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, 2009




OR




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




Commission
file number: 000-24977





Linkwell
Corporation


(Exact
name of registrant as specified in its charter)





Florida
                  65-1053546(State
      of Incorporation)
                  (I.R.S.
      Employer
                    Identification
      Number)1104
      Jiatang Road
                    Jiading
      District
                    Shanghai
      China
                  201807(Address
      of Principal Executive Offices)
                  (Zip
      Code)





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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).    Yes   ̈    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.    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
      AcceleratedFiler    ̈
              Accelerated
      Filer    ̈
              Non-accelerated
      Filer  ̈
                (Do
      not check if a smaller
                reporting
      company)
              Smaller
      reporting companyx




Indicate
by check mark 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 June 30, 2009, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately
$3,953,880.





The
number of shares outstanding of capital stock as of March 31, 2010 was
86,605,475.








TABLE
      OF CONTENTSPart
      IItem
      1.
                                                                    Business.
                                                                    4Item
      1A.
                                                                    Risk
      Factors.
                                                                    21Item
      1B.
                                                                    Unresolved
      Staff Comments.
                                                                    27Item
      2.
                                                                    Properties.
                                                                    27Item
      3.
                                                                    Legal
      Proceedings.
                                                                    27Item
      4.
                                                                    Removed
      and Reserved.
                                                                    27Part
      IIItem
      5.
                                                                    Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
                                                                    28Item
      6.
                                                                    Selected
      Financial Data.
                                                                    28Item
      7.
                                                                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                                                    29Item
      7A.
                                                                    Quantitative
      and Qualitative Disclosures About Market Risk.
                                                                    37Item
      8.
                                                                    Financial
      Statements and Supplementary Data.
                                                                    37Item
      9.
                                                                    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
                                                                    37Item
      9A(T).
                                                                    Controls
      and Procedures.
                                                                    37Item
      9B.
                                                                    Other
      Information.
                                                                    38Part
      IIIItem
      10.
                                                                    Directors,
      Executive Officers and Corporate Governance.
                                                                    38Item
      11.
                                                                    Executive
      Compensation.
                                                                    40Item
      12.
                                                                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                                                                    41Item
      13.
                                                                    Certain
      Relationships and Related Transactions, and Director
      Independence.
                                                                    42Item
      14.
                                                                    Principal
      Accounting Fees and Services.
                                                                    43Part
      IVItem
      15.
                                                                    Exhibits,
      Financial Statement Schedules.
                                                                    44Signatures
                                                                    47


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 1A.
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, unless the context indicates otherwise, the terms:





“Linkwell”,
the “Company”, “we” and “us” refers to Linkwell Corporation,


a Florida
corporation;





“Linkwell
Tech” refers to our 90% owned subsidiary Linkwell Tech Group, Inc.,


a Florida
corporation;





“LiKang
Disinfectant” refers to Shanghai LiKang Disinfectant High-Tech Company,
Limited,


a
wholly-owned subsidiary of Linkwell Tech;





“LiKang
Biological” refers to Shanghai LiKang Biological High-Tech Co.,
Ltd.,


a
wholly-owned subsidiary of LiKang Disinfectant;





“LiKang
International” refers to Shanghai LiKang International Trade Co.,
Ltd.,


formerly
a wholly-owned subsidiary of LiKang Disinfectant which was sold to Linkwell
International Trading Co., Limited on May 31, 2008.





We also
use the following terms when referring to certain related parties:





“Shanhai”
refers to Shanghai Shanhai Group,a Chinese company which used to be the minority
owner of LiKang Disinfectant;





“Meirui”
refers to Shanghai LiKang Meirui Pharmaceuticals High-Tech Co., Ltd., a
company of which Shanhai is a majority shareholder;





“ZhongYou”
refers to Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd., a company
owned by Shanghai Jiuqing Pharmaceuticals Company, Ltd., whose 65% owner is
Shanghai Ajiao Shiye Co. Ltd. Our Chairman and Chief Executive Officer Xuelian
Bian is a 60% shareholder of Shanghai Ajiao Shiye Co. Ltd.




The
People's Republic of China is herein referred to as China or the
PRC.





The
information which appears on our web site at www.linkwell.us is not part of this
report.


3


PART
I





ITEM
1. BUSINESS.





We operate under a holding company
structure and currently have one direct operating subsidiary, Linkwell Tech
Group Inc. (“Linkwell Tech”) a Florida corporation, of which we own 90%. On
February 15, 2008, Linkwell Tech sold 10% of its issued and outstanding capital
stock to Ecolab Inc., a Delaware corporation (“Ecolab”).  Linkwell
Tech owns 100% of Shanghai LiKang Disinfectant High-Tech Company, Limited
(“LiKang Disinfectant”).  We regard LiKang Disinfectant's business of
hospital disinfectant products as our primary business.  LiKang
Disinfectant acquired 100% of LiKang Biological on March 5, 2009.





Linkwell Corporation, through LiKang
Disinfectant, is engaged in the development, manufacture, sale and distribution
of disinfectant health care products primarily to the medical industry in China.
We have a national marketing and sales presence throughout all twenty-two
provinces as well as four autonomous regions and four municipalities in China.
We currently employ forty full-time sales and marketing people based in
Shanghai.  Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd,
(“ZhongYou Pharmaceutical”) a company 65% owned by our Chairman and Chief
Executive Officer, Xuelian Bian, also sells our products using seventy
independent sales representatives in China.





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.  We have made
efforts to grow our customer base by expanding into the civil, industrial,
livestock and agricultural disinfection markets of China.  Currently
we offer a variety of disinfectant products for the following
applications:





·
            Skin
      and mucous membrane disinfectants;




·
            Hand
      disinfectants (external);




·
            Environment
      and surface disinfectants;




·
            Medical
      devices and equipment
disinfectants;




·
            Machine
      disinfectants; and




·
            Animal
      disinfectants.





LiKang Disinfectant has fifty-six
marketed products, fifty 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 thirty
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 1.0% of our
revenue for the fiscal year ended December 31, 2009.  Products that we
manufacture account for approximately 99.0% of our total net revenues for the
fiscal year ended December 31, 2009.





Prior to May 31, 2008, we owned 100% of
Shanghai LiKang International Trade Co. Ltd., through our subsidiary LiKang
Disinfectant. The primary business of LiKang International was 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 our Vice President and Director.




Corporate Structure
Chart










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.”


4





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:





·   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 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.


