committee.  It is our intention that one or more of these
independent directors will also qualify as an audit committee financial
expert.  Our securities are not quoted on an exchange that has
requirements that a majority of our Board members be independent and we are not
currently otherwise subject to any law, rule or regulation requiring that all or
any portion of our Board of Directors include “independent” directors, nor is
our Board of Directors required to establish or maintain an Audit Committee or
other committee.


36


ITEM
11. EXECUTIVE COMPENSATION.





Summary Compensation
Table





The
following table summarizes all compensation recorded by us in each of the last
two completed fiscal years for our principal executive officer.  Our
principal executive officer also serves as our principal financial officer. No
other executive officer received total annual compensation exceeding
$100,000.





SUMMARY
      COMPENSATION TABLE





Name and principal
                                              position (a)
                                            
                                            Year
                                              (b)
                                            
                                            Salary
                                              ($)
                                              (c)
                                            
                                            
                                            Bonus
                                              ($)
                                              (d)
                                            
                                            
                                            Stock
                                              Awards
                                              ($)
                                              (e)
                                            
                                            
                                            Option
                                              Awards
                                              ($)
                                              (f)
                                            
                                            
                                            Non-Equity
                                              Incentive Plan
                                              Compensation
                                              ($)
                                              (g)
                                            
                                            
                                            Non-qualified
                                              Deferred
                                              Compensation
                                              Earnings
                                              ($)
                                              (h)
                                            
                                            
                                            All
                                              Other
                                              Compensations
                                              ($)
                                              (i)
                                            
                                            
                                            Total
                                              ($)
                                              (j)Xuelian
      Bian 1
                                            
                                            2008
                                            
                                            
                                            12,800
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            12,800Chief
      Executive Officer, principal
                                            
                                            2007
                                            
                                            
                                            12,800
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            10,250executive
      officer, and principal financial officer





1 Mr.
Bian has served as our Chief Executive Officer, Chief Financial Officer,
President and director since May 2, 2005.





Employment
Agreements





We are
not a party to any employment agreements.





Compensation
of Directors





Our Board
of Directors is presently comprised of our executive officers who do not receive
compensation for their services as directors.  At such time as we
expand our Board of Directors to include independent members we will establish a
policy for the compensation of those members.





ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.





Securities Authorized For
Issuance under Equity Compensation Plans





The
following table sets forth securities authorized for issuance under equity
compensation plans, including individual compensation arrangements, by us under
our Stock Option Plan and any compensation plans not previously approved by our
stockholders as of December 31, 2008.





Number of
                        securities to be
                        issued upon
                        exercise of
                        outstanding
                        options,
                        warrants and
                        rights (a)
                      
                      
                      Weighted
                        average exercise
                        price of
                        outstanding
                        options, warrants
                        and rights (b)
                      
                      
                      Number of
                        securities
                        remaining
                        available for
                        future issuance
                        under equity
                        compensation
                        plans (excluding
                        securities
                        reflected in
                        column (a)) (c)Plan
      categoryPlans
      approved by our stockholders:2005
      Equity Compensation Plan
                      
                      
                      2,000,000
                      
                      
                      
                      0.21
                      
                      
                      
                      8,000,000Plans
      not approved by stockholders:
                      
                      
                      N/A
                      
                      
                      
                      N/A
                      
                      
                      
                      N/ANone




37


Stock Option
Plans





Year
2000 Equity Compensation Plan





On
October 10, 2000, our Board of Directors adopted our Year 2000 Equity
Compensation Plan under which a total of 540,000 shares of common stock are made
available for the granting of awards, a portion or all of which may qualify as
incentive stock options, non-incentive stock options and restricted stock
grants.  The purpose of the plan, which was approved by our
shareholders on November 10, 2000, is to encourage stock ownership by our
officers, directors, key employees and consultants, and to give such persons a
greater personal interest in the success of our business and an added incentive
to continue to advance and contribute to us.  If any option or
restricted stock grant expires or terminates before it has been exercised in
full, the shares of common stock allocable to the unexercised portion of such
option or restricted stock grant may again be subject to an option or restricted
stock grant under the 2000 Equity Compensation Plan.  The number of
shares available and subject to options, option prices and, to the extent
applicable, the number of shares subject to any restricted stock grant will be
adjusted upward or downward, as the case may be, in the event of any subdivision
or consolidation of shares or other capital readjustment, stock dividend,
merger, consolidation or similar transaction affecting the shares.  At
December 31, 2008 we did not have any options to purchase shares of our common
stock outstanding under the plan.





The 2000
Equity Compensation Plan is administered by our Board of Directors which has the
sole authority to determine which eligible employees of our company receive
options and restricted stock grants under the plan, the times when options and
restricted stock grants are granted, the number of shares covered by the option
and restricted stock grant, the provisions of any agreement and when options may
be exercised or when restricted stock grants become vested.  In
addition, the Board has the power and authority to construe and interpret the
Plan.





Stock
options may be granted by the Board at prices determined in the discretion of
the Board, provided that the option price must be at least equal to the fair
market value of the common stock on the date of the grant.  The option
price is payable in cash, common stock or such other form of payment as may be
determined by the Board.  The exercise price of an incentive stock
option must be at least equal to the fair market value of our common stock on
the date of grant or 110% of such value in the case of options granted to an
individual who is a 10% or greater shareholder of our company.





An
optionee generally may exercise an option only while an employee of our
company.  If an optionee becomes disabled or dies while in the employ
of our company, the option may be exercised within one year of the optionee's
death or termination due to disability.  The expiration date of an
option will be determined by the Board at the time of the grant, but in no event
will an incentive stock option be exercisable after the expiration of 10 years
from the date of grant or five years in the case of incentive options granted to
a 10% or greater shareholder.  The Board may grant to an eligible
individual shares of our common stock subject to specified restrictions on
transferability and vesting as provided in a written grant agreement or
resolutions in which the restricted stock grant is adopted and approved by the
Board.  Restricted stock grants may be made in lieu or cash
compensation or as additional compensation.  The Board may also make
restricted stock grants contingent on pre-established performance goals
determined by the Board.  Except for certain transfers that may be
permitted by the Board, no option or restricted stock grant may be transferred
by an eligible individual other than by will or the laws of descent or
distribution.





The 2000
Equity Compensation Plan terminates on December 21, 2010.  The Board
of Directors may at any time amend, suspend or discontinue the plan, except that
no amendment may be made without the approval of the shareholders which would
increase the number of shares subject to the plan, materially change the
designation of the class of employees eligible to receive options, remove the
administration of the plan from the Board or a committee of the Board or
materially increase the benefits accruing to participants under the
plan.




38





Non-Qualified
Stock Option Plan





On
December 21, 2000 our Board of Directors adopted our Non-Qualified Stock Option
Plan under which a total of 200,000 shares of common stock are made available
for granting of non-qualified stock options to officers, directors, employees
and key advisors or consultants.  The purpose of the plan is to
encourage the participants to contribute materially to our growth.  If
any option expires or terminates before it has been exercised in full, the
shares of common stock allocable to the unexercised portion of such option may
again be subject to an option under the Non Qualified Stock Option
Plan.  The number of shares available and subject to options and
option prices will be adjusted upward or downward, as the case may be, in the
event of any subdivision or consolidation of shares or other capital
readjustment, stock dividend, merger, consolidation or similar transaction
affecting the shares.  At December 31, 2008 we did not have any
options to purchase shares of our common stock outstanding under the
plan.





The
Non-Qualified Stock Option Plan is administered by our Board of Directors which
has the sole authority to determine which who is eligible to receive grants of
non-qualified options under the plan, the times when options are granted, the
number of shares covered by the option, the provisions of any agreement and when
options may be exercised.  In addition, the Board has the power and
authority to construe and interpret the Plan.





Stock
options may be granted by the Board at prices determined in the discretion of
the Board and the exercise price of the option may be greater than, or less
than, the fair market value of our common stock.  The option price is
payable in cash, common stock or such other form of payment as may be determined
by the Board.  An optionee generally may exercise an option only while
the grantee is employed by us or otherwise providing our company
services.  If an optionee becomes disabled or dies while in the employ
of our company or while otherwise providing services to us, the option may be
exercised within 90 days after optionee's death or termination due to
disability.  The expiration date of an option will be determined by
the Board at the time of the grant, but in no event will a stock option be
exercisable after the expiration of 10 years from the date of
grant.  Except for certain transfers that may be permitted by the
Board, no option may be transferred by an eligible individual other than by will
or the laws of descent or distribution.





The 2000
Equity Compensation Plan terminates on December 21, 2010.  The Board
of Directors may at any time amend, suspend or discontinue the plan, except that
no amendment may be made without the approval of the shareholders which would
increase the number of shares subject to the plan, materially change the
designation of the class of employees eligible to receive options, remove the
administration of the plan from the Board or a committee of the Board or
materially increase the benefits accruing to participants under the
plan.





2005
Equity Compensation Plan





On June
28, 2005, our Board of Directors adopted our 2005 Equity Compensation Plan under
which 5,000,000 shares of our common stock have been reserved for issuance upon
the exercise of options or stock grants under the plan.  Our officers,
directors, key employees and consultants are eligible to receive stock grants
and non-qualified options under the Plan. Only our employees are eligible to
receive incentive options.  The purpose of the 2005 Equity
Compensation Plan is to encourage stock ownership by our officers, directors,
key employees and consultants, and to give such persons a greater personal
interest in the success of our business and an added incentive to continue to
advance and contribute to us.  Shares used for stock grants and plan
options may be authorized and unissued shares or shares reacquired by us,
including shares purchased in the open market.  Shares covered by plan
options which terminate unexercised will again become available for grant as
additional options, without decreasing the maximum number of shares issuable
under the plan, although such shares may also be used by us for other
purposes.  As of December 31, 2008 we had no outstanding options or
stock grants under the plan and no shares available for issuance under the 2005
Equity Compensation Plan.





Our Board
of Directors, or a committee of the Board, administers the 2005 Equity
Compensation Plan including, without limitation, the selection of the persons
who will be awarded stock grants and granted options, the type of options to be
granted, the number of shares subject to each option and the exercise
price.  Plan options may either be options qualifying as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified options.  In addition, the plan allows for
the inclusion of a reload option provision, which permits an eligible person to
pay the exercise price of the option with shares of common stock owned by the
eligible person and receive a new option to purchase shares of common stock
equal in number to the tendered shares.  Any incentive option granted
under the Plan must provide for an exercise price of not less than 100% of the
fair market value of the underlying shares on the date of grant, but the
exercise price of any incentive option granted to an eligible employee owning
more than 10% of our outstanding common stock must not be less than 110% of fair
market value on the date of the grant.  The exercise price of
non-qualified options shall be determined by the Board of Directors, but shall
not be less than the par value of our common stock on the date the option is
granted.


39




The term
of each plan option and the manner in which it may be exercised is determined by
the Board of Directors or the committee, provided that no option may be
exercisable more than 10 years after the date of its grant and, in the case of
an incentive option granted to an eligible employee owning more than 10% of the
common stock, no more than five years after the date of the
grant.  The plan provides that, with respect to incentive stock
options, the aggregate fair market value (determined as of the time the option
is granted) of the shares of common stock, with respect to which incentive stock
options are first exercisable by any option holder during any calendar year
shall not exceed $1,000,000.  Unless the plan is approved by our
shareholders within one year of the effective date, no incentive stock options
may be granted and all incentive stock options that may have been previously
granted shall automatically be converted into non-qualified stock
options.  As of the date of this annual report, we have not submitted
the 2005 Equity Compensation Plan to our shareholders for approval.





The plan
provides that, if our outstanding shares are increased, decreased, exchanged or
otherwise adjusted due to a share dividend, forward or reverse share split,
recapitalization, reorganization, merger, consolidation, combination or exchange
of shares, an appropriate and proportionate adjustment shall be made in the
number or kind of shares subject to the plan or subject to unexercised options
and in the purchase price per share under such options.  Any
adjustment, however, does not change the total purchase price payable for the
shares subject to outstanding options.  In the event of our proposed
dissolution or liquidation, a proposed sale of all or substantially all of our
assets, a merger or tender offer for our shares of common stock, the Board of
Directors may declare that each option granted under the plan shall terminate as
of a date to be fixed by the Board of Directors; provided that not less than 30
days written notice of the date so fixed shall be given to each participant
holding an option, and each such participant shall have the right, during the
period of 30 days preceding such termination, to exercise the participant's
option, in whole or in part, including as to options not otherwise
exercisable.





Plan
options are exercisable by delivery of written notice to us stating the number
of shares with respect to which the option is being exercised, together with
full payment of the purchase price therefore.  Payment is to be in the
form of cash, checks, certified or bank cashier's checks, promissory notes
secured by the shares issued through exercise of the related options, shares of
common stock or in such other form or combination of forms which may be
acceptable to the Board of Directors, provided that any loan or guarantee by us
of the purchase price may only be made upon resolution of the Board that such
loan or guarantee is reasonably expected to benefit us.





All plan
options are nonassignable and nontransferable, except by will or by the laws of
descent and distribution, and during the lifetime of the optionee, may be
exercised only by such optionee.  If an optionee shall die while our
employee or within three months after termination of employment by us because of
disability, or retirement or otherwise, such options may be exercised, to the
extent that the optionee shall have been entitled to do so on the date of death
or termination of employment, by the person or persons to whom the optionee's
right under the option pass by will or applicable law, or if no such person has
such right, by his executors or administrators.





In the
event of termination of employment because of death while an employee or because
of disability, the optionee's options may be exercised not later than the
expiration date specified in the option or one year after the optionee's death,
whichever date is earlier, or in the event of termination of employment because
of retirement or otherwise, not later than the expiration date specified in the
option or one year after the optionee's death, whichever date is
earlier.  If an optionee's employment by us terminates because of
disability and such optionee has not died within the following three months, the
options may be exercised, to the extent that the optionee shall have been
entitled to do so at the date of the termination of employment, at any time, or
from time to time, but not later than the expiration date specified in the
option or one year after termination of employment, whichever date is
earlier.