5





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 reportedDecember
      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 deathsApril,
      2009
                                                                          
                                                                          Worldwide
                                                                          
                                                                          H1N1
                                                                          
                                                                          12,220
      deaths deathsNovember,
      2009
                                                                          
                                                                          Ukraine
                                                                          
                                                                          Flu
                                                                          
                                                                          1.4
      million infected and 328
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.


6





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.





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.





H1N1





HINI is an influenza virus that had
never been identified as a cause of infections in people before the current H1N1
pandemic. Genetic analyses of this virus have shown that it originated from
animal influenza viruses and is unrelated to the human seasonal H1N1 viruses
that have been in general circulation among people since 1977.





Antigenic
analysis has shown that antibodies to the seasonal H1N1 virus do not protect
against the pandemic H1N1 virus. However, other studies have shown that a
significant percentage of people age 65 and older do have some immunity against
the pandemic virus. This suggests that some people in older age groups may have
some cross protection from exposure to viruses that have circulated in the more
distant past.





Unlike
typical seasonal flu patterns, the new virus caused high levels of summer
infections in the northern hemisphere, and then even higher levels of activity
during cooler months in this part of the world. After early outbreaks in North
America in April 2009 the new influenza virus spread rapidly around the world.
To date, most countries in the world have confirmed infections from the new
virus. As of December 27 2009, worldwide more than 208 countries and overseas
territories or communities have reported laboratory confirmed cases of pandemic
influenza H1N1 2009, including at least 12,220 deaths.





The new
virus has also led to patterns of death and illness not normally seen in
influenza infections. Most of the deaths caused by the pandemic influenza have
occurred among younger people, including those who were otherwise healthy.
Pregnant women, younger children and people of any age with certain chronic lung
or other medical conditions appear to be at higher risk of more complicated or
severe illness. Many of the severe cases have been due to viral pneumonia, which
is harder to treat than bacterial pneumonias usually associated with seasonal
influenza. Many of these patients have required intensive care.





H1N1 Flu viruses are spread mainly from
person to person through coughing or sneezing by people with influenza.
Sometimes people may become infected by touching something with flu viruses on
it and then touching their eyes, mouth, or nose. Providing sufficient facilities
for hand washing and alcohol-based hand sanitizers in common workplace areas
such as lobbies, corridors, and rest rooms can reduce the chance of spread of
the H1N1 virus. Studies have shown that influenza virus can survive on
environmental surfaces and can infect a person for up to 2-8 hours after being
deposited on the surface. Disinfecting commonly touched hard surfaces in the
workplace, such as work stations, counter tops, door knobs, and bathroom
surfaces by wiping them down with disinfectant can reduce the chance of spread
of the H1N1 virus.


7





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.





In June 2009, the Chinese Ministry of
Public Health issued the Hygiene Standard of Manufacturers of Disinfection
Products (2009) (“Hygiene Standard”) which updated the previously issued 2004
version. It specifies plant layout, hygiene requirements for workplaces,
requirements for production equipment, materials, warehouse and workers. The
Hygiene Standard will go into effect on January 1, 2010 and will restrict market
access of some small disinfectant companies due to the high Good Manufacturing
Practice (“GMP”) standard which should prove to be beneficial for normalization
of  the disinfectant market.





The table
below details the 30 licenses issued to LiKang Disinfectant by the Chinese
Ministry of Public Health.





#
              
              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
              
              2007.6.429
              
              Jifro
      surgical hand scrub
              
              2009.12.2230
              
              Putai
      2% Chlorhexidine gluconate disinfectant
              
              2009.12.22





Product
Lines





We market
fifty-six 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.


8





Five
Product Categories:





·
            Skin
      and Mucous Membrane Disinfectants – Eight
  Products




·
            Hand
      Disinfectants – Eight Products




·
            Environment
      and Surface Disinfectants  – Ten
  Products




·
            Medical
      Devices and Equipment Disinfectants – Five
  Products




·
            Air
      disinfection equipment – Seven
Products




·
            Other
      products – Eighteen Products





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 99.0% of our sales are derived from products
we have internally developed and produced and 1.0% of sales are produced by
outside companies. 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 45.8% of our fiscal year 2009 sales, and
approximately 51.7% of our fiscal year 2008 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


9


Hand
Disinfectants





These disinfectants target the skin
surface.  Products are applied to the skin prior to medial
procedures.  This product group accounted for approximately 26.3% of
our fiscal year 2009 sales and approximately 18.7% of our fiscal year 2008
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





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 12.5% of our fiscal year 2009 sales and approximately 17.7% of our
fiscal year 2008 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 9.9% of our fiscal year 2009 sales and approximately 10.6% of our
fiscal year 2008 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





The machine series is a line of
disinfectants that target air quality.  This product group accounted
for approximately 1.3% of our fiscal year 2009 sales and approximately 1.1% of
our fiscal year 2008 sales.  The table below lists our machine series
disinfectants.


10





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





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, 2009 two
affiliated entities that are our customers, ZhongYou Pharmaceutical and Shanghai
Jiuqing Pharmaceuticals Co. Ltd., represented approximately 36.6% of our total
net revenues.





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 99% of LiKang
Disinfectant’s revenues for fiscal 2009 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.  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.


11





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 purchased 100% of the
issued and outstanding stock of LiKang Biological.





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.





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, 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.


12





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. In 2009, we commercialized two
new disinfectant products, Jifro surgical hand scrub and Putai 2% Chlorhexidine
gluconate disinfectant.





For the fiscal years ended December 31,
2009 and 2008, we spent approximately $108,026 and approximately $63,552,
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.





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 40
full-time sales and marketing people based in Shanghai.  ZhongYou
Pharmaceutical, an affiliate, also sells our products using 70 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.





We anticipate 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 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


13





After the Wenchuan 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.  In 2009, there were 2,320 participants that attended the
Likang Disinfectant training course, of which 2,156 became
qualified.





Intellectual
Property





We have received eleven patents and have
twenty-one pending patent application with National Property Right
Administration of the PRC.  The patent approval process can take up to
thirty-six 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.


14


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 includes facilities and
machinery and software includes 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.  Compliance with the new standards is
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 the 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, at
a minimum, no later than 24 hours after a customer’s inquiry;


15





·   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;
and





·   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.


16





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.





Sanitary Standard for
Producing Disinfectant products Enterprises 2009





To strengthen supervision and management
of disinfection products, standardize the behavior of disinfection products
based on "Infectious Diseases Prevention Law" and "sterilization management
approach," The People's Republic of China Ministry of Health have revised the
old disinfectant manufacturing criteria and enacted the “Sanitary Standard for
Producing Disinfectant products Enterprises 2009 ” and effective from January 1,
2010.





According to the new guideline, the
compounding, mixing and subpackaging of Skin and mucous membrane disinfectants,
and antibacterial preparation (except for hand-washing products), should be
processed in a workshop with a 300,000 level of air purification.





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 toChina'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.


17





Employees





The
Company employs approximately 162 full time employees, including our executive
officers, as follows:





Department
              
              Number of EmployeesAdministrative
      center
              
              15Accounting
              
              12Production
              
              54Logistics
              
              17Sales
      and Marketing Staff in Shanghai
              
              40Training
              
              9Research
      and Development
              
              15Total
              
              162





U.S.
Advisors





In
September 2006, we entered into a three-year agreement with a consultant to
provide business development and management services. In connection with this
agreement, we issued 500,000 shares of our common stock. We valued these
services using the fair value of common shares on the grant date at $0.185 per
share and recorded a deferred consulting expense of $92,500 to be amortized over
the service period. For the year ended December 31, 2009, amortization of
consulting compensation amounted to $20,556.





On
November 20, 2007, we entered into a one year 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 16,000
shares of common stock per month. From November 20, 2007 to June 30, 2008, we
recorded a total of 116,800 common shares issuable valued at $24,064 as
stock-based consulting expense. On February 27, 2008, 70,000 shares of our
common stock were issued to Segue Ventures LLC. We valued these 70,000 shares
using the fair value of the common shares on the contract date at $0.19 per
share and recorded consulting expense of $13,300, of which,  $3,938
was allocated to the year ended December 31, 2007, and $9,362 was allocated to
the six months ended June 30, 2008. On August 13, 2008, 68,800 shares of our
common stock were issued to Segue Ventures LLC. We valued these 68,800 shares
using the fair value of common shares on the grant date at $0.19 per share and
recorded consulting expense of $13,072 in 2008. We terminated its services
agreement with Segue Ventures LLC on September 11, 2008, and no shares are
unissued.





In March
2008, we entered into a two month agreement with SmallCapVoice.Com, Inc. to
provide us with financial public relations services. In connection with this
agreement, we pay $3,500 per month and issues a total of 35,000 shares of our
common stock. On March 11, 2008, we issued 35,000 shares to SmallCapVoice.Com,
Inc. We valued these services using the fair value of common shares on the grant
date at $0.19 per share.





On May 1,
2008, we entered into a two year agreement with China Health Capital Group, Inc.
(“CHC”) to provide us with financial and investment services. In connection with
this agreement, on June 24, 2008, we issued 2,000,000 shares of Common Stock
valued at $0.21 per share to CHC and recorded $420,000 as deferred compensation.
We amortized $210,000 as stock-based compensation for the year ended December
31, 2009.





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. We received proceeds from
this warrant exercise of $20,000 on June 24, 2008.





On July
1, 2009, we entered into a two year agreement with First Trust. In connection
with this agreement, we issued 1,800,000 shares of Common Stock valued at $0.09
per share to First Trust and recorded $162,000 as deferred compensation. We
amortized $40,500 as stock-based compensation for the year ended December 31,
2009.


18


History of Our
Company





Linkwell
Corporation (formerly Kirshner Entertainment & Technologies, Inc.
(“Kirshner”)) was incorporated in the State of Colorado on December 11, 1996. On
May 31, 2000, we acquired 100% of HBOA.com, Inc. 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 May 2,
2005, we entered into and consummated a share exchange with all of the
shareholders of Linkwell Tech Group, Inc. (“Linkwell Tech”). Pursuant to the
share exchange, 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 on June 22,
2004, as a Florida corporation. On June 30, 2004, Linkwell Tech acquired 90% of
Shanghai LiKang Disinfectant High-Tech Company, Ltd. (“LiKang Disinfectant”)
through a share exchange. LiKang Disinfectant is a science and technology
enterprise founded in 1988. LiKang Disinfectant is involved in the development,
production, marketing and sale, 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 hospital disinfectant products as the primary segment of its business
and has developed and manufactured several series of products in the field of
skin mucous disinfection, hand disinfection, surrounding articles disinfection,
medical instruments disinfection and air disinfection.





On June
30, 2005, our Board of Directors approved an amendment of our 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.





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





i)
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”), in a related party transaction
with Mr. Xuelian Bian, our Chief Executive Officer, Mr. Wei Guan our
Vice-President and Director, 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 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 our
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 our common stock to
$200,000 and 500,000 shares of our 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
amendment to the Biological Stock Purchase Agreement (“Second Biological
Amendment”) in order to complete the purchase transactions timely and properly.
Pursuant to the terms of the Second Biological Amendment, the purchaser was
changed from Linkwell Tech to LiKang Disinfectant, in addition, the
consideration was changed to RMB2,000,000 (approximately $291,792) and 500,000
shares of our common stock. After the Second Biological Amendment, approval from
Ministry of Commerce, in the People’s Republic of China is not necessary
because LiKang Disinfectant acquired 100% of the equity interest in LiKang
Biological and both LiKang Disinfectant and LiKang Biological are companies
registered in PRC. This transaction closed on March 5, 2009. We issued 500,000
shares of our common stock to LiKang Pharmaceutical on December 28, 2009;
and





ii)
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, pursuant to a stock
purchase agreement (the “Disinfectant Stock Purchase Agreement”) whereby
Shanghai Shanhai Group was to receive 3,000,000 shares of our common
stock.


19





Due to
restrictions under PRC law that prohibited the consideration then contemplated
by the Disinfectant Stock Purchase Agreement, the transaction 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 a 10% equity
interest, which was changed from 3,000,000 shares of our common stock, to
$380,000 and 1,500,000 shares of our 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 were not
changed.





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 of our common stock 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 90%
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. On May 31, 2008, the Company, Linkwell Tech and
Ecolab entered into a Linkwell Tech Group Inc. Stockholders 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, our Vice President 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.




During
the quarter ended September 30, 2009, LiKang Disinfectant invested certain of
its intangible assets in Likang Biological.  The Likang Disinfectant
intangible assets were valued at approximately $2,000,000 and accounted
for an approximately $800,000 increase in the registered capital of
Likang Biological.  Due to U.S. GAAP, a majority of this $800,000 has
been eliminated as this patent has been generated internally.