If an
optionee's employment terminates for any reason other than death or disability,
optionee may exercise the options to the same extent that the options were
exercisable on the date of termination, for up to three months following such
termination, or on or before the expiration date of the options, whichever
occurs first. In the event that the optionee was not entitled to exercise the
options at the date of termination or if the optionee does not exercise such
options (which were then exercisable) within the time specified herein, the
options will terminate.  If an optionee's employment terminates for
any reason other than death, disability or retirement, all right to exercise the
option terminate not later than 90 days following the date of such termination
of employment.




The Board
of Directors may amend, suspend or terminate the plan at any
time.  Unless the plan shall have been earlier suspended or terminated
by the Board of Directors, the 2005 Equity Compensation Plan terminates on June
28, 2015.




40




As of
January 22, 2008, 5,000,000 shares of our restricted common stock had been
granted under the Equity Compensation Plan. No shares of common stock (plus any
shares that might in the future be returned to the Equity Compensation Plan as a
result of the termination, expiration, or forfeiture of options) remain
available for future grant under the Equity Compensation Plan as of such date.
Management believes that the number of shares of common stock currently
available for issuance under the Equity Compensation Plan is insufficient to
meet its needs to provide for awards to the plan participants for the next
twelve months.




On
January 22, 2008, our Board of Directors approved and adopted an amendment
to our Equity Compensation Plan, subject to shareholder approval. On
January 22, 2008, stockholders owning approximately 53.9% of the
outstanding shares of our common stock approved the amendment to the Equity
Compensation Plan by action taken by written consent without a meeting in
accordance with the Florida Business Corporation Act. No further vote of our
stockholders is required to approve the amendment to the Equity Compensation
Plan. Such approval by our stockholders will be effective 20 calendar days after
the date this Information Statement is first mailed to our
stockholders.




The
amendment to our Equity Compensation Plan will increase the number of shares of
common stock with respect to which awards may be granted under the Equity
Compensation Plan from 5,000,000 to 15,000,000.  On May 1, 2008, the
Company entered into a two year agreement with China Health Capital Group, Inc.
(“CHC”) to provide the Company with financial and investment services. In
connection with this agreement, on June 24, 2008, the Company issued 2,000,000
shares of Common Stock under the Equity Compensation Plan valued at $0.21 per
share to CHC and recorded $420,000 as deferred compensation. For the fiscal year
ended December 31, 2008, amortization of consulting compensation amount to
$140,000. At December 31, 2008 we had 77,955,475 shares of our common stock
issued and outstanding.  The following table sets forth information
regarding the beneficial ownership of our common stock as of December, 2008
by:





·
            Each
      person known by us to be the beneficial owner of more than 5% of our
      common stock;


·
            Each
      of our directors;


·
            Each
      of our executive officers; and


·
            Our
      executive officers, directors and director nominees as a
      group.





Security
Ownership of Certain Beneficial Owners and Management





Unless
otherwise indicated, the business address of each person listed is in care of
1104 Jiatang Road Jiading District, Shanghai China 201807.  The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
on that date and all shares of our common stock issuable to that holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by that person at that date which are exercisable within 60
days of that date.  Except as otherwise indicated, the persons listed
below have sole voting and investment power with respect to all shares of our
common stock owned by them, except to the extent that power may be shared with a
spouse.





Name
      of Beneficial Owner
                
                Amount
      and Nature of
                  Beneficial
      Ownership
                
                
                Percentage
      of
                  Class
      1Xuelian
      Bian
                
                
                20,420,919
                
                
                
                26.2
                %Wei
      Guan
                
                
                13,602,551
                
                
                
                17.4
                %All
      officers and directors as a group (two persons)
                
                
                34,023,470
                
                
                
                43.6
                %Holders
      of 5% or more of the total number of shares
    outstanding





1
Calculated based on 77,955,475 shares outstanding as December 31,
2008.


41





ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.





LiKang
Disinfectant is engaged in business activities with four related
parties.  These companies are referred to throughout this report and
financial documents as “related parties” or “affiliated entities”:





Shanghai
LiKang Meirui Pharmaceutical High-Tech Co., Limited





Shanghai
LiKang Meirui Pharmaceutical High-Tech Co., Ltd. was previously a supplier of
both raw materials and finished products to LiKang Disinfectant. Currently,
however, Shanghai  LiKang
Meirui  Pharmaceutical  High-Tech  Co.,  Ltd
only  purchases  products from us which it resells to
the  retail/consumer market in  the PRC.  Shanghai
Shanhai Group is the majority owner of Shanghai LiKang Meirui Pharmaceutical
High-Tech Co., Ltd., owning a 68% interest.





At
December 31, 2008, we do not owe Shanghai LiKang Meirui Pharmaceutical High-Tech
Co., Ltd. any amount for products purchased.





In
January 2005 LiKang Disinfectant signed a two year agreement with Shanghai
LiKang Meirui Pharmaceutical High-Tech Co., Ltd. to market its products to the
retail/consumer market using Shanghai LiKang Meirui Pharmaceutical High-Tech Co.
Ltd.'s proprietary sales network which caters to the retail/consumer market in
China.  For the fiscal year ended December 31, 2008 we recorded net
revenues on sales to this affiliate of $51,702. At December 31, 2008, Shanghai
LiKang Meirui Pharmaceuticals High-Tech Company owed us $169,545.





Shanghai
ZhongYou Pharmaceutical High-Tech Co., Limited.





Mr.
Xuelian Bian and Wei Guan; our officers, directors and principal shareholders,
are the shareholders of ZhongYou Pharmaceutical owning 90% and 10%,
respectively.  During the fiscal year ended 2007, Mr. Xuelian Bian and
Wei Guan sold all of their shares of ZhongYou Pharmaceutical to Shanghai Jiuqing
Pharmaceuticals Company, Limited., which is 100% owned by Shanghai Ajiao Shiye
Co. Ltd. Mr. Bian is a 60% shareholder of Shanghai Ajiao Shiye Co. Limited.
ZhongYou Pharmaceutical distributes our products to the commercial medical
industry.  For the fiscal year ended December 31, 2008 we recorded net
revenues of $2,553,602 from sales to ZhongYou Pharmaceutical.  At
December 31, 2008 ZhongYou Pharmaceutical owed us $3,596,333 as a related party
receivable for products purchased from us.





In
December 2005, we loaned ZhongYou Pharmaceutical $100,000 for working capital
purposes.  The loan accrues interest at the rate of 3% per
annum.  The principal and interest were paid in April
2006.





Shanghai Jiuqing
Pharmaceuticals Company, Limited





Shanghai
Ajiao Shiye Co. Ltd. owns 100% of Shanghai Jiuqing Pharmaceuticals Company,
Limited.  Xuelian Bian is a 60% shareholder of Shanghai Ajiao Shiye
Co. Ltd. Shanghai Jiuqing Pharmaceuticals Company, Limited distributes our
products to the commercial medical industry. For the fiscal year ended December
31, 2008 we recorded net revenues of $18,255 from sales to this related
party.  At December 31, 2008 Shanghai Jiuqing Pharmaceuticals Company,
Limited owed us $81,112 as a related party receivable for products purchased
from us.





Shanghai
LiKang Biological Hi-Tech Company, Ltd.





Shanghai
LiKang Biological High-Tech Company, Ltd is 40% owned by LiKang Pharmaceutical
and 60% owned  by Mr. Xuelian Bian, an executive officer and director
of our company. On March 25, 2008, our wholly-owned subsidiary Linkwell Tech
purchased a 100% equity interest in LiKang Biological from LiKang Pharmaceutical
and Mr. Xuelian Bian. LiKang Pharmaceuticals is owned by Mr. Bian and Wei Guan,
90% and 10%, respectively.  However, due to the time consuming and
complicated nature of the approval procedures of the Ministry of Commerce of the
People’s Republic of China, the parties agreed to enter into amendment to the
Biological Stock Purchase Agreement to change the purchaser of Linkwell Tech to
LiKang Disinfectant. Approval from Ministry of Commerce, the People’s Republic
of China will not be necessary if LiKang Disinfectant acquires 100% of the
equity interest in Shanghai LiKang Biological. Shanghai LiKang Biological
manufactures and sells biological products, cosmetic products and develops
technology for third parties. For the fiscal year ended December 31, 2008 and
2007, the Company recorded net revenues of $0 and $851 to Biological,
respectively and made purchases of $160,395 and $57,032 from Biological
respectively. The amount of $831,607 (RMB 5,700,000) was loaned to Biological
for working capital purpose during the year of 2007. In addition, the amount of
$932,550 was loaned to Bioligical from LiKang Disinfectant for the same purpose
in 2008 and are reflected on the accompanying balance sheet as due from a
related party. At December 31, 2008, the remaining balance of accounts
receivable due from Biological of $1,764,157. The loans were non-interest
bearing. At December 31, 2008, the remaining balance of accounts payable due to
Biological of $93,707 recorded to LiKang Disinfectant.


42





Other related party
transactions





There
were no other related party transactions.





Director
Independence





None of
the members of our Board of Directors are “independent” as defined by Rule
4200(a)(14) of the Financial Industry Regulatory Authority (FINRA)
Rules.





ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.





Sherb
& Co., LLP served as our independent registered public accounting firm for
fiscal 2008 and 2007.  The following table shows the fees that were
billed for the audit and other services provided by the firm for fiscal 2008 and
2007.





Fiscal 2008
                  
                  
                  Fiscal 2007Audit
      Fees
                  
                  $
                  67,500
                  
                  
                  $
                  85,500Audit-Related
      Fees
                  
                  
                  0
                  
                  
                  
                  0Tax
      Fees
                  
                  
                  0
                  
                  
                  
                  0All
      Other Fees
                  
                  
                  0
                  
                  
                  
                  0Total
                  
                  $
                  67,500
                  
                  
                  $
                  85,500





Audit
Fees — This category includes the audit of our annual financial statements,
review of financial statements included in our Form 10-Q Quarterly Reports and
services that are normally provided by the independent auditors in connection
with engagements for those fiscal years. This category also includes advice on
audit and accounting matters that arose during, or as a result of, the audit or
the review of interim financial statements.





Audit-Related
Fees — This category consists of assurance and related services by the
independent auditors that are reasonably related to the performance of the audit
or review of our financial statements and are not reported above under “Audit
Fees.” The services for the fees disclosed under this category include
consultation regarding our correspondence with the SEC and other accounting
consulting.





Tax Fees
— This category consists of professional services rendered by our independent
auditors for tax compliance and tax advice. The services for the fees disclosed
under this category include tax return preparation and technical tax
advice.





All Other
Fees — This category consists of fees for other miscellaneous
items.





Our Board
of Directors has adopted a procedure for pre-approval of all fees charged by the
our independent auditors.  Under the procedure, the Board approves the
engagement letter with respect to audit, tax and review services. Other fees are
subject to pre-approval by the Board, or, in the period between meetings, by a
designated member of Board. Any such approval by the designated member is
disclosed to the entire Board at the next meeting. The audit and tax fees paid
to the auditors with respect to fiscal year 2008 were pre-approved by the entire
Board of Directors.





ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





The
following documents are filed as a part of this report or are incorporated by
reference to previous filings, if so indicated:





Exhibit
      No.
                  
                  Description2.1
                  
                  Stock
      Purchase Agreement between HBOA.Com, Inc., Philip J. Davis and John C. Lee
      dated November 17, 1999 (1)2.2
                  
                  Amendment
      No. 1 to the Stock Purchase Agreement between HBOA.Com, Inc., Phillip J.
      Davis and John C. Lee dated December 28, 1999
  (1)




43





2.3
              
              Stock
      Exchange Agreement dated May 2, 2005 by and among Kirshner Entertainment
      & Technologies, Inc., Gary Verdier, Linkwell Tech Group, Inc. and the
      shareholders of Linkwell (2)3.1
              
              Articles
      of Incorporation (3)3.2
              
              Articles
      of Amendment to Articles of Incorporation (4)3.3
              
              Articles
      of Amendment to Articles of Incorporation (5)3.4
              
              Articles
      of Amendment to Articles of Incorporation (6)3.5
              
              Articles
      of Amendment to the Articles of Incorporation (11)3.6
              
              Bylaws
      (3)3.7
              
              Articles
      of Amendment to the Articles of Incorporation (12)4.1
              
              Form
      of common stock purchase warrant (7)4.2
              
              Form
      of Class A and Class B Common Stock Purchase Warrants
  (11)10.1
              
              HBOA
      Holdings, Inc. - Year 2000 Equity Compensation Plan (8)10.2
              
              HBOA
      Holdings, Inc. - Non Qualified Stock Option Plan (9)10.3
              
              Linkwell
      Corporation 2005 Equity Compensation Plan (10)10.3(a)
              
              Linkwell
      Corporation 2005 Equity Compensation Plan*10.4
              
              Consulting
      and Management Agreement dated August 24, 2005 between Linkwell
      Corporation and China Direct Investments, Inc. (20)10.5
              
              Form
      of Subscription Agreement for $1,500,000 unit offering
  (11)10.6
              
              Form
      of agreement between Shanghai LiKang Disinfectant High-Tech Company,
      Limited and its customers (12)10.7
              
              Form
      of agreement between Shanghai LiKang Disinfectant High-Tech Company,
      Limited and its suppliers (12)10.8
              
              Sales
      Agreement dated as of January 1, 2005 between Shanghai LiKang Disinfectant
      High-Tech Co., Ltd. and Shanghai LiKang Meirui Pharmaceutical High-Tech
      Co., Ltd. (20)10.9
              