On
December 21, 2009, Linkwell entered into a stock purchase agreement with Inner
Mongolia Wuhai Chengtian Chemical Co., Ltd., a corporation organized under
the laws of China (“Wuhai Chengtian”) and Honglin Li, a stockholder of Wuhai
Chengtian, pursuant
to which Likang Disinfectant was to purchase 35% of the outstanding
capital stock of Wuhai Chengtian from Honglin Li in exchange for approximately
$463,235 (3,150,000 RMB) and 4,000,000 shares of our common stock. Prior to
this transaction, Likang Disinfectant owned 16% of the capital stock of Wuhai
Chengtian. When this
transaction is consummated, LiKang Disinfectant shall own 51%
of the capital stock of Wuhai Chengtian. Wuhai Chengtian manufactures
materials we use to make certain of our disinfectant products.





We, along
with Wuhai Chengtian, have been unable to obtain governmental tax approval of
the transaction with Wuhai
Chengtian and Honglin Li.  As such, on February 26, 2010, the
Company, Linkwell Tech, Likang Disinfectant, Wuhai Chengtian and Honglin Li
entered into Amendment No. 1 to the Stock Purchase Agreement (the “Amendment”)
whereby the Stock Purchase Agreement has been amended such that the Exchange is
now contingent upon the parties receiving governmental approval of the
transaction.  This transaction has not closed as of the date of this
report.


20


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 related party represented
approximately 21.9% of our total net revenues in the fiscal year of 2008 and
approximately 36.6% of our total net revenues in fiscal 2009.  This
related party represented approximately 58.6% and approximately 49.6% of our
accounts receivable at December 31, 2009 and 2008, respectively. 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.





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 2009, 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 2008; 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.


21


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.





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, 2009 and 2008 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.


22


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.





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.


23





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.





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.


24


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.





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.


25





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.





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 Florida 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.


26





As a
result of the trading price of our common stock being 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 of a disclosure schedule
explaining the penny stock market and its associated risks prior to any penny
stock transaction.  These requirements severely limit the liquidity of
securities in the secondary market because few brokers or dealers are likely to
undertake these compliance requirements.  In addition to the
applicability of the penny stock rules, other risks associated with trading in
penny stocks include 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 a lease that
expires in December 2010 for approximately $32,000 annually. The amount due
under the lease increased during the lease years beginning in 2008 by 8% to 10%
annually.





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





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 approximately $11,500
annually.  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
leased approximately 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 $41,366 annually. The lease agreement
expired on October 31, 2009. In July 2009, due to the completion of new
warehouse in Jiading, we ended the lease agreement with Shanghai Henglian
Industrial Co.Limited and ceased renting the warehouse.








ITEM
3. LEGAL PROCEEDINGS.





Please
see the disclosure included in NOTE 16, “CONTINGENCY” in the notes to
our financial statements included in Item 8 to this Form 10-K.





ITEM
4. (REMOVED AND RESERVED).





N/A.




27




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”) under
the symbol LWLL.    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
      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


Fiscal
      2009First
      quarter ended March 31, 2009
                          
                          $
                          0.07
                          
                          
                          $
                          0.03Second
      quarter ended June 30, 2009
                          
                          $
                          0.22
                          
                          
                          $
                          0.04Third
      quarter ended September 30, 2009
                          
                          $
                          0.24
                          
                          
                          $
                          0.07Fourth
      quarter ended December 31, 2009
                          
                          $
                          0.19
                          
                          
                          $
                          0.13





On April
13, 2010, the last sale price of our common stock as reported on the OTCBB was
$0.12. As of December 31, 2009, there were approximately 1,730 record owners of
our common stock.





Dividend
Policy





We have
never paid cash dividends on our common stock.  Payment of dividends
will be made at 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.





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





None.





ITEM
6.  SELECTED FINANCIAL DATA.





N/A.


28





ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





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 our Form 10-K annual report for the fiscal year ended December 31,
2009. 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 8 hereof.





OVERVIEW





We
operate under a holding company structure and currently have one direct 90%
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”).  On March 5, 2009, LiKang Disinfectant purchased 100% of
LiKang Biological Company for approximately $291,792 (RMB 2,000,000), and
500,000 shares of our common stock.





Linkwell
Corporation, through Linkwell Tech’s wholly-owned subsidiaries, LiKang
Disinfectant and Likang Biological, is engaged in the development, manufacture,
sale and distribution of disinfectant health care products primarily to the
medical industry in China.





Since
1988 we have developed, manufactured and distributed disinfectant health care
products primarily to the medical industry in China. In the last few 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, such as facilities and
machinery, and software, including the technology to monitor the facilities, as
well as the heightened knowledge and capability of the production staff
regarding quality control procedures. Following the adoption of the industry
standards in 2002, we have been granted thirty-one hygiene licenses by the
Ministry of Public Health.





We
believe that government standards adopted in July 2002 have increased the
barriers to entry for competitors in the disinfectant industry in China. The
implementation of these improved production standards and license requirements
has effectively decreased the competitive landscape as it pertains to small to
medium 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 the adoption of industry standards, the marketplace
is evolving with a more stringent focus on product quality, which we believe
will enable us to increase our base of commercial customers thereby increasing
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. We have made efforts to expand our distribution reach to the retail
market. We have repackaged certain of our commercial disinfectant products for
sale to the consumer market and have commenced upon expanding our customer base
to include hotels, schools, supermarkets and pharmacies. By virtue of the
Chinese government's continuing focus on educating the Chinese population about
the benefits of proper sanitation procedures, we believe that another key to
increasing our revenues is the continued expansion of the retail distribution of
our products.


29





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 only a 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 in China, gives us a competitive
advantage over many other disinfectant companies in China, and will enable us to
leverage the brand awareness for our 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 assets and capital
available to us necessary to enable the increase of our revenues in future
periods as the market for disinfectant products in China continues to
increase.  We will continue to focus our efforts on the 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 capacity and align our company with small, regional companies in
the industry.