              Lease
      Agreement effective January 1, 2005 between Shanghai LiKang Disinfectant
      High-Tech Co., Ltd. and Shanghai Shanhai Group for principal executive
      offices (20)10.10
              
              Lease
      Agreement effective January 1, 2002 between Shanghai LiKang
      Pharmaceuticals Co., Ltd. and Shanghai LiKang Disinfectant High-Tech Co.
      Ltd. (20)10.11
              
              Lease
      Agreement effective January 1, 2005 between Shanghai Jinshan Zhuhang
      Plastic Lamp Factory, Ltd. and Shanghai LiKang Disinfectant High-Tech Co.
      Ltd. (20)10.12
              
              Manufacturing
      Agreement dated as of January 1, 2005 between Shanghai LiKang Disinfectant
      High-Tech Co., Ltd. and Shanghai LiKang Meirui Pharmaceutical High-Tech
      Co., Ltd. (20)10.13
              
              Stock
      Purchase Agreement effective February 6, 2006 between Linkwell
      Corporation, Aerisys Incorporated and Gary Verdier (13)10.14
              
              Transfer
      Agreement dated August 5, 2005 between Shanghai LiKang Disinfectant
      High-Tech Company, Limited, Shanghai LiKang Pharmaceuticals Technology
      Company and Xuelian Bian (20)10.15
              
              Contract
      Management Agreement dated January 1, 2005 between Shanghai Shanhai Group
      and Shanghai LiKang Disinfectant High-Tech Co., Ltd.
  (20)10.16
              
              Lease
      Agreement dated December 15, 2004 between Shanghai Shanhai Group and
      Shanghai LiKang Disinfectant High-Tech Co., Ltd. (20)10.17
              
              Lease
      Agreement dated August 11, 2005 between Shanghai Henglain Industrial Co.,
      Ltd. and Shanghai LiKang Disinfectant High-Tech Co., Ltd.
    (20)10.18
              
              Lease
      Agreement dated September 16, 2005 between Shanghai Henglain Industrial
      Co., Ltd. and Shanghai LiKang Disinfectant High-Tech Co., Ltd.
      (20)10.19
              
              Disinfection
      Education Center Agreement dated May 25, 2006 between Shanghai LiKang
      Disinfectant High-Tech Co., Ltd. and China Pest Infestation Control and
      Sanitation Association (20)10.20
              
              Agreement
      between Linkwell Corporation and China Direct Investments, Inc.
      (21)10.21
              
              Stock
      Purchase Agreement, dated April 6, 2007, by and among the Company,
      Linkwell Tech, Xuelian Bian and LiKang Pharmaceutical
  (22)10.21(a)
              
              Amendment
      to Stock Purchase Agreement, dated March 25, 2008 by and among the
      Company, Linkwell Tech, Xuelian Bian and LiKang Pharmaceutical
      (23)10.22
              
              Stock
      Purchase Agreement, dated April 6, 2007, by and among the Company,
      Linkwell Tech, Xuelian Bian and LiKang Pharmaceutical
  (22)10.22(a)
              
              Amendment
      to Stock Purchase Agreement, dated March 25, 2008, by and among the
      Company, Linkwell Tech and Shanghai Shanhai
(23)




44





10.23
              
              Loan
      agreement between LiKang Disinfectant and LiKang Biological, as
      translated, dated January 2, 2007 (24)10.24
              
              Consulting
      agreement dated September 8, 2006 between Linkwell Corp and Zhiyan Shi
      (24)10.25
              
              Stock
      Purchase Agreement dated February 15, 2008, among Linkwell
      Corporation, Linkwell Tech Group, Inc., and Ecolab Inc.
      (25)10.26
              
              Linkwell
      Tech Group, Inc. Stockholders Agreement, dated May 30, 2008, by and among
      Linkwell Tech Group, Inc., Linkwell Corp. and Ecolab Inc.
(26)10.27
              
              Registration
      Rights Agreement, dated May 30, 2008, by and among Ecolab Inc. and
      Linkwell Corp.
                (26)10.28
              
              Stock
      Purchase Agreement dated May 29, 2008, by and between Shanghai Likang
      Disinfectant Hi-Tech Co., Ltd, and Hong Kong Linkwell International
      Trading Company (27)10.29
              
              Amended
      and Restated Stock Purchase Agreement, dated March 5, 2009, by and among
      the Linkwell Corp., Linkwell Tech Group, Inc., Shanghai Likang Biological
      High-Tech Co., Ltd., Shanghai Likang Disinfectant Hi-Tech Co., Ltd.,
      Xuelian Bian and Shanghai Likang Pharmaceutical Technology Co., Ltd.
      (28)14.1
              
              Code
      of Business Conduct and Ethics (20)21.1
              
              Subsidiaries
      of the small business issuer (20)23.1
              
              Consent
      of Sherb & Co., LLP*31.1
              
              Section
      302 Certificate of Chief Executive Officer*31.2
              
              Section
      302 Certificate of principal financial and accounting officer
      *32.1
              
              Section
      906 Certificate of Chief Executive Officer
*





* filed
herewith





(1)
                  Incorporated
      by reference to the Form 10-SB as filed on June 17,
  1999.(2)
                  Incorporated
      by reference to the Report on Form 8-K as filed on December 3,
      1999.(3)
                  Incorporated
      by reference to the Report on Form 8-K as filed on December 8,
      1999.(4)
                  Incorporated
      by reference to the Report on Form 8-K as filed on December 27,
      2001.(5)
                  Incorporated
      by reference to the annual report on Form 10-KSB for the fiscal year ended
      December 31, 2002.(6)
                  Incorporated
      by reference to the Report on Form 8-K as filed on March 17,
      2005.(7)
                  Incorporated
      by reference to the Report on Form 8-K as filed on April 15,
      2005.(8)
                  Incorporated
      by reference to the Report on Form 8-K as filed on January 31,
      2002.(9)
                  Incorporated
      by reference to the Report on Form 8-K as filed on February 1,
      2005.(10)
                  Incorporated
      by reference to the Report on Form 8-K as filed on August 17,
      2006.(11)
                  Incorporated
      by reference to the Report on Form 8-K as filed on August 22,
      2006.(12)
                  Incorporated
      by reference to the Report on Form 8-K as filed on September 15,
      2006.(13)
                  Incorporated
      by reference to the Report on Form 8-K as filed on October 14,
      2006.(14)
                  Incorporated
      by reference to the Report on Form 8-K as filed on October 27,
      2006.(15)
                  Incorporated
      by reference to the Report on Form 8-K as filed on October 27,
      2006.(16)
                  Incorporated
      by reference to the registration statement on Form S-8, SEC File No.
      333-138297 as filed on October 30, 2006.(17)
                  Incorporated
      by reference to the registration statement on Form SB-2, SEC File No.
      333-139752, as amended, as initially filed on December 29,
      2006.(18)
                  Incorporated
      by reference to the registration statement on Form S-8, SEC File No.
      333-125871, as filed on June 16, 2005.(19)
                  Incorporated
      by reference to the registration statement on Form S-8, SEC File No.
      333-121963, as filed on January 11, 2005.(20)
                  Incorporated
      by reference to the registration statement on Form SB-2, SEC File No.
      333-131666, as amended, as initially filed on February 8,
      2006.(21)
                  Incorporated
      by reference to the by reference to the annual report on Form 10-KSB for
      the fiscal year ended December 31, 2006.(22)
                  Incorporated
      by reference to the Report on Form 8-K as filed on April 14,
      2007.(23)
                  Incorporated
      by reference to the Report on Form 8-K as filed on March 28,
      2008(24)
                  Incorporated
      by reference to the by reference to the quarterly report on Form 10-QSB
      for the quarter ended March 31,
2007.




45





(25)
                Incorporated
      by reference to the annual report on Form 10-KSB as filed on April 15,
      2008(26)
                Incorporated
      by reference to the Report on Form 8-K as filed on June 5,
      2008.(27)
                Incorporated
      by reference to the by reference to the quarterly report on Form 10-QSB
      for the quarter ended August 26, 2008.(28)
                Incorporated
      by reference to the Report on Form 8-K as filed on March 10,
      2009.




46




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.





Date:April
      27, 2009
              Linkwell
      CorporationBy: /s/ Xuelian BianXuelian
      BianCEO,
      President,Principal
      executive officer,Principal
      financial and accounting
officer





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.





Signature
              
              Title
              
              Date/s/
      Xuelian Bian
                Xuelian
      Bian
              
              CEO,
      President, Chairman, Principal executive officer principal financial and
      accounting officer
              
              April
      27, 2009/s/
      Wei Guan
                Wei
      Guan
              
              Vice
      President, Secretary and Director
              
              April
      27, 2009




47




INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





CONTENTS





Report
      of Independent Registered Public Accounting Firm
                
                F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheet
                
                F-3Consolidated
      Statements of Operations
                
                F-4Consolidated
      Statements of Stockholders' Equity
                
                F-5Consolidated
      Statements of Cash Flows
                
                F-6Notes
      to Consolidated Financial Statements
                
                F-7 to F-24




F-1




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Shareholders
 Linkwell
Corporation and Subsidiaries
 Shanghai,
China
 
 We have audited the accompanying
consolidated balance sheets of Linkwell Corporation and Subsidiaries as of
December 31, 2008 and 2007 and the related consolidated statements of
operations, changes in shareholders’ equity, and cash flows for the year ended
December 31, 2008 and 2007. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated 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. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amount and disclosures in the combined
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Linkwell Corporation and
Subsidiaries as of December 31, 2008 and 2007, and the results of their
operation and their cash flows for the year ended December 31, 2008 and 2007, in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/
      Sherb & Co., LLPCertified
      Public Accountants
 
 New York,
NY
 March 31,
2009
 
 LINKWELL
CORPORATION AND SUBSIDIARIES
  F-2




LINKWELL
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 December 31,2008
                        
                        
                        2007ASSETSCurrent
      Assets:Cash
      and cash equivalent
                        
                        $
                        2,072,687
                        
                        
                        $
                        782,727Accounts
      receivable (net of allowance for doubtful accounts of  of
      $801,895 and $460,175 at December 31, 2008 and 2007
      respectively)
                        
                        
                        3,526,440
                        
                        
                        
                        2,759,745Accounts
      receivable-related parties (net of allowance for doubtful accounts of
      $376,437 and $221,359 at December 31, 2008 and 2007
      respectively)
                        
                        
                        3,470,553
                        
                        
                        
                        1,992,233Other
      receivables
                        
                        
                        204,480
                        
                        
                        
                        157,835Inventories
      (net of reserve for obsolete inventory of $145,031 and
      $136,287  at December 31, 2008 and December 31, 2007
      respectively)
                        
                        
                        1,207,352
                        
                        
                        
                        824,653Prepaid
      expenses and other current assets
                        
                        
                        339,378
                        
                        
                        
                        -Due
      from related parties
                        
                        
                        2,158,077
                        
                        
                        
                        946,591Assets
      from discontinued operations
                        
                        
                        -
                        
                        
                        
                        1,804,445Total
      current assets
                        
                        
                        12,978,967
                        
                        
                        
                        9,268,229Property,
      plant and equipment - net
                        
                        
                        703,935
                        
                        
                        
                        747,253Total
      assets
                        
                        $
                        13,682,902
                        
                        
                        $
                        10,015,482LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Loans
      payable
                        
                        $
                        744,069
                        
                        
                        $
                        699,210Accounts
      payable and accrued expenses
                        
                        
                        1,508,271
                        
                        
                        
                        1,209,228Taxes
      payable
                        
                        
                        220,103
                        
                        
                        
                        92,933Other
      payables
                        
                        
                        368,690
                        
                        
                        
                        174,704Due
      to related parties
                        
                        
                        94,583
                        
                        
                        
                        41,801Advances
      from customers
                        
                        
                        91,326
                        
                        
                        
                        24,644Liabilities
      of discontinued operation
                        
                        
                        -
                        
                        
                        
                        1,459,905Total
      current liabilities
                        
                        
                        3,027,042
                        
                        
                        
                        3,702,425Fair
      value of derivative instrument
                        
                        
                        281,030
                        
                        
                        
                        -Minority
      interest
                        
                        
                        2,118,970
                        
                        
                        
                        527,244Stockholders'
      Equity:Preferred
      Stock: (No par value; 10,000,000 authorized, no shares issued and
      outstanding at December 31, 2008 and 2007, respectively)
                        
                        
                        -
                        
                        
                        
                        -Common
      Stock: ($.0005 par value, 150,000,000 authorized,
      77,955,475  and  73,731,675 shares issued and
      outstanding at December 31, 2008 and  2007,
      respectively)
                        
                        
                        38,978
                        
                        
                        
                        36,866Common
      stock issuable
                        
                        
                        -
                        
                        
                        
                        11Additional
      paid-in capital
                        
                        
                        6,512,346
                        
                        
                        
                        5,724,363Statutory
      surplus reserve
                        
                        
                        561,222
                        
                        
                        
                        319,036Retained
      earnings
                        
                        
                        430,849
                        
                        
                        
                        (829,957
                        )Deferred
      compensation
                        
                        
                        (318,556
                        )
                        
                        
                        (51,389
                        )Accumulated
      other comprehensive income
                        
                        
                        1,031,021
                        
                        
                        
                        586,883Total
      stockholders' equity
                        
                        
                        8,255,860
                        
                        
                        
                        5,785,813Total
      liabilities and stockholders' equity
                        
                        $
                        13,682,902
                        
                        
                        $
                        10,015,482
 
 See notes
to audited consolidated financial statements.
 
 F-3
 
 LINKWELL
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 For
      the YearsEnded December 31,2008
                  
                  
                  2007NET
      REVENUESNon-affiliated
      companies
                  
                  $
                  9,362,364
                  
                  
                  $
                  5,486,026Affiliated
      companies
                  
                  
                  2,623,560
                  
                  
                  
                  2,641,691Total
      Net Revenues
                  
                  
                  11,985,924
                  
                  
                  
                  8,127,717COST
      OF SALES
                  
                  
                  (5,963,830
                  )
                  
                  
                  (4,259,128
                  )GROSS
      PROFIT
                  
                  
                  6,022,094
                  
                  
                  
                  3,868,589OPERATING
      EXPENSES:Selling
      expenses
                  
                  
                  1,083,431
                  
                  
                  
                  848,488General
      and administrative
                  
                  
                  2,432,327
                  
                  
                  
                  2,629,006Total
      Operating Expenses
                  
                  
                  3,515,758
                  
                  
                  
                  3,477,494INCOME
      FROM OPERATIONS
                  
                  
                  2,506,336
                  
                  
                  
                  391,095OTHER
      (EXPENSE) INCOME:Other
      (expense) income
                  
                  
                  (66,554
                  )
                  
                  
                  144,895Put
      option expenses
                  
                  
                  (281,030
                  )
                  
                  
                  -Interest
      income
                  
                  
                  6,455
                  
                  
                  
                  3,649Interest
      expense
                  
                  
                  (64,191
                  )
                  
                  
                  (67,717
                  )Total
      Other (Expense) Income
                  
                  
                  (405,320
                  )
                  
                  
                  80,827INCOME
      FROM CONTINUING OPERATION BEFORE INCOME TAXES AND MINORITY
      INTEREST
                  
                  
                  2,101,016
                  
                  
                  
                  471,922INCOME
      TAXES
                  
                  
                  (387,324
                  )
                  
                  
                  -INCOME
      FROM CONTINUING OPERATION BEFORE MINORITY INTEREST AND DISCONTINUED
      OPERATION
                  
                  
                  1,713,692
                  
                  
                  
                  471,922MINORITY
      INTEREST
                  
                  
                  (149,505
                  )
                  
                  
                  (132,924
                  )INCOME
      FROM CONTINUING OPERATION
                  
                  
                  1,564,187
                  
                  
                  
                  338,998DISCONTINUED
      OPERATIONS:Gain
      from discontinued operation (including gain on disposal of $25,322 at June
      30, 2008 )
                  
                  
                  65,083
                  
                  
                  
                  21,137NET
      INCOME
                  
                  $
                  1,629,270
                  
                  
                  $
                  360,135BASIC
      AND DILUTED INCOME PER COMMON SHARE:Basic
      earnings per shares from continuing operation
                  
                  $
                  0.02
                  
                  
                  $
                  0.00Basic
      earnings per shares including discontinued operation
                  
                  $
                  0.02
                  
                  
                  $
                  0.00Diluted
      earnings per shares from continuing operation
                  
                  $
                  0.02
                  
                  
                  $
                  0.00Diluted
      earnings per shares including discontinued operation
                  
                  $
                  0.02
                  
                  
                  $
                  0.00WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING:Basic
                  
                  
                  75,339,667
                  
                  
                  
                  73,195,593Diluted
                  
                  
                  75,549,558
                  
                  
                  
                  73,455,345
 
 See notes
to audited consolidated financial statements.
 
 F-4
 
 LINKWELL
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 
 Additional
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Other
                    
                    
                    TotalCommon
      Stock
                    
                    
                    Common
      Stock Issuable
                    
                    
                    Paid-in
                    
                    
                    Statutory
                    
                    
                    Retained
                    
                    
                    Deferred
                    
                    
                    Comprehensive
                    
                    
                    Stockholders'Shares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Reserve
                    
                    
                    Earnings
                    
                    
                    Compensation
                    
                    
                    Income
                    
                    
                    EquityBalance,
      January 1, 2007
                    
                    
                    69,868,355
                    
                    
                    $
                    34,934
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    5,290,536
                    
                    
                    $
                    319,036
                    
                    
                    $
                    (1,190,092
                    )
                    
                    $
                    (646,222
                    )
                    
                    $
                    136,706
                    
                    
                    $
                    3,944,898Grant
      of common stock for services
                    
                    
                    650,000
                    
                    
                    
                    325
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    110,175
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (76,500
                    )
                    
                    
                    -
                    
                    
                    
                    34,000Warrants
      exercised
                    
                    
                    3,213,320
                    
                    
                    
                    1,607
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    319,725
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    321,332Common
      stock issuable for services
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    21,280
                    
                    
                    
                    11
                    
                    
                    
                    3,927
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,938Amortization
      of deferred compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    671,333
                    
                    
                    
                    -
                    
                    
                    
                    671,333Comprehensive
      income:Net
      income for the year
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    360,135
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    360,135Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    450,177
                    
                    
                    
                    450,177Subtotal
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    810,312Balance,
      December 31, 2007
                    
                    
                    73,731,675
                    
                    
                    
                    36,866
                    
                    
                    
                    21,280
                    
                    
                    
                    11
                    
                    
                    
                    5,724,363
                    
                    
                    
                    319,036
                    
                    
                    
                    (829,957
                    )
                    
                    
                    (51,389
                    )
                    
                    
                    586,883
                    
                    
                    
                    5,785,813Grant
      of common stock for services
                    
                    
                    2,623,800
                    
                    
                    
                    1,312
                    
                    
                    
                    (21,280
                    )
                    
                    
                    (11
                    )
                    
                    
                    483,783
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (456,000
                    )
                    
                    
                    -
                    
                    
                    
                    29,084Common
      stock issued for acquisitions
                    
                    
                    1,500,000
                    
                    
                    
                    750
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    284,250
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    285,000Amortization
      of deferred compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    188,833
                    
                    
                    
                    -
                    
                    
                    
                    188,833Warrants
      exercised
                    
                    
                    100,000
                    
                    
                    
                    50
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    19,950
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    20,000Adjustment
      to statutory reserve
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    242,186
                    
                    
                    
                    (242,186
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Deemed
      Dividend for 10% minority interest acquisition
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (126,278
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (126,278
                    )Comprehensive
      income:Net
      income for the year
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,629,270
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,629,270Foreign
      currency translation adjustment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    444,138
                    
                    
                    
                    444,138Subtotal
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,073,408Balance,
      December 31, 2008
                    
                    
                    77,955,475
                    
                    
                    $
                    38,978
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    6,512,346
                    
                    
                    $
                    561,222
                    
                    
                    $
                    430,849
                    
                    
                    $
                    (318,556
                    )
                    
                    $
                    1,031,021
                    
                    
                    $
                    8,255,860
 
 See notes
to audited consolidated financial statements.
 
 F-5
  LINKWELL
CORPORATION AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 For
      the YearsEnded December 31,2008
                  
                  
                  2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Income
      from continued operations
                  
                  $
                  1,629,270
                  
                  
                  $
                  360,135Adjustments
      to reconcile net income from operations to net cash provided by (used in)
      operating activities:Amortization
      of deferred compensation
                  
                  
                  188,833
                  
                  
                  
                  671,333Depreciation
                  
                  
                  123,666
                  
                  
                  
                  124,908Minority
      interest
                  
                  
                  149,505
                  
                  
                  
                  132,924Allowance
      for doubtful accounts
                  
                  
                  427,561
                  
                  
                  
                  315,536Allowance
      for doubtful accounts-related party
                  
                  
                  155,078
                  
                  
                  
                  133,422Gain
      from disposal of discontinued operation
                  
                  
                  (25,322
                  )
                  
                  
                  -Stock-based
      compensation
                  
                  
                  29,084
                  
                  
                  
                  37,938Expense
      from derivative liabilities
                  
                  
                  281,030
                  
                  
                  
                  -Changes
      in assets and liabilities:Accounts
      receivable
                  
                  
                  (1,108,415
                  )
                  
                  
                  (1,447,158
                  )Accounts
      receivable - related party
                  
                  
                  (1,633,398
                  )
                  
                  
                  (719,230
                  )Other
      receivable
                  
                  
                  (46,645
                  )
                  
                  
                  (157,835
                  )Inventories
                  
                  
                  (391,443
                  )
                  
                  
                  (297,967
                  )Prepaid
      and other current assets
                  
                  
                  (339,378
                  )
                  
                  
                  153,869Accounts
      payable and accrued expenses
                  
                  
                  299,043
                  
                  
                  
                  51,159Tax
      payable
                  
                  
                  127,170
                  
                  
                  
                  92,933Other
      payable
                  
                  
                  193,986
                  
                  
                  
                  136,371Advances
      from customers
                  
                  
                  66,682
                  
                  
                  
                  (88,579
                  )NET
      CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS
                  
                  
                  126,307
                  
                  
                  
                  (500,241
                  )Changes
      in assets of discontinued operation
                  
                  
                  (69,237
                  )
                  
                  
                  (755,188
                  )Changes
      in liabilities of discontinued operation
                  
                  
                  147,307
                  
                  
                  
                  622,035NET
      CASH PROVIDED BY (USED IN) OPERATIONS
                  
                  
                  204,377
                  
                  
                  
                  (633,394
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property, plant and equipment
                  
                  
                  (108,988
                  )
                  
                  
                  (99,349
                  )Cash
      paid for minority interest
                  
                  
                  (399,057
                  )
                  
                  
                  -NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (508,045
                  )
                  
                  
                  (99,349
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from loans payable
                  
                  
                  732,517
                  
                  
                  
                  699,210Repayment
      for loans payable
                  
                  
                  (732,517
                  )
                  
                  
                  (699,210
                  )Proceeds
      from issuance of Linkwell Tech shares
                  
                  
                  2,000,000
                  
                  
                  
                  -Increase
      in due from related parties
                  
                  
                  (919,694
                  )
                  
                  
                  (586,517
                  )Proceed
      from due to related party
                  
                  
                  52,782
                  
                  
                  
                  (123,670
                  )Proceeds
      from Warrants Exercised
                  
                  
                  20,000
                  
                  
                  
                  321,332NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                  
                  
                  1,153,088
                  
                  
                  
                  (388,855
                  )EFFECT
      OF EXCHANGE RATE ON CASH
                  
                  
                  440,540
                  
                  
                  
                  508,053NET
      INCREASE (DECREASE) IN CASH
                  
                  
                  1,289,960
                  
                  
                  
                  (613,545
                  )CASH  -
      beginning of period
                  
                  
                  782,727
                  
                  
                  
                  1,396,272CASH
      - end of period
                  
                  $
                  2,072,687
                  
                  
                  $
                  782,727SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW  INFORMATION:Cash
      paid for:Interest
                  
                  $
                  64,191
                  
                  
                  $
                  67,717Income
      taxes
                  
                  $
                  278,367
                  
                  
                  $
                  -NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Issuance
      of stocks to buy minority interest
                  
                  $
                  285,000
                  
                  
                  $
                  -Receivable
      from sale of discontinued operation
                  
                  $
                  291,792
                  
                  
                  $
                  -Dividends
      for minority interest acquisition
                  
                  $
                  126,278
                  
                  
                  $
                  -Adjustment
      to statutory reserve
                  
                  $
                  242,186
                  
                  
                  $
                  -
 
 See notes
to audited consolidated financial statements.


F-6




LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





ORGANIZATION





Linkwell
Corporation (formerly Kirshner Entertainment & Technologies, Inc.) (the
“Company”) was incorporated in the state of Colorado on December 11, 1996. On
May 31, 2000, the Company acquired 100% of HBOA.Com, Inc. The Company focused on
development of an Internet portal through which home based business owners, as
well as commercial private label businesses, could obtain the products,
services, and information necessary to start, expand and profitably run their
businesses. On December 28, 2000, the Company formed a new subsidiary, Aerisys
Incorporated (“Aerisys”), a Florida corporation, to handle commercial private
business. In June 2003, the Company formed its entertainment division and
changed its name to reflect this new division. Effective as of March 31, 2003,
we discontinued our entertainment division and our technology division, except
for the Aerisys operations that continue on a limited basis.





On May 2,
2005, the Company entered into and consummated a share exchange with all of the
shareholders of Linkwell Tech Group, Inc. (“Linkwell Tech”). Linkwell Tech was
founded on June 22, 2004, as a Florida corporation. Pursuant to the share
exchange, the Company acquired 100% of the issued and outstanding shares of
Linkwell Tech's common stock, in exchange for 36,273,470 shares of our common
stock, which at closing represented approximately 87.5% of the issued and
outstanding shares of our common stock. As a result of the transaction, Linkwell
Tech became our wholly owned subsidiary. For financial accounting purposes, the
exchange of stock was treated as a recapitalization of Kirshner with the former
shareholders of the Company retaining 7,030,669 or approximately 12.5% of the
outstanding stock. The consolidated financials statements reflect the change in
the capital structure of the Company due to the recapitalization and the
consolidated financial statements reflect the operations of the Company and its
subsidiaries for the periods presented.





On June
30, 2004, Linkwell Tech acquired 90% of Shanghai LiKang Disinfectant High-Tech
Company, Ltd. (“LiKang Disinfectant”), a company incorporated in the People’s
Republic of China (the “PRC”) through a stock exchange. The transaction through
which Linkwell Tech acquired its 90% interest in LiKang Disinfectant resulted in
the formation of a U.S. holding company by the shareholders of LiKang as it did
not result in a change in the underlying ownership interest of LiKang
Disinfectant. LiKang Disinfectant is a science and technology enterprise founded
in 1988. LiKang Disinfectant is involved in the development, production,
marketing, sales, and distribution of disinfectant health care
products.





LiKang
Disinfectant has developed a line of disinfectant product offerings which are
utilized by the hospital and medical industry in China. LiKang Disinfectant
regards the hospital disinfecting products as the primary segment of its
business. LiKang Disinfectant has developed and manufactured several series
products in the field of skin mucous disinfection, hand disinfection,
surrounding articles disinfection, medical instruments disinfection and air
disinfection.