RESULTS
OF OPERATIONS





The table
below sets forth the results of operations for the year ended December 31, 2009,
as compared to the year ended December 31, 2008 as a percentage of net
sales




2009
                  
                  
                  2008$
                  
                  
                  % of Sales
                  
                  
                  $
                  
                  
                  % of SalesNet
      RevenuesNon-related
      companies
                  
                  
                  9,299,120
                  
                  
                  
                  
                  
                  
                  
                  9,362,364Related
      companies
                  
                  
                  5,367,662
                  
                  
                  
                  
                  
                  
                  
                  2,623,560Total
      Net Revenue
                  
                  
                  14,666,782
                  
                  
                  100
                  %
                  
                  
                  11,985,924
                  
                  
                  100
                  %Cost
      of Sales
                  
                  
                  6,501,335
                  
                  
                  
                  44.3
                  %
                  
                  
                  5,963,830
                  
                  
                  
                  49.8
                  %Gross
      Profit
                  
                  
                  8,165,447
                  
                  
                  
                  55.7
                  %
                  
                  
                  6,022,094
                  
                  
                  
                  50.2
                  %Selling
      Expense
                  
                  
                  1,598,134
                  
                  
                  
                  10.9
                  %
                  
                  
                  1,083,431
                  
                  
                  
                  9.0
                  %General
      and Administrative
                  
                  
                  2,409,104
                  
                  
                  
                  16.4
                  %
                  
                  
                  2,432,327
                  
                  
                  
                  20.3
                  %Total
      Operating Expenses
                  
                  
                  4,007,238
                  
                  
                  
                  27.3
                  %
                  
                  
                  3,515,758
                  
                  
                  
                  29.3
                  %Income
      from Operations
                  
                  
                  4,158,209
                  
                  
                  
                  28.4
                  %
                  
                  
                  2,506,336
                  
                  
                  
                  20.9
                  %Other
      Income (Expenses), net
                  
                  
                  (121,897
                  )
                  
                  
                  (0.8
                  )%
                  
                  
                  (405,320
                  )
                  
                  
                  (3.4
                  )%Income
      tax expense
                  
                  
                  594,078
                  
                  
                  
                  4.1
                  %
                  
                  
                  387,324
                  
                  
                  
                  3.2
                  %Income
      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  %
                  
                  
                  65,083
                  
                  
                  
                  0.5
                  %Net
      Income including non-controlling interest
                  
                  
                  3,442,234
                  
                  
                  
                  23.5
                  %
                  
                  
                  1,778,775
                  
                  
                  
                  14.8
                  %Less:
      net income attributable non-controlling interest
                  
                  
                  (381,441
                  )
                  
                  
                  2.6
                  %
                  
                  
                  (149,505
                  )
                  
                  
                  1.2
                  %Net
      Income attributable to Linkwell Corp
                  
                  
                  3,060,793
                  
                  
                  
                  20.9
                  %
                  
                  
                  1,629,270
                  
                  
                  
                  13.6
                  %





NET
REVENUES





Net
revenues for the year ended December 31, 2009 were $14,666,782, as compared to
net revenues of $11,985,924 for the year of 2008, an increase of $2,680,858 or
approximately 22.4%. This increase in revenues was due to increased demand from
end customers as a result of increased recognition of our high-quality,
competitively priced disinfectant products. Of our total net revenues for the
year ended December 31, 2009, $5,367,662 or approximately 36.6% were
attributable to related parties as compared to net revenues of $2,623,560, or
approximately 21.9% were attributable to related parties in
2008.


30





COST
OF REVENUES





Cost of
revenues includes raw materials and manufacturing costs, which includes labor,
rent and an allocated portion of overhead expenses, such as utilities, directly
related to product production. For the year ended December 31, 2009, cost of
revenues amounted to $6,501,335 or approximately 44.3% of net revenues as
compared to cost of revenues of $5,963,830, or approximately 49.8% of net
revenues in 2008.  The increase in cost of sales is attributed to the
increase of production and sales volume in 2009; while the decrease in cost of
revenue as a percentage of revenue was mainly due to the stable raw material
cost compared to the cost in 2008, improved economies of scale on fixed costs as
a result of increased production, and our continuous improvement on control of
the manufacturing costs. We purchase raw materials from several primary
suppliers and we have purchase contracts with these suppliers in an effort to
ensure a steady supply of raw materials.





GROSS
PROFIT





Gross
profit for the year ended December 31, 2009 was $8,165,447, or approximately
55.7% of net revenues, as compared to $6,022,094, or approximately 50.2% of
revenues for the year of 2008. The increase in our gross profits and gross
profit margin was mainly due to the decrease of cost of revenue as a percentage
of revenue while our sales activities increased.




OPERATING
EXPENSES





Total
operating expenses consisted of selling, general and administrative expenses;
for the year ended December 31, 2009, total operating expenses were $4,007,238,
an increase of $491,480, or approximately 14%, from total operating expenses of
$3,515,758 for the year of 2008. The increase in operating expenses was mainly
due to a proportional increase in selling expenses with our increased sales and
production.  In addition, we incurred non-cash consulting fees during
the year ended December 31, 2009 of $408,014 as compared to $188,833 for the
year of 2008, an increase of $219,181. Non-cash consulting fees represent the
amortization of fees to consultants under agreements entered into during the
year, which was paid by issuance of our common shares.





DISCONTINUED
OPERATION





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 Trading. Pursuant to the terms of the agreement,
LiKang Disinfectant will receive $291,754 (RMB 2,000 000) once the agreement is
approved by the Ministry of Commerce, the People’s Republic of
China.





As of May
31, 2008, the Company had classified LiKang International business as a
discontinued operation. For the year ended December 31, 2008, gain from
discontinued operations was $65,083.





NONCONTROLLING
INTEREST





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 March 28, 2008 and June 4, 2008, Linkwell Tech
received $200,000 and $1,388,559, respectively, from Ecolab. Including the
$400,000 loan that Ecolab released to Linkwell Tech and accrued interest of
$11,441, Linkwell Tech received a total 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, whereby both the Company and Ecolab are subject to,
and benefit by, 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 no longer needed
to be repaid. After this transaction, Ecolab became the 10% minority interest
holder of Linkwell Tech. For the year ended December 31, 2009, we had a minority
interest expense of $381,441 as compared to $149,505 for the year of
2008.


31





NET
INCOME





Our net
income for the year ended December 31, 2009 was $3,060,793 compared to
$1,629,270 for 2008, an increase of $1,431,523 or 87.8%.  Net income
as a percentage of revenue was 20.9% in 2009 while it was 13.6% in 2008. This
increase in net income was attributable to economies of scale combined with
rapid growth in revenue and efficiency of operations.  Our management
believes that net income will continue to increase as we continue to increase
our sales, offer better quality products and control our manufacturing
costs.