On June
30, 2005, the Company's Board of Directors approved an amendment of its Articles
of Incorporation to change the name of the Company to Linkwell Corporation. The
effective date of the name change was after close of business on August 16,
2005.





In August
2006, LiKang Disinfectant incorporated a new subsidiary, Shanghai LiKang
International Trade Co., Ltd (“LiKang International”), a PRC company. The
primary business of LiKang International involves import and export activities
relating to computer, computer components, instruments and meters,
electromechanical devices, constructional materials, metallic material,
hardware, handiwork, knitting textile, furniture, chemical raw materials, and
business consulting service, investment consulting, graphics design, conference
services, exhibition services, equipment lease and the import and export of
technology.





On April
6, 2007, our subsidiary, Linkwell Tech, entered into two material stock purchase
agreements as follows:





-
            Linkwell
      Tech entered into an agreement (the “Biological Stock Purchase Agreement”)
      to acquire a 100% equity interest in Shanghai LiKang Biological High-Tech
      Company, Ltd. (“LiKang Biological”), a Chinese company, in a related party
      transaction with Mr. Xuelian Bian, the Company’s Chief Executive Officer,
      Mr. Wei Guan, the Company’s Vice-President and Secretary, and Shanghai
      Likang Pharmaceuticals Technology Co., Ltd. (“LiKang Pharmaceutical”).
      Before the Biological Stock Purchase Agreement, Mr. Bian and Mr. Guan
      owned 90% and 10% of LiKang


F-7





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Pharmaceutical,
respectively. Mr. Bian and LiKang Pharmaceutical owned 60% and 40% of LiKang
Biological, respectively. Pursuant to the terms of the Biological Stock Purchase
Agreement, Mr. Bian and LiKang Pharmaceutical were to receive 1,000,000 shares
of Linkwell Corporation restricted common stock.




Due to
restrictions under PRC law that prohibited the consideration contemplated by the
Biological Stock Purchase Agreement, the agreement did not close. As a result,
on March 25, 2008, the parties agreed to enter into an amendment to the
Biological Stock Purchase Agreement (“Biological Amendment”) in an effort to
complete the stock purchase transaction. Pursuant to the terms of the Biological
Amendment, the only material change to the Biological Stock Purchase Agreement
related to the consideration paid by Linkwell Tech to Xuelian Bian and LiKang
Pharmaceutical, which was changed from 1,000,000 shares of the Company’s common
stock to $200,000 and 500,000 shares of common stock. As of December 31, 2008,
the Biological Stock Purchase Agreement was pending and required further
approval from the PRC Ministry of Commerce. Due to the time consuming and
complicated nature of the approval procedure, the parties agreed to enter into a
second amendmentto
the Biological Stock Purchase Agreement in order to complete the purchase
transactions timely and properly. Pursuant to the terms of the Biological
Amendment, the purchaser was changed from Linkwell Tech to LiKang Disinfectant,
in addition, the consideration changed to RMB2,000,000, approximately $291,792
and 500,000 shares of common stock. Approval from Ministry of Commerce, in the
People’s Republic of China will not be necessary if LiKang Disinfectant acquires
100% of the equity interest in LiKang Biological, because both companies are
companies regiested in PRC. This transaction closed on March 5,
2009.





-
            Linkwell
      Tech, which already owned a 90% equity interest in LiKang Disinfectant,
      was to purchase the remaining 10% equity interest of LiKang Disinfectant
      from Shanghai Shanhai Group, a non-affiliated Chinese entity (the
      “Disinfectant Stock Purchase Agreement”). Pursuant to the terms of the
      Disinfectant Stock Purchase Agreement, Shanghai Shanhai Group was to
      receive 3,000,000 shares of Linkwell Corporation restricted common
      stock.





Due to
restrictions under PRC law that prohibited the consideration then contemplated
by the Disinfectant Stock Purchase Agreement, the agreement did not close. As a
result of this, on March 25, 2008, the parties agreed to enter into an amendment
to the Disinfectant Stock Purchase Agreement (“Disinfectant Amendment”) in an
effort to complete the stock purchase transaction. Pursuant to the terms of the
Disinfectant Amendment, the only material change to the Disinfectant Stock
Purchase Agreement related to the consideration paid by Linkwell Tech to the
Shanghai Shanhai Group for the remaining 10% equity interest, which was changed
from 3,000,000 shares of Common Stock, to $380,000 and 1,500,000 shares of
Common Stock. Due to the fluctuation of the applicable exchange rate, the cash
consideration was increased to $399,057. The other terms of the Disinfectant
Stock Purchase Agreement remained in full force and
effective.





Linkwell
Tech paid $395,800 to the Shanghai Shanhai Group on February 21, 2008 and paid
$3,257 on April 18, 2008. A total of 1,500,000 shares were expected to be issued
before the end of May, 2008. The parties agreed to extend the share issuance
date until October 20, 2008. The Company valued the acquisition using the fair
value of common shares at $0.19 per share and recorded an investment of
$285,000. Including the cash payment of $399,057, the total investment for
acquiring 10% equity interest in LiKang Disinfectant was $684,057. The
cumulative minority interest of 10% equity interest in LiKang Disinfectant at
March 25, 2008, was approximately $557,779. The difference between the total
investment and the cumulative minority interest of $126,278 was deducted from
retained earnings as dividends to the 10% minority shareholder, Shanghai Shanhai
Group. As a result of the closing of the Disinfectant Stock Purchase Agreement,
as amended, as of March 25, 2008, our wholly-owned subsidiary Linkwell Tech owns
100% of the equity interest in LiKang Disinfectant.





On
February 15, 2008, we entered into a stock purchase agreement with Ecolab Inc.,
a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed to purchase
888,889 of shares of Linkwell Tech, or 10% of the issued and outstanding capital
stock of Linkwell Tech, for $2,000,000. On March 28, 2008 and June 4, 2008,
Linkwell Tech received $200,000 and $1,388,559, respectively from Ecolab.
Including a $400,000 loan that Linkwell Tech received from Ecolab and accrued
interest thereon of $11,441, Linkwell Tech received a total investment of
$2,000,000 from Ecolab. On May 31, 2008, the Company, Linkwell Tech and Ecolab
entered into a Linkwell Tech Group Inc. Stockholders Agreement
(“Stockholders


F-8





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007








NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





Agreement”),
whereby both the Company and Ecolab are subject to, and beneficiaries of,
certain pre-emptive rights, transfer restrictions and take along rights relating
to the shares of Linkwell Tech that the Company and Ecolab each hold. As of May
31, 2008, the principal and accrued interest of $11,441 on the short-term
$400,000 loan became part of Ecolab’s investment and does not need to be
repaid.





On May
31, 2008, LiKang Disinfectant entered into a stock purchase agreement under
which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang
International, to Linkwell International Trading Co., Ltd, a company registered
in Hong Kong which is 100% owned by Mr. Wei Guan, the Company’s Vice President,
Secretary and Director.  Pursuant to the terms of the agreement,
LiKang Disinfectant received $291,754 (RMB 2,000,000) once the agreement was
approved by the PRC Ministry of Commerce with such approval occurring on March
27, 2008.





BASIS
OF PRESENTATION





Certain
reclassifications have been made to the prior year to conform to current year
presentation. The consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United States of America
(“US GAAP”). The audited consolidated financial statements of the Company
include the accounts of its 90% owned subsidiary, Linkwell Tech Group, Inc., and
its 100%-owned subsidiary, LiKang Disinfectant. All significant inter-company
balances and transactions have been eliminated.





USE
OF ESTIMATES





The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates. Significant estimates in the year ended December 31, 2008 and 2007
include the allowance for doubtful accounts, stock-based compensation, the
useful life of property and equipment, the inventory reserve, and option
value.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





The
carrying amounts reported in the balance sheet for cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses, customer advances,
loans and amounts due from or to related parties approximate their fair market
value based on the short-term maturity of these instruments.





CASH
AND CASH EQUIVALENTS





For
purposes of the consolidated statements of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less and
money market accounts to be cash equivalents.





Substantially
all of the Company’s cash is maintained with state-owned banks within the
People’s Republic of China of which no deposits are covered by insurance. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any risks on its cash in bank accounts.





ACCOUNTS
RECEIVABLE





The
Company has a policy of reserving for uncollectible accounts based on its best
estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account
may be in doubt. Account balances deemed to be uncollectible are charged to the
allowance after all means of collection have been exhausted and the potential
for recovery is considered remote. At December 31, 2008 and 2007, the Company
had established, based on a review of its non-related party accounts receivable
outstanding balances, allowances for doubtful accounts in the amounts of
$801,895 and $460,175, respectively. At December 31, 2008 and 2007, the Company
had established, based on a review of its related party accounts receivable
outstanding balances, allowances for doubtful accounts in the amounts of
$376,437 and $221,359, respectively.


F-9





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





INVENTORIES





Inventories,
consisting of raw materials, work in process and finished goods related to the
Company’s products are stated at the lower of cost or market utilizing the
weighted average method. The valuation of inventory requires the Company to
estimate obsolete or excess inventory based on analysis of future demand for our
products. Due to the nature of the Company’s business and our target market,
levels of inventory in the distribution channel, changes in demand due to price
changes from competitors and introduction of new products are not significant
factors when estimating the Company’s excess or obsolete inventory. If inventory
costs exceed expected market value due to obsolescence or lack of demand,
inventory write-downs may be recorded as deemed necessary by management for the
difference between the cost and the market value in the period that impairment
is first recognized. As of December 31, 2008 and 2007, the reserve for obsolete
inventory amounted to $145,031 and $136,287, respectively.





PROPERTY
AND EQUIPMENT





Property
and equipment are carried at cost. Depreciation and amortization are provided
using the straight-line method over the estimated economic lives of the assets,
which are from five to twenty years. The cost of repairs and maintenance are
expensed as incurred; major replacements and improvements are capitalized. When
assets are retired or disposed of, the cost and accumulated depreciation are
removed from the accounts, and any resulting gains or losses are included in
income in the year of disposition





IMPAIRMENT
OF LONG-LIVED ASSETS





In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company
periodically reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The amount of impairment is measured as the difference between the
asset’s estimated fair value and its book value. The Company did not record any
impairment charges during the fiscal year ended December 31, 2008 and
2007.





ADVANCES
FROM CUSTOMERS





Advances
from customers at December 31, 2008 and 2007 was $91,326 and $24,644,
respectively, which consist of prepayments from third party customers to the
Company for merchandise that had not yet been shipped by the Company. The
Company will recognize the deposits as revenue as customers take delivery of the
goods, in compliance with its revenue recognition policy.





DISCONTINUED
OPERATIONS





The
Company records discontinued operations if both of the following conditions are
met: (a) the operations and cash flows of the component have been (or will be)
eliminated from the ongoing operations of the Company as a result of the
disposal transaction and (b) the Company will not have any significant
continuing involvement in the operations of the component after the disposal
transaction. During a period in which a component of the Company either has been
disposed of or is classified as held for sale, the income statement of the
Company for current and prior periods shall report the results of operations of
the component, including any gain or loss recognized in accordance with SFAS No.
144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” in
discontinued operations. The results of operations of a component classified as
held for sale shall be reported in discontinued operations in the period(s) in
which they occur. The results of discontinued operations, less applicable income
taxes (benefit), shall be reported as a separate component of income before
extraordinary items and the


F-10





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





cumulative
effect of accounting changes (if applicable).





On May
31, 2008, LiKang Disinfectant entered into a stock sale agreement under which it
sold 100% of the shares of its wholly-owned subsidiary, LiKang International to
Linkwell International Trading Co., Ltd., a related party company registered in
Hong Kong owned by Mr. Wei Guan, the Company’s Vice President, Secretary and
Director. Since May 31, 2008, all financial statements of the Company, reported
the results of operations of LiKang International as discontinued operations for
all periods presented.





INCOME
TAXES





The
Company files federal and state income tax returns in the United States for its
corporate operations, and files separate foreign tax returns for their Company's
Chinese subsidiaries. Income taxes are accounted for under Statement of
Financial Accounting Standards No. 109, “Accounting for Income Taxes,” which is
an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns.





INCOME
(LOSS) PER COMMON SHARE





The
Company presents net income (loss) per share (“EPS”) in accordance with SFAS No.
128, “Earnings per Share”. Accordingly, basic income (loss) per share is
computed by dividing income (loss) available to common shareholders by the
weighted average number of shares outstanding, without consideration for common
stock equivalents. Diluted net income per share is computed by dividing the net
income by the weighted-average number of common shares outstanding as well as
common share equivalents outstanding for the period determined using the
treasury-stock method for stock options and warrants and the if-converted method
for convertible notes. The Company has made an accounting policy election to use
the if-converted method for convertible securities that are eligible to
participate in common stock dividends, if declared; If the converted method was
anti-dilutive (that is, the if-converted method resulted in a higher net income
per common share amount than basic net income per share calculated under the
two-class method), then the two-class method was used to compute diluted net
income per common share, including the effect of common share equivalents.
Diluted earnings per share reflects the potential dilution that could occur
based on the exercise of stock options or warrants, unless such exercise would
be anti-dilutive, with an exercise price of less than the average market price
of the Company’s common stock.





The
Company’ common stock equivalents at December 31, 2008 and 2007 included the
following:





December
      312008
                        
                        
                        2007Warrants
                        
                        
                        33,469,795
                        
                        
                        
                        33,921,545




REVENUE
RECOGNITION





The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin 104 for revenue recognition. In general, the Company
recognizes revenue when the following fundamental criteria are met: (i)
persuasive evidence of an arrangement exists, (ii) delivery has occurred or
services have been rendered, (iii) the price to the customer is fixed or
determinable and (iv) collection of the resulting receivable is reasonably
assured. Revenue is not recognized until title and risk of loss is transferred
to the customer, which occurs upon delivery of goods, and objective evidence
exists that customer acceptance provisions have been met. Provisions for
discounts and returns are provided for at the time the related sales are
recorded, and are reflected as a reduction of sales. The Company bases its
estimates on historical experience taking into consideration the type of
products sold, the type of customer, and the type of specific transaction in
each arrangement. Revenues represent the invoiced value of goods, net of value
added tax (“VAT”).


F-11





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





The
Company does not offer promotional payments, customer coupons, rebates or other
cash redemption offers to its customers. Deposits or advance payments from
customers prior to delivery of goods and passage of title of goods are recorded
as advances from customers.





In
general, the related party does not hold the Company’s inventory. If the related
party has inventory on hand at the end of a reporting period, the sale is
reversed and the inventory is included on the Company’s balance
sheet.





RELATED
PARTIES





Parties
are considered to be related to the Company if the parties, directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with the Company. Related parties also include
principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties
with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own
separate interests. The Company shall disclose all related party transactions.
All transactions shall be recorded at fair value of the goods or services
exchanged. Property purchased from a related party is recorded at the cost to
the related party and any payment to or on behalf of the related party in excess
of the cost is reflected as a distribution to related party. The recognition of
sales to related parties has no difference to sales to unrelated parties, i.e.
revenue is not recognized until title and risk of loss is transferred to
ultimate customer which, occurs upon delivery of goods, and objective evidence
exists that customer acceptance provisions have been met.





CONCENTRATION
OF CREDIT RISK





The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC's economy. The Company's operations in the PRC are subject to
specific considerations and significant risks not typically associated with
companies in North America. The Company's results may be adversely affected by
changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation, among other things.





The
largest related party, ZhongYou Pharmaceutical and its branches (see note 5)
purchased $2,553,603 and $2,186,647 of products (about 21% and 27% of net
revenue), from the Company during the years ended December 31, 2008 and 2007,
respectively. This related party customer accounted for 50% and 42% of accounts
receivable-related parties as of December 31, 2008 and 2007, respectively. The
largest non-related third party customer, Guangzhou LianJian Disinfectant Co.,
Ltd., purchased $1,926,432 and $1,752,135 of products (about 16% and 22% of net
revenue) from the Company during the years ended December 31, 2008 and 2007
respectively. This non-related customer accounted for 50% and 58% of accounts
receivable as of December 31, 2008 and 2007, respectively. The Company also
performs ongoing credit evaluations of its customers to help further reduce
credit risk. The afore-mentioned related party customer and non-related
party customer represented the largest customers, in excess of 10%, of total
accounts receivable and accounts receivable-related parties and total net
revenue, as of December 31, 2008 and 2007, and the related years then ended,
respectively.





Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and trade accounts receivable. Substantially
all of the Company’s cash is maintained with state-owned banks within the
People’s Republic of China of which no deposits are covered by insurance. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any risks on its cash in bank accounts. At December 31, 2008 and
2007, the Company’s bank deposits by geographic area were as
follows:





December
      31, 2008
                    
                    
                    December
      31, 2007United
      States
                    
                    $
                    905
                    
                    
                    
                    0.1
                    %
                    
                    $
                    11,911
                    
                    
                    
                    1.5
                    %China
                    
                    
                    2,071,782
                    
                    
                    
                    99.9
                    %
                    
                    
                    770,816
                    
                    
                    
                    98.5
                    %Total
      cash and cash equivalents
                    
                    $
                    2,072,687
                    
                    
                    
                    100.0
                    %
                    
                    $
                    782,727
                    
                    
                    
                    100.0
                    %




F-12


LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





COMPREHENSIVE
INCOME





The
Company uses Statement of Financial Accounting Standards No.130 (SFAS 130)
“Reporting Comprehensive Income”. Comprehensive income is comprised of net
income and all changes to the statements of stockholders' equity, except those
due to investments by stockholders, changes in paid-in capital and distributions
to stockholders. For the year ended December 31, 2008 and 2007 comprehensive
income included net income and unrealized gain from foreign currency translation
adjustments.





SHIPPING
COSTS





Shipping
costs are included in selling expenses and totaled $269,518 and $274,086 for the
fiscal year ended December 31, 2008 and 2007 respectively.





ADVERTISING





Advertising
is expensed as incurred. For the fiscal year ended December 31, 2008 and 2007,
advertising expenses amounted to $2,943 and $5,069, respectively and were
included in selling expenses.





STOCK-BASED
COMPENSATION





Effective
October 1, 2005, the Company adopted Statement of Financial Accounting Standards
No.123 (revised 2004), Share Based Payment (“SFAS No. 123R”). SFAS No.123R
establishes the financial accounting and reporting standards for stock-based
compensation plans. As required by SFAS No. 123R, the Company recognizes the
cost resulting from all stock-based payment transactions including shares issued
under its stock option plans in the financial statements. There were no options
or warrants granted for services during the fiscal years ended December 31, 2008
and 2007.





NON-EMPLOYEE
STOCK BASED COMPENSATION





The cost
of stock-based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task Force
Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services” (“EITF 96-18”).





REGISTRATION
RIGHTS AGREEMENTS





The
Company has adopted View C of EITF 05-4 “Effect of a Liquidated Damages Clause
on a Freestanding Financial Instrument Subject to EITF 00-19” (“EITF 05-4”).
Accordingly, the Company classifies as liability instruments, the fair value of
registration rights agreements when such agreements (i) require it to file, and
cause to be declared effective under the Securities Act, a registration
statement with the SEC within contractually fixed time periods, and (ii) provide
for the payment of liquidating damages in the event of its failure to comply
with such agreements. Under View C of EITF 05-4, (i) registration rights with
these characteristics are accounted for as derivative financial instruments at
fair value and (ii) contracts that are (a) indexed to and potentially settled in
an issuer's own stock and (b) permit gross physical or net share settlement with
no net cash settlement alternative are classified as equity
instruments.





FOREIGN
CURRENCY TRANSLATION





Transactions
and balances originally denominated in U.S. dollars are presented at their
original amounts. Transactions and balances in other currencies are converted
into U.S. dollars in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, “Foreign Currency Translation” and are included in determining
net income or loss.


F-13





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)




Renminbi,
the local currency, or sometimes referred to as the Chinese Yuan (“RMB”). The
financial statements of the subsidiary are translated into United States dollars
using period-end rates of exchange for assets and liabilities, and average rates
of exchange for the period for revenues, costs, and expenses. Net gains and
losses resulting from foreign exchange transactions are included in the
consolidated statements of operations and were not material during the periods
presented. Translation adjustments resulting from the process of translating the
local currency financial statements into U.S. dollars are included in
determining comprehensive income. The cumulative translation adjustment was
$1,031,021 and $572,650as ofDecember 31, 2008 and 2007, respectively. On December 31, 2008 and 2007,
the exchange rate was 1 USD=6.85 RMB and 1 USD = 7.31 RMB, respectively. The
average exchange rate used for the fiscal years ended December 31, 2008 and 2007
was 1 USD=6.96 RMB and 1 USD = 7.59 RMB, respectively.





RESEARCH
AND DEVELOPMENT





Research
and development costs are expensed as incurred and are included in general and
administrative expenses. These costs primarily consist of cost of material used
and salaries paid for the development of the Company’s products and fees paid to
third parties. Research and development costs for the fiscal year ended December
31, 2008 and 2007 were approximately $137,588 and $61,452,
respectively.





RECENT
ACCOUNTING PRONOUNCEMENTS





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”. This Statement amends ARB 51 to establish
accounting and reporting standards for the noncontrolling (minority) interest in
a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company’s fiscal year
beginning October 1, 2009. Management is currently evaluating the effect of this
pronouncement on financial statements.





In
December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations”. This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company’s fiscal year beginning October 1, 2009.
While the Company has not yet evaluated this statement for the impact, if any,
that SFAS No. 141(R) will have on its consolidated financial statements, the
Company will be required to expense costs related to any acquisitions after
September 30, 2009.





In March
2008, FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities”. The new standard is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. We are
currently evaluating the impact of adopting SFAS No.161 on our consolidated
financial statements.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon either mandatory or


F-14





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





optional
conversion (including partial cash settlement) are not addressed by paragraph 12
of APB Opinion No. 14, Accounting for Convertible Debt and
Debt issued with Stock Purchase Warrants. Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for
the liability and equity components in a manner that will reflect the entity’s
non-convertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The Company has adopted FSP APB 14-1 beginning January 1,
2009, and this standard must be applied on a retroactive basis. The Company is
evaluating the impact the adoption of FSP APB 14-1 will have on its consolidated
financial position and results of operations.





In May
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
162, The Hierarchy of
Generally Accepted Accounting Principles. This standard is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with generally accepted accounting principles
in the United States for non-governmental entities. SFAS No. 162 is effective 60
days following approval by the U.S. Securities and Exchange Commission (“SEC”)
of the Public Company Accounting Oversight Board’s amendments to AU Section 411,
The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles. The Company
does not expect SFAS No. 162 to have a material impact on the preparation of its
consolidated financial statements.




On June
16, 2008, the FASB issued final Staff Position (FSP) No. EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities,” to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
The FSP determines that unvested share-based payment awards that contain rights
to dividend payments should be included in earnings per share calculations. The
guidance will be effective for fiscal years beginning after December 15, 2008.
The Company is currently evaluating the requirements of (FSP) No. EITF 03-6-1 as
well as the impact of the adoption on its consolidated financial
statements.





In
June 2008, the FASB ratified Emerging Issues Task Force Issue
No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is
Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 mandates a two-step
process for evaluating whether an equity-linked financial instrument or embedded
feature is indexed to the entity’s own stock.  Warrants that a company
issues that contain a strike price adjustment feature, upon the adoption of EITF
07-5, are no longer being considered indexed to the company’s own stock.
Accordingly, adoption of EITF 07-5 will change the current classification (from
equity to liability) and the related accounting for such warrants outstanding at
that date. EITF 07-5 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The
Company is currently evaluating the impact the adoption of EITF 07-5 will have
on its financial statement presentation and disclosures.





In
December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, “Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities” (“FSP FAS 140-4 and FIN 46(R)-8”). FSP FAS 140-4
and FIN 46(R)-8 amends FAS 140 and FIN 46(R) to require additional disclosures
regarding transfers of financial assets and interest in variable interest
entities. FSP FAS 140-4 and FIN 46(R)-8 is effective for interim or annual
reporting periods ending after December 15, 2008. The adoption of FSP FAS 140-4
and FIN 46(R)-8 did not have an impact on its consolidated financial position
and results of operations.





Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements
upon adoption.


F-15





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
2 – INVENTORIES





A summary
of inventories by major category at December 31, 2008 and 2007 are as
follows:





December 31,2008
                
                
                2007Raw
      materials
                
                $
                592,380
                
                
                $
                420,797Work-in-process
                
                
                47,621
                
                
                
                31,012Finished
      goods
                
                
                712,382
                
                
                
                509,1311,352,383
                
                
                
                960,940Less:
      Reserve for obsolescence
                
                
                (145,031
                )
                
                
                (136,287
                )Net
      inventories
                
                $
                1,207,352
                
                
                $
                824,653





NOTE
3 – PROPERTY AND EQUIPMENT





At
December 31, 2008 and 2007, property and equipment consist of the
following:





EstimatedUseful
      Life
                        
                        
                        December 31,(In years)
                        
                        
                        2008
                        
                        
                        2007Office
      equipment and furniture
                        
                        3-7
                        
                        
                        $
                        158,187
                        
                        
                        $
                        140,240Autos
      and trucks
                        
                        5
                        
                        
                        
                        201,723
                        
                        
                        
                        157,179Manufacturing
      equipment
                        
                        2-10
                        
                        
                        
                        346,420
                        
                        
                        
                        263,021Building
                        
                        5-20
                        
                        
                        
                        458,752
                        
                        
                        
                        541,3301,165,082
                        
                        
                        
                        1,101,770Less:
      Accumulated depreciation
                        
                        
                        
                        
                        
                        
                        (461,147
                        )
                        
                        
                        (354,517
                        )Total
      property and equipment, net
                        
                        
                        
                        
                        
                        $
                        703,935
                        
                        
                        $
                        747,253





For the
fiscal year ended December 31, 2008 and 2007, depreciation expense amounted to
$82,583 and $126,295, respectively.





NOTE
4 – LOANS PAYABLE





Loans
payable consisted of the following at December 31, 2008 and 2007:





December 31,2008
                          
                          
                          2007Loan
      from De Chang Credit Union due on June 16, 2009 and June 2, 2008 with
      interest at 8.96% and 7.88% per annum. Guaranteed by Shanghai
      Shanhai.
                          
                          $
                          379,329
                          
                          
                          $
                          356,460Loan
      from De Chang Credit Union due on December 10, 2009 and December 10, 2008
      with interest 6.70% and 7.29% per annum. Guaranteed by Shanghai Shanhai
      and Chairman Bian.
                          
                          
                          364,740
                          
                          
                          
                          342,750Total
      Loans Payable
                          
                          $
                          744,069
                          
                          
                          $
                          699,210





On
February 15, 2008, the Company entered into issued a Promissory Note with Ecolab
Inc., a Delaware corporation (“Ecolab”), whereby Ecolab agreed to loan the
Company $400,000. This short-term loan was due on April 5, 2008 with an interest
rate of 8% per annum. On April 14, 2008, the Company and Ecolab Inc. agreed to
extend the maturity date of this loan


F-16





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
4 – LOANS PAYABLE (CONTINUED)





from
April 5, 2008 to June 5, 2008 with the same interest rate. On March 27, 2008,
Ecolab loaned the Company an additional $200,000 with an interest rate of 8% per
annum. This short-term loan was due on June 5, 2008. These two short-term loans
of $600,000 were not repaid to Ecolab but became partial payments of a
$2,000,000 investment from Ecolab as described below.