LIQUIDITY
AND CAPITAL RESOURCES





As shown
in the accompanying financial statements, our working capital increased
$2,154,726 or approximately 21.7% from $9,951,925 on December 31, 2008 to
$12,106,651 on December 31, 2009. With the expansion of our businesses, we
anticipate the need to utilize our capital resources in the near future. In
addition to our working capital, we intend to obtain required capital through a
combination of bank loans and the sale of our equity securities. Although we are
not party to any commitments or agreements at this time to provide us with
additional bank financing or to sell our securities, we are optimistic that 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,
2009, we had a total of $380,774 in outstanding short term loans, which will
mature on June 16, 2010. 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 production capacity and improve the quality of our products. Based on
our preliminary estimates, upgrades and expansion will require additional
capital of approximately $1 million.





We need
to raise additional capital resources to meet the demands described above. We
may 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.





The
following is a summary of cash provided by or used in each of the indicated
types of activities during the years ended December 31, 2009 and
2008:




2009
                  
                  
                  2008Cash
      provided by (used in):Operating
      Activities
                  
                  $
                  1,670,710
                  
                  
                  $
                  204,377Investing
      Activities
                  
                  
                  (1,317,186
                  )
                  
                  
                  (508,045
                  )Financing
      Activities
                  
                  
                  (287,989
                  )
                  
                  
                  1,153,088





NET
CASH FROM OPERATING ACTIVITES




Net cash
provided by operating activities for the year ended December 31, 2009 was
$1,670,710, as compared to $204,377 for the same period of 2008, an increase of
$1,466,333 or approximately 717.5%. The increase in cash inflow in 2009 was
mainly a result of increased sales with improved collection on accounts
receivable.




NET
CASH FROM INVESTING ACTIVITIES





Net cash
used in investing activities for the year ended December 31, 2009 was $1,317,186
as compared to net cash used in investing activities of $508,045 for the same
period in 2008, an increase of $809,144 or 159.3%. Cash used in investing
activities mainly consisted payments of $1,170,150 for purchases of
equipment; while in 2008, we paid $108,988 for acquisition of fixed assets,
$399,057 for acquiring remaining 10% minority interest in LiKang
Disinfectant.


32





NET
CASH FROM FINANCING ACTIVITIES:





Net cash
used in financing activities was $287,989 for the year ended December 31, 2009,
as compared to net cash provided by financing activities of $1,153,088 in 2008.





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; asset impairment and option value.





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.





REVENUE
RECOGNITION





In
general, our revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 480). We record
revenue when persuasive evidence of an arrangement exists, services have been
rendered or product delivery has occurred, the sales price to the customer is
fixed or determinable, and collectibility is reasonably assured. The following
policies reflect specific criteria for the various revenue streams of the
Company.





Our
revenues from the sale of products to related parties are recorded when the
goods are shipped to the customers from our related parties. Upon shipment,
title passes, and collectibility is reasonably assured. We receive purchase
orders from our related parties on an as need basis from the related party
customers. Generally, the related party does not hold our 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 in our balance sheet.


33


INCOME
TAXES





We
account for income taxes in accordance with, Accounting for Income Taxes,
which 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 our
ownership, our 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.





STOCK-
BASED COMPENSATION





We
account for share-based payments in accordance with, 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.




IMPAIRMENT
OF LONG-LIVED ASSETS





Long-lived
assets, which include property, plant and equipment and intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.





Recoverability
of long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the assets. Fair value is generally determined using the asset’s
expected future discounted cash flows or market value, if readily
determinable.





FOREIGN
CURRENTY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)





Our
functional currency is the Chinese yuan - renminbi (“RMB”). For financial
reporting purposes, RMB was translated into United States dollars ("USD") as the
reporting currency. Assets and liabilities are translated at the exchange rate
in effect at the balance sheet date. Revenues and expenses are translated at the
average rate of exchange prevailing during the reporting period. Translation
adjustments arising from the use of different exchange rates from period to
period are included as a component of shareholders' equity as "Accumulated other
comprehensive income." Gains and losses resulting from foreign currency
transactions are included in income. There has been no significant fluctuation
in exchange rate for the conversion of RMB to USD after the balance sheet
date.


34


We use
Statement of Financial Accounting Standards ("SFAS") No. 130, “Reporting
Comprehensive Income” (codified in FASB ASC Topic 220). Comprehensive income is
comprised of net income and all changes to the statements of shareholders’
equity, except those due to investments by shareholders, changes in paid-in
capital and distributions to shareholders.





RECENT
ACCOUNTING PRONOUNCEMENTS





In
October 2009, the FASB issued an ASU regarding accounting for own-share lending
arrangements in contemplation of convertible debt issuance or other
financing.  This ASU requires that at the date of issuance of the
shares in a share-lending arrangement entered into in contemplation of a
convertible debt offering or other financing, the shares issued shall be
measured at fair value and be recognized as an issuance cost, with an offset to
additional paid-in capital. Further, loaned shares are excluded from basic and
diluted earnings per share unless default of the share-lending arrangement
occurs, at which time the loaned shares would be included in the basic and
diluted earnings-per-share calculation.  This ASU is effective for
fiscal years beginning on or after December 15, 2009, and interim periods within
those fiscal years for arrangements outstanding as of the beginning
of those fiscal years. The Company is currently evaluating the impact
of this ASU on its consolidated financial statements.




In August
2009, the FASB issued an Accounting Standards Update (“ASU”) regarding measuring
liabilities at fair value. This ASU provides additional guidance clarifying the
measurement of liabilities at fair value in circumstances in which a quoted
price in an active market for the identical liability is not available; under
those circumstances, a reporting entity is required to measure fair value using
one or more of valuation techniques, as defined. This ASU is effective for the
first reporting period, including interim periods, beginning after the issuance
of this ASU. The adoption of this ASU did not have a material impact on our
consolidated financial statements.





On July
1, 2009, the Company adopted Accounting Standards Update (“ASU”) No.
2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments
based on Statement of Financial Accounting Standards No. 168 , “The FASB
Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01
re-defines authoritative GAAP for nongovernmental entities to be only comprised
of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC
registrants, guidance issued by the SEC.  The Codification is a
reorganization and compilation of all then-existing authoritative GAAP for
nongovernmental entities, except for guidance issued by the SEC.  The
Codification is amended to effect non-SEC changes to authoritative
GAAP.  Adoption of ASU No. 2009-01 only changed the referencing
convention of GAAP in Notes to the Consolidated Financial
Statements.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”), codified as FASB ASC Topic 810-10, which modifies how a
company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. SFAS 167
clarifies that the determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance. SFAS 167 requires an ongoing
reassessment of whether a company is the primary beneficiary of a variable
interest entity. SFAS 167 also requires additional disclosures about a company’s
involvement in variable interest entities and any significant changes in risk
exposure due to that involvement. SFAS 167 is effective for fiscal years
beginning after November 15, 2009. The Company does not believe the adoption of
SFAS 167 will have an impact on its financial condition, results of operations
or cash flows.