On
February 15, 2008, the Company entered into a stock purchase agreement with
Ecolab Inc., a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed
to purchase 888,889 of shares of Linkwell Tech, or 10% of the issued and
outstanding capital stock of Linkwell Tech, for $2,000,000. As part of this
transaction, $400,000 and $200,000 were paid to Linkwell Tech on February 15,
2008 and March 27, 2008, respectively, in the form of a short-term loan payable
as described above. On May 31, 2008, the Company, Linkwell Tech and Ecolab
signed a “Stockholders Agreement” and the principal and accrued interest on the
short-term loans were retained by the Company as partial proceeds of Ecolab’s
$2,000,000 investment in Linkwell Tech. Deducting the accrued accumulated
interest of $11,441 on the two short-term loans of $600,000 at an interest rate
of 8% as of June 30, 2008, Linkwell received the rest of the investment amount
of $1,388,559 from Ecolab and the total accrued interest of $11,441, and the
notes payable totaling $600,000, were forgiven.





NOTE
5 – RELATED PARTY TRANSACTIONS





Linkwell
Tech's 90% owned subsidiary, LiKang Disinfectant, is engaged in business
activities with four related parties: Shanghai LiKang Meirui Pharmaceuticals
High-Tech Co., Ltd (“Meirui”), Shanghai ZhongYou Pharmaceutical High-Tech Co.,
Ltd., (“ZhongYou”), Shanghai Jiuqing Pharmaceuticals Company, Ltd (“Shanghai
Jiuqing”) and Shanghai LiKang Biological High-Tech Co., Ltd.
(“Biological”).





Meirui is
a company in which the Shanghai Shanhai Group, the former minority shareholder
LiKang Disinfectant, owns a 68% interest. Meirui used to manufacture two
products for LiKang Disinfectant. Specifically, Meirui provided LiKang
Disinfectant with ozone producing equipment and ultraviolet radiation lamp
lights. In January 2005, LiKang Disinfectant signed a two year business
corporation agreement with Meirui to market its products to the retail consumer
market using Meirui's proprietary sales network which caters to the retail
consumer market in China. In addition, under the terms of a two year agreement
entered into in January 2005, Meirui produced the Lvshaxing Air Disinfectant
Machine and LiKang Surgery hand-washing table for LiKang Disinfectant. The
agreement above was mutually terminated in December 2006. Additionally, in the
fiscal year of 2008 and 2007, the Company purchased products from Meirui
amounting to $0 and $8,871 respectively. At December 31, 2008 and 2007, there
was no balance due to Meirui included in due to related parties. The Company now
only use Meirui’s sales network without a charge. For the years ended December
31, 2008 and 2007, the Company recorded net revenues on sales to affiliated
companies to Meirui of $51,702 of $34,707, such sales are included in net
revenues to affiliated companies. As of December 31, 2008 and 2007, Meirui owed
us $169,545 and $37,775, respectively, recorded in accounts receivable-related
parties. In general, accounts receivable-related parties due from Meirui are
payable in cash and are due within 4 to 6 months, which approximate normal
business terms with independent third parties.





ZhongYou
(or “LiKang Pharmaceuticals”) sells the Company’s products to third parties.
LiKang Pharmaceuticals was formerly owned 90% by Mr. Xuelian Bian, the Company’s
Chief Executive Officer and 10% Mr. Wei Gu by, the Company’s Vice-President and
Secretary. In March 2007, Mr. Wei Guan sold his 10% share to Bing Chen,
President of the Company’s LiKang Disinfectant subsidiary. In August 2007, Mr.
Xuelian Bian sold his 90% shares to his mother, Xiuyue Xing. In October, 2007,
the two new shareholders, Bing Chen (10%) and Xiuyue Xing (90%) sold all of
their shares in LiKang Pharmaceuticals to Shanghai Jiuqing, whose 100% owner is
Shanghai Ajiao Shiye Co. Ltd. (“Shanghai Ajiao”), of which Mr. Bian is a 60%
shareholder. For the fiscal year ended December 31, 2008 and 2007, the Company
recorded net revenues from affiliated companies of $2,553,603 and $2,354,010
from LiKang Pharmaceuticals, respectively, and made purchases of $84,833 and
$233,478, respectively, from LiKang Pharmaceuticals. At December 31, 2008 and
2007, accounts receivable-related parties from LiKang Pharmaceuticals were
$3,596,333 and $2,089,641, respectively, and accounts payable included in due to
related party were $876 and $0, respectively. In general, accounts
receivable-related parties due from LiKang Pharmaceuticals are payable in cash
and are due within 4 to 6 months, which approximate normal business terms with
independent third parties.


F-17





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
5 – RELATED PARTY TRANSACTIONS (CONTINUED)





Shanghai
Jiuqing is 100% owned by Shanghai Ajiao, of which Mr. Xuelian Bian owns 60% of
shares. For the fiscal years ended December 31, 2008 and 2007, respectively, the
Company recorded revenue of $18,255 and $13,388 to Shanghai Jiuqing. At December
31, 2008 and 2007, accounts receivable-related parties from Shanghai Jiuqing
were $81,112 and $61,840, respectively. There are no amounts due to Shanghai
Jiuqing as of December 31, 2008 and 2007, respectively. In general, accounts
receivable-related parties due from Shanghai Jiuqing are payable in cash and are
due within 4 to 6 months, which approximate normal business terms with
independent third parties.





Biological
was 60% owned by Mr. Xuelian Bian, the Company's Chief Executive Officer, and
40% owned by LiKang Pharmaceuticals, which in turn was 90% owned by Mr. Xuelian
Bian, the Company’s Chief Executive Officer and 10% owned by Mr. Wei Guan, the
Company’s Vice-President and Secretary. The Company sells biological products to
LiKang Biological, including cosmetic products, and develops technology for
third parties. Additionally, the Company sells certain raw materials to LiKang
Biological that are employed in the LiKang Biological’s production process. The
Company purchased 100% of LiKang Biological on March 5, 2009. For the fiscal
years ended December 31, 2008 and 2007, the Company recorded net revenues of $0
and $851 to LiKang Biological, respectively, and made purchases of $160,395 and
$57,032 from LiKang Biological, respectively. The amount of $831,607 (RMB
5,700,000) was loaned to LiKang Biological for working capital purpose during
the year ended December 31, 2007. In addition, the Company loaned at various
times, a total of $932,550 to LiKang Biological from LiKang Disinfectant for
same purpose during the year ended December 31, 2008. All loans advanced are
reflected in the accompanying balance sheet as due from a related party as of
December 31, 2008 and 2007. At December 31, 2008 and 2007, the remaining balance
due from LiKang Biological was $1,764,157 and $831,607. The loan advances from
LiKang Disinfectant to LiKang Biological are non-interest bearing. At December
31, 2008 and 2007, the remaining balance of accounts payable due to LiKang
Biological, included in due to related parties, was $93,707 and $58,347,
respectively. In general, accounts payable to, and accounts receivables from,
LiKang Biological are payable in cash and are due within 4 to 6 months, which
approximate normal business terms with unrelated parties.





On May
31, 2008, LiKang Disinfectant entered into a stock purchase agreement under
which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang
International to Linkwell International Trading Co., Ltd (“Linkwell Trading”), a
company registered in Hong Kong and 100% owned by Wei Guan, our Vice President,
Secretary and Director,. Pursuant to the terms of the agreement, LiKang
Disinfectant will receive $291,792 (RMB 2,000,000) once the agreement was
approved by the Ministry of Commerce, the People’s Republic of China, such
approval occurred on March 27, 2008. The Company expects to receive the sales
proceeds in July, 2009. In addition, LiKang International owed Likang
Disinfectant a total of $102,128 (RMB 700,000). Linkwell Trading assumed all the
debts of LiKang International after it acquired LiKang International. Therefore,
as of December 31, 2008, the total balance due from Linkwell Trading was
$393,920. The sale of LiKang International, resulted in a discontinued
operation, and is reflected as such in the accompanying financial
statements.





NOTE
6 – DERIVATIVE PAYABLE





On
February 15, 2008, we entered into a stock purchase agreement with Ecolab
pursuant to which Ecolab agreed to purchase and Linkwell Tech agreed to sell
888,889 of its shares, or 10% of the issued and outstanding capital stock of
Linkwell Tech, for $2,000,000. On May 31, 2008, the Company, Linkwell Tech and
Ecolab entered into a Stockholders Agreement (the “Stockholders Agreement”),
whereby both the Company and Ecolab are subject to, and the beneficiaries of,
certain pre-emptive rights, transfer restrictions and take along rights relating
to the shares of Linkwell Tech held by the Company and Ecolab.





Pursuant
to the terms of the Stockholders Agreement, Ecolab has an option (“Put Option”)
to sell the 888,889 shares (“Shares”) of common stock, par value $0.001, of
Linkwell Tech that Ecolab purchased under the Stock Purchase Agreement, back to
Linkwell Tech in exchange for, as determined by Linkwell Corp., cash in the
amount of $2,400,000 or the lesser of (a) 10,000,000 shares of Linkwell Corp.
common stock, or (b) such number of shares of Linkwell Corp. common stock as is
determined by dividing (i) 3,500,000 by (ii) the average daily closing price of
Linkwell Corp. common stock for the twenty days on which Linkwell Corp. shares
of common stock were traded on the OTC Bulletin Board prior to the date the Put
Option is exercised (“Put Shares”). The Put Option is exercisable during the
period between the second and fourth anniversaries of


F-18




LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
6 – DERIVATIVE PAYABLE (CONTINUED)





May 30,
2008, or upon the occurrence of certain events including material breach by
Linkwell Tech or its subsidiaries of the Consulting Agreement, the Distributor
Agreements or the Sales Representative Agreement entered into in connection with
the Stock Purchase Agreement.





Under the
Stockholders Agreement, Ecolab also has a call option (“Call Option”),
exercisable if Linkwell Corp. is subject to a change of control transaction, to
require Linkwell Corp. to sell to Ecolab all of their equity interests in
Linkwell Tech, or any of Linkwell Tech’s subsidiaries, then owned by Linkwell
Corp.





The
Company recognized the maximum expenses of the put option and the call option,
described above, as $400,000. The Company allocated the minority interest of
Linkwell Tech of $118,970, as of December 31, 2008, against the maximum expense
and recorded a, long term liability of derivative payable of
$281,030.





NOTE
7 - DISCONTINUED OPERATION





Due to
losses and uncertainty about future profitability, on May 31, 2008, LiKang
Disinfectant entered into a stock purchase agreement pursuant to which it sold
100% of the equity interest of its wholly-owned subsidiary, LiKang International
to Linkwell Trading, a related party. The agreement was approved on March 27,
2008 by the Ministry of Commerce, the People’s Republic of China.





As of May
31, 2008, the Company has classified the LiKang International business as
discontinued operation for all period presented. For the fiscal year ended
December 31, 2008, the total gain from discontinued operations was $65,083
including a gain from the disposal of the operation amounting to $39,761. The
Company will receive $291,792 (RMB2,000,000) from Linkwell International Trading
Co., Ltd.





As of
December 31, 2007, the Company has reclassified LiKang International as a
discontinued operation for all financial statement periods or dates presented.
Identifiable assets and liabilities of LiKang International as of December 31,
2007 are as follows:





Cash
                  
                  $
                  439,401Accounts
      Receivable-unrelated parties (net)
                  
                  
                  239,447Other
      receivables
                  
                  
                  86,291Prepaid
      expenses
                  
                  
                  1,037,486Property
      held for sale
                  
                  
                  1,820Total
      assets
                  
                  $
                  1,804,445Accounts
      Payable
                  
                  $
                  37,715Advances
      from customers
                  
                  
                  688,934Other
      Payble
                  
                  
                  110,569Due
      to related party
                  
                  
                  622,687Total
      liabilities
                  
                  $
                  1,459,905Net
      assets of discontinued operations
                  
                  $
                  344,540





The
following table is a summary of discontinued operations:





Years Ended December 31,2008
                  
                  
                  2007Net
      Revenues
                  
                  $
                  4,136,741
                  
                  
                  $
                  62,08,004Cost
      of Sales
                  
                  
                  3,980,530
                  
                  
                  
                  5,812,863Gross
      Profit
                  
                  
                  156,211
                  
                  
                  
                  395,141Total
      operating expenses
                  
                  
                  123,974
                  
                  
                  
                  376,053Total
      other income
                  
                  
                  7,524
                  
                  
                  
                  2,049Net
      income
                  
                  
                  39,761
                  
                  
                  
                  21,137Gain
      on disposal
                  
                  
                  25,322
                  
                  
                  
                  -Total
                  
                  $
                  65,083
                  
                  
                  $
                  21,137




F-19




LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
8 – SHAREHOLDER’ EQUITY





Common
Stock





In July
2007, the Company terminated a business consulting service contact with China
Direct Investments, Inc. The contract, originally effective as of January 1,
2006 for a three year term, called for the issuance of 4,700,000 shares of the
Company’s common stock valued on the date of grant at $0.18 per share, or
$846,000. The Company amortized this contract over the years ended December 31,
2007 and 2006, at an expense of $564,000 and $282,000,
respectively.





In
September, 2006, the Company entered into a three-year agreement with a
consultant to provide business development and management services. In
connection with this agreement, the Company issued 500,000 shares of the
Company’s common stock. The Company valued these services using the fair value
of common shares on the grant date of approximately $0.185 per share and
recorded deferred consulting expenses of approximately $92,000 to be amortized
over the service period. For the years ended December 31, 2008 and 2007,
amortization of consulting compensation amounted to $30,833 and $30,125,
respectively.