In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets — an amendment of FASB Statement No. 140” (“SFAS 166”), codified as FASB
Topic ASC 860, which requires entities to provide more information regarding
sales of securitized financial assets and similar transactions, particularly if
the entity has continuing exposure to the risks related to transferred financial
assets. SFAS 166 eliminates the concept of a “qualifying special-purpose
entity,” changes the requirements for derecognizing financial assets and
requires additional disclosures. SFAS 166 is effective for fiscal years
beginning after November 15, 2009. The Company does not believe the adoption of
SFAS 166 will have an impact on its financial condition, results of operations
or cash flows.


35




In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”) codified in
FASB ASC Topic 855-10-05, which provides guidance to establish general standards
of accounting for and disclosures of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
SFAS 165 also requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected.
SFAS 165 is effective for interim and annual periods ending after June 15, 2009,
and accordingly, the Company adopted this pronouncement during the second
quarter of 2009. SFAS 165 requires that public entities evaluate subsequent
events through the date that the financial statements are issued.





In April
2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, “Interim Disclosures
about Fair Value of Financial Instruments,” which is codified in FASB ASC Topic
825-10-50. This FSP essentially expands the disclosure about fair value of
financial instruments that were previously required only annually to also be
required for interim period reporting. In addition, the FSP requires certain
additional disclosures regarding the methods and significant assumptions used to
estimate the fair value of financial instruments. These additional disclosures
are required beginning with the quarter ending June 30, 2009. This FSP had no
material impact on our financial position, results of operations or cash
flows.





In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition
and Presentation of Other-Than-Temporary Impairments,” which is codified in FASB
ASC Topic 320-10. This FSP modifies the requirements for recognizing
other-than-temporarily impaired debt securities and changes the existing
impairment model for such securities. The FSP also requires additional
disclosures for both annual and interim periods with respect to both debt and
equity securities. Under the FSP, impairment of debt securities will be
considered other-than-temporary if an entity (1) intends to sell the security,
(2) more likely than not will be required to sell the security before recovering
its cost, or (3) does not expect to recover the security’s entire amortized cost
basis (even if the entity does not intend to sell). The FSP further indicates
that, depending on which of the above factor(s) causes the impairment to be
considered other-than-temporary, (1) the entire shortfall of the security’s fair
value versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulate other comprehensive income. The Company adopted FSP No. SFAS 115-2
and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on our
financial position, results of operations or cash flows.





In April
2009, the Financial Accounting Standards Board (“FASB”) issued FSP
No. SFAS 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly” (“FSP No. SFAS 157-4”). FSP
No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and
820-10-50-2, provides additional guidance for estimating fair value and
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009.
This FSP had no material impact on our financial position, results of operations
or cash flows.





OFF-BALANCE
SHEET ARRANGEMENTS





We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties.  We have not
entered into any derivative contracts that are indexed to our stock and
classified as shareholder’s equity or that are not reflected in our consolidated
financial statements.  Furthermore, we do not have any retained or
contingent interest in assets transferred to an unconsolidated entity that
serves as credit, liquidity or market risk support to such entity.  We
do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing,
hedging or research and development services with us.


36





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-25 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(T). 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,
2009. 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 our management, including our 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, 2009, our principal executive officer concluded
that, as of such date, our disclosure controls and procedures were not effective
at the reasonable assurance level.





Internal
Control Over Financial Reporting





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company. 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, our principal executive and principal financial officers and
effected by our 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 our assets;





•   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 our management and
directors; and




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


37





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.





Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, our 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, 2009, 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 our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our 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.





Changes
in Internal Control over Financial Reporting





There
were no changes in our internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f)) that occurered during the fiscal quarter ended
December 31, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.





ITEM
9B. OTHER INFORMATION.





None.





PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVRNANCE.





Directors and Executive
Officers





Name
              
              Age
              
              PositionsXuelian
      Bian
              
              44
              
              Chief
      Executive Officer, President and Chairman of the BoardWei
      Guan
              
              46
              
              Vice
      President and Director


38


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 41, has served as Chief Operating Officer 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 57, 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 41, 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 34, 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.





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.


39


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 407(d)(5) of Regulation S-K.  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.





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 TABLEName 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
                                                              
                                                              2009
                                                              
                                                              
                                                              12,800
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              12,800Chief
      Executive Officer, principal executive officer, and principal financial
      officer
                                                              
                                                              2008
                                                              
                                                              
                                                              12,800
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              12,800


40


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, 2009.





Number of
                        securities to be
                        issued upon
                        exercise of
                        outstanding
                        options,
                        warrants and
                        rights
                      
                      
                      Weighted
                        average exercise
                        price of
                        outstanding
                        options, warrants
                        and rights
                      
                      
                      Number of
                        securities
                        remaining
                        available for
                        future issuance
                        under equity
                        compensation
                        plans (excluding
                        securities
                        reflected in
                        columnPlan
      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





41




Security
Ownership of Certain Beneficial Owners and Management








·   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.





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
                  Class1Xuelian
      Bian
                
                
                20,420,919
                
                
                
                23.6
                %Wei
      Guan
                
                
                13,602,551
                
                
                
                15.7
                %All
      officers and directors as a group (two persons)
                
                
                34,023,470
                
                
                
                39.3
                %





1Calculated based on 86,605,475
shares outstanding as March 31, 2010.





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





Linkwell
Tech's wholly-owned subsidiary, LiKang Disinfectant, is engaged in business
activities with four related parties: Shanghai ZhongYou Pharmaceutical High-Tech
Co., Ltd., (“ZhongYou”), Shanghai LiKang Biological High-Tech Co., Ltd. (“Likang
Biological”), Shanghai Jiuqing Pharmaceuticals Company, Ltd (“Shanghai Jiuqing”)
and Linkwell International Trading Co., Ltd (“Linkwell Trading ”). Shanghai
LiKang Meirui Pharmaceuticals High-Tech Co., Ltd (“Meirui”), a company of which
Shanhai is a majority shareholder, and had owned 68% of its Meirui equity shares
used to be a related party. However due to the fact that Linkwell Tech acquired
Shanghai Shanhai’s 10% equity interest in LiKang Disinfectant for total
consideration of $684,057 which included the cash payment of $399,057 and
1,500,000 common shares at value of $0.19 per share. As a result of this
transaction, Meirui was no longer a related party.  Likang
Disinfectant completed its acquisition of Likang Biological on March 3, 2009;
therefore, Likang Biological was no longer a related party of the Company since
then, all the sales and purchase with Likang Biological were eliminated for the
consolidation.