On
December 3, 2007, the Company issued 200,000 shares of its restricted common
stock to Mr. Ye Wenhu, an individual and Ms. Xu Xinfang, an individual. They
provided business development and management services to the Company. The
Company valued the service using the fair value of common shares on grant date
at $0.17 per share and recorded consulting expense of $34,000.





On June
6, 2007, the Company entered into a six months agreement with FirsTrust Group
Inc. to provide business development and management services. In connection with
this agreement, on July 12, 2007, the Company issued 450,000 shares of its
restricted common stock. The Company valued the service using the fair value of
common shares on the grant date of $0.17 per share and recorded consulting
expense of $76,500 in the year ended December 31, 2007. On October 6, 2008, the
Company issued another 450,000 shares of its restricted common stock to
FirsTrust Group, Inc. for additional services to be provided. The Company valued
the service using the fair value of common shares on grant date at $0.08 per
share and recorded deferred consulting expenses of $36,000 to be amortized over
six months of the service period.  For the fiscal year ended December
31, 2008, amortization of consulting compensation amount to
$18,000.





On
November 20, 2007, the Company entered into an agreement with Segue Ventures LLC
to provide various informal advisory and consulting services, including U.S.
business methods and compliance with SEC disclosure requirements. In connection
with this agreement, Segue Ventures LLC received $4,000 in cash and was to have
received 16,000 shares of common stock per month. The Contract was effective
from November 20, 2007 to June 30, 2008. On February 27, 2008, a total of 70,000
shares of the Company’s common stock were issued to Segue Ventures LLC. The
Company valued these 70,000 shares using the fair value of common shares on the
contract date of $0.19 per share and recorded consulting expense of $13,311, of
which, $3,938 and $9,373, was amortized for the years ended December 31,
2007 and 2008, respectively. With regards to these 70,000 shares the Company
recorded 21,280 as common shares issuable at December 31, 2007. On August 13,
2008, a total of 68,800 shares of the Company’s common stock were issued to
Segue Ventures LLC. The Company valued these 68,800 shares using the fair value
of common shares on the grant date at $0.19 per share and recorded consulting
expenses of $13,072 during the year ended December 31, 2008. As of December 31,
2008, zero shares remained unissued as the Company had terminated its services
agreement with Segue Ventures LLC on September 11, 2008.





In March
2008, the Company entered into a two month agreement with SmallCapVoice.Com,
Inc. to provide the Company with financial public relations services. In
connection with this agreement, the Company will pay $3,500 per month and issue
a total of 35,000 shares of the Company’s common stock. On March 11, 2008, the
Company issued 35,000 shares to SmallCapVoice.Com, Inc. The Company valued these
services using the fair value of common shares on the grant date of $0.19 per
share and recorded deferred consulting expenses of $6,650 to be amortized over
the service period. For the year ended December 31, 2008, amortization of
consulting compensation amount to $6,650.





On May 1,
2008, the Company entered into a two year agreement with China Health Capital
Group, Inc. (“CHC”) to provide the Company with financial and investment
services. In connection with this agreement, on June 24, 2008, the Company
issued


F-20





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
8 – SHAREHOLDER’ EQUITY (CONTINUED)





2,000,000
shares of Common Stock valued at $0.21 per share to CHC and recorded $420,000 as
deferred compensation. For the year ended December 31, 2008, amortization of
consulting compensation amounted to $140,000.





Pursuant
to the terms of the Disinfectant Stock Purchase Agreement, on October 20, 2008,
the Company issued 1,500,000 shares of common Stock valued at $0.19 per share to
Shanghai Shanhai Group to purchase 10% equity interest held by Shanhai in
Disinfectant for $380,000 and 1,500,000 shares of Common Stock. The Company
recorded $750 in Common Stock and $284,250 in Additional Paid-in
Capital.





WARRANTS





In
January 2007, warrants to purchase 3,213,320 shares of common stock were
exercised at $0.10 per share, for proceeds of $321,332





On June
27, 2008, Monarch Capital Fund, Ltd. exercised a warrant to purchase 100,000
shares of Common Stock with price of $0.20 per share. The Company received
proceeds from this warrant exercise of $20,000 on June 24, 2008.





During
the year ended December 31, 2008 at total of 351,750 warrants with exercise
price ranging from $0.75 to $2.50, expired.





Stock
warrant activities for the years ended December 31, 2008 and 2007 are summarized
as follows:





Number
      of
                  
                  
                  Weighted-AverageShares
                  
                  
                  Exercise PriceOutstanding
      at January 1, 2007
                  
                  
                  37,134,865
                  
                  
                  $
                  0.25Grants
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (3,213,320
                  )
                  
                  
                  0.10Expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at December 31, 2007
                  
                  
                  33,921,545
                  
                  
                  
                  0.26Grants
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (100,000
                  )
                  
                  
                  0.20Expired
                  
                  
                  (351,750
                  )
                  
                  
                  2.05Outstanding
      at December 31, 2008
                  
                  
                  33,469,795
                  
                  
                  $
                  0.25





The
following table summarizes the Company's stock warrants outstanding at December
31, 2008:





Warrants Outstanding and ExercisableRange of
                                          
                                          Number
                                          
                                          
                                          Weighted Average
                                          
                                          Weighted AverageExercise
                                          
                                          Of
                                          
                                          
                                          Remaining
                                          
                                          ExercisePrice
                                          
                                          Warrants
                                          
                                          
                                          Exercise Life
                                          
                                          Price$
                                          0.10
                                          
                                          
                                          540,130
                                          
                                          
                                          
                                          1.49
                                          
                                          
                                          $
                                          0.10$
                                          0.20
                                          
                                          
                                          17,055,000
                                          
                                          
                                          
                                          1.74
                                          
                                          
                                          $
                                          0.20$
                                          0.30
                                          
                                          
                                          15,866,665
                                          
                                          
                                          
                                          1.99
                                          
                                          
                                          $
                                          0.30$
                                          1.00
                                          
                                          
                                          8,000
                                          
                                          
                                          
                                          3.77
                                          
                                          
                                          $
                                          1.0033,469,795




F-21





LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





NOTE
9 - FOREIGN OPERATIONS





For the
fiscal year ended December 31, 2008 and 2007, the Company derived all of its
revenue from its subsidiaries located in the People's Republic of China.
Identifiable assets by geographic areas as of December 31, 2008 and 2007 are as
follows:





Identifiable AssetsDecember 31,2008
                    
                    
                    2007United
      States
                    
                    $
                    905
                    
                    
                    $
                    905People's
      Republic of China
                    
                    
                    13,681,997
                    
                    
                    
                    10,014,577Total
                    
                    $
                    13,682,902
                    
                    
                    $
                    10,015,482




NOTE
10 – INCOME TAXES





The
Company's parent and their US subsidiaries are subject to applicable Federal,
State and Local tax statues. The Company's subsidiaries in China are governed by
the Income Tax Law of the Peoples Republic of China concerning Foreign
Investment Enterprises and Foreign Enterprises and local income tax laws (the
"PRC Income Tax Law"). Pursuant to the PRC Income Tax Law, in 2008, wholly-owned
foreign enterprises are subject to tax at a statutory rate of approximately
25%.





The
components of income (loss) before income tax, inclusive of income apportioned
for minority interest and income from discontinued operations, consist of the
following:





Year Ended December 31,2008
                  
                  
                  2007US
      Operations
                  
                  $
                  (827,157
                  )
                  
                  $
                  (857,321
                  )Chinese
      Operations
                  
                  
                  2,821,791
                  
                  
                  
                  1,196,318China
      Operations – discontinued operations
                  
                  
                  21,960
                  
                  
                  
                  21,137$
                  2,016,594
                  
                  
                  $
                  360,134





The
components of the (benefit) provision for income taxes are approximately as
follows:





Years Ended December 31,2008
                  
                  
                  2007Federal,
      State and Local
                  
                  $
                  -
                  
                  
                  $
                  -Peoples
      Republic of China –Federal and Local
                  
                  
                  387,324
                  
                  
                  
                  -$
                  387,324
                  
                  
                  $
                  -





The table
below approximately summarizes the reconciliation of the Company’s income tax
provision (benefit) computed at the statutory U.S. Federal rate and the actual
tax provision:





Years Ended December 31,2008
                  
                  
                  2007Income
      tax (benefit) provision at Federal statutory rate
                  
                  $
                  705,000
                  
                  
                  $
                  126,000State
      income taxes, net of Federal benefit
                  
                  
                  93,000
                  
                  
                  
                  17,000Permanent
      differences
                  
                  
                  87,000
                  
                  
                  
                  279,000U.S.
      tax rate in excess of foreign tax rate
                  
                  
                  (415,000
                  )
                  
                  
                  (178,000
                  )Abatement
      of foreign income taxes
                  
                  
                  (324,000
                  )
                  
                  
                  (304,000
                  )Increase
      in valuation allowance
                  
                  
                  241,000
                  
                  
                  
                  60,000Tax
      (benefit) provision
                  
                  $
                  387,000
                  
                  
                  $
                  -




F-22





The
Company has a U.S net operating loss carryforward of approximately $1,330,000 as
of December 31, 2008 which will begin to expire in 2028. Under IRC section 382,
certain of these loss carryforward amounts may be limited due to the more than
50% change in ownership which took place during 2004. The deferred tax asset
associated with these net operating loss carryforwards was fully reserved as of
December 31, 2008.





NOTE
11 - COMMITMENTS AND CONTINGENCIES





Operating
Leases





The
Company rents office and manufacturing space and warehouse under leases that
expire in February 2011.





Future
minimum rental payments required under these operating leases are as
follows:





Year Ended December 31,2009
                  
                  
                  152,8282010
                  
                  
                  152,8282011
                  
                  
                  111,030Total
      minimum lease payments
                  
                  
                  416,686





For the
years ended December 31, 2008 and 2007, rent expense amounted to $123,964 and $
103,090, respectively.





Litigation





The
Company is not a party to any pending legal proceeding. No federal, state or
local governmental agency is presently contemplating any proceeding against the
Company. No director, executive officer or affiliate of the Company or owner of
record or beneficially of more than five percent of the Company's common stock
is a party adverse to the company or has a material interest adverse to the
Company in any proceeding.





NOTE
12 – STATUTORY RESERVES




The
Company is required to make appropriations to reserve funds, comprising the
statutory surplus reserve, statutory public welfare fund and discretionary
surplus reserve, based on after-tax net income determined in accordance with
generally accepted accounting principles of the PRC (the “PRC GAAP”).
Appropriation to the statutory surplus reserve should be at least 10% of the
after tax net income determined in accordance with the PRC GAAP until the
reserve is equal to 50% of the entities’ registered capital or members’ equity.
Appropriations to the statutory public welfare fund are at a minimum of 5% of
the after tax net income determined in accordance with PRC GAAP. Commencing on
January 1, 2006, the new PRC regulations waived the requirement for
appropriating retained earnings to a welfare fund. As of December 31, 2006, the
Company accumulatively appropriated the required maximum 50% of its registered
capital to statutory reserves, therefore the Company did not appropriate
statutory reserve during year 2007. However, as LiKang Disinfectant increased
its registered capital during 2008, we appropriated 10% of 2008’s net income of
LiKang Disinfectant to the statutory reserve accordingly.


F-23




LINKWELL
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008 and 2007





Balances
of Statutory reserves as of December 31, 2008 and 2007 are as
follows:




December
      31,2008
                                            
                                            
                                            2007Net
      income of operation subject to statutory reserve in the PRC for the year
      endedDecember
      31, 2008 and 2007, respectively
                                            
                                            $
                                            2,421,879
                                            
                                            
                                            $
                                            1,206,783Reserve
      rate of statutory fund
                                            
                                            
                                            10
                                            %
                                            
                                            
                                            0
                                            %Amount
      reserved for the year ended December 31, 2008 and 2007,
      respectively
                                            
                                            
                                            242,186
                                            
                                            
                                            
                                            -Balance
      of statutory reserve at January 1, 2008 and 2007,
    respectively
                                            
                                            
                                            319,036
                                            
                                            
                                            
                                            319,036Balance
      of statutory reserve at December 31, 2008 and 2007,
      respectively
                                            
                                            $
                                            561,222
                                            
                                            
                                            $
                                            319,036




NOTE
13 – OPERATING RISK





(a)
            Country
      risk





Currently,
the Company’s revenues are primarily derived from the sale of a line of
disinfectant product offerings to customers in the PRC. The Company hopes to
expand its operations to countries outside the PRC, however, such expansion has
not been commenced and there are no assurances that the Company will be able to
achieve such an expansion successfully. Therefore, a downturn or stagnation in
the economic environment of the PRC could have a material adverse effect on the
Company’s financial condition.





(b)
            Products
      risk





In
addition to competing with other manufacturers of disinfectant product
offerings, the Company competes with larger U.S. companies who have greater
funds available for expansion, marketing, research and development and the
ability to attract more qualified personnel. These U.S. companies may be able to
offer products at a lower price. There can be no assurance that the Company will
remain competitive should this occur.





(c)
            Exchange
      risk





The
Company cannot guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profits depending on exchange rate of Renminbi
converted to US dollars on that date. The exchange rate could fluctuate
depending on changes in the political and economic environments without
notice.





(d)
            Political
      risk





Currently,
the PRC is in a period of growth and is openly promoting business development in
order to bring more business into the PRC. Additionally, the PRC currently
allows a Chinese corporation to be owned by a United States corporation. If the
laws or regulations relating to ownership of a Chinese corporation are changed
by the PRC government, the Company's ability to operate the PRC subsidiaries
could be affected.


F-24





NOTE
14 – SUBSEQUENT EVENTS





Pursuant
to the second amendment to the Biological Stock Purchase Agreement, Likang
Disinfectant will pay RMB 2,000,000 and 500,000 shares of the Company’s common
stock to acquire 100% of equity interest of LiKang Biological. Such transaction
was completed on March 5, 2009.


F-25