42


Shanghai
ZhongYou Pharmaceutical High-Tech Co., Limited.





Our
Chairman and Chief Executive Officer, Xuelian Bian, and Vice President and
Director, Wei Guan, own 90% and 10% respectively, of the capital stock of
ZhongYou. In March 2007, Wei Guan sold his 10% interest to Bing Chen, President
of LiKang Disinfectant. In August 2007, 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 ZhongYou to Shanghai Jiuqing
Pharmaceuticals Company, Ltd., whose 100% owner is Shanghai Ajiao Shiye Co. Ltd.
Mr. Bian is a 60% shareholder of Shanghai Ajiao Shiye Co. Ltd. For the years
ended December 31, 2009 and 2008, we recorded net revenues of $4,983,962 and
$1,748,547 to ZhongYou respectively. At December 31, 2009 and 2008, accounts
receivable from sales to ZhongYou were $3,322,044 and $2,114,681, respectively.
In general, accounts receivable due from ZhongYou are payable in cash and are
due within 4 to 6 months, which approximate normal business terms with
independent third parties.





Shanghai
Jiuqing Pharmaceuticals Company, Limited.





Shanghai
Ajiao Shiye Co. Ltd. owns 100% of Shanghai Jiuqing Pharmaceuticals Company, Ltd
(“Shanghai Jiuqing”). Xuelian Bian is a 60% shareholder of Shanghai Ajiao Shiye
Co. Ltd. For the years ended December 31, 2009 and 2008, the Company recorded
net revenues of $3,222 and $18,255 to Shanghai Jiuqing, respectively. At
December 31, 2009 and 2008, accounts receivable from sales to Shanghai Jiuqing
were $85,451 and $81,112, respectively.  As of December 31, 2009,
accounts receivable from sales to other related parties was
$2,300,860.





Shanghai
LiKang Biological Hi-Tech Company, Ltd.





As of
December 31, 2008, we loaned and were due $1,764,157 from LiKang Biological, and
were due $393,920 from Linkwell International Trading for the proceeds from the
disposition of Likang International.





As of
December 31, 2009, LinkTech owed Linkwell Trading $78,220, Zhongyou $96,837 and
other related parties of $42,670.  As of December 31, 2008, the
Company owed to LiKang Biological, $93,707, and owed to LiKang Pharmaceuticals,
$876.





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 2009 and 2008.  The following table shows the fees that were
billed for the audit and other services provided by the firm for fiscal 2009 and
2008.





Fiscal 2009
                        
                        
                        Fiscal 2008Audit
      Fees
                        
                        $
                        80,000
                        
                        
                        $
                        67,500Audit-Related
      Fees
                        
                        
                        0
                        
                        
                        
                        0Tax
      Fees
                        
                        
                        0
                        
                        
                        
                        0All
      Other Fees
                        
                        
                        0
                        
                        
                        
                        0Total
                        
                        $
                        80,000
                        
                        
                        $
                        67,500





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.


43





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)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)10.4
                
                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)


44





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)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)10.30
                          
                          Stock
      Purchase Agreement, dated December 21, 2009, by and among Linkwell Corp.,
      Linkwell Tech Group Inc., Shanghai Likang Disinfectant Hi-Tech Co., Ltd.,
      Inner Mongolia Wuhai Chengtian Chemical Co., Ltd. and Honglin Li.
      (29)10.31
                          
                          Amendment
      No. 1 to the  Stock Purchase Agreement, dated February 26, 2010,
      by and among Linkwell Corp., Linkwell Tech Group Inc., Shanghai Likang
      Disinfectant Hi-Tech Co., Ltd., Inner Mongolia Wuhai Chengtian Chemical
      Co., Ltd. and Honglin Li. (30)14.1
                          
                          Code
      of Business Conduct and Ethics (20)21.1
                          
                          Subsidiaries
      of the small business issuer *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


45





(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.(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.(29)
            Incorporated
      by reference to the Report on Form 8-K as filed on December 28,
      2009.(30)
            Incorporated
      by reference to the Report on Form 8-K/A as filed on March 4,
      2010.


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.





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
                    
                    CEO,
      President, Chairman, principal executive
                    
                    April 15,
      2010Xuelian
      Bian
                    
                    officer,
      principal financial and accounting officer/s/ Wei Guan
                    
                    Vice
      President and Director
                    
                    April 15,
      2010Wei
      Guan


47




LINKWELL
CORPORATION AND SUBSIDIARIES
 INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 CONTENTS
 
 
 Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets
              F-3Consolidated
      Statements of Income and Comprehensive Income
              F-4Consolidated
      Statements of Stockholders' Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6Notes
      to Consolidated Financial Statements.
              F-7
      to F-25
  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, 2009 and 2008 and the related consolidated statements of
operations, changes in stockholders’ equity, and cash flows for the years ended
December 31, 2009 and 2008. 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
consolidated 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, 2009 and 2008, and the results of their
operations and their cash flows for the years ended December 31, 2009 and 2008,
in conformity with accounting principles generally accepted in the United States
of America.
 
 
 /s/ Sherb
& Co., LLP
 Certified
Public Accountants
 
 
 New York,
NY
 March 31,
2010
  F-2
  LINKWELL
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSAS
      OF DECEMBER 31,2009
                
                
                2008ASSETSCURRENT
    ASSETSCash
      and cash equivalent
                
                $
                2,144,360
                
                
                $
                2,072,687Accounts
      receivable, net
                
                
                4,033,718
                
                
                
                3,526,440Accounts
      receivable - related parties, net
                
                
                5,798,368
                
                
                
                3,470,553Other
      receivables
                
                
                254,166
                
                
                
                204,480Inventories,
      net
                
                
                2,055,986
                
                
                
                1,207,352Prepaid
      expenses and other current assets
                
                
                263,643
                
                
                
                339,378Deposits
                
                
                1,103,445
                
                
                
                -Due
      from related parties
                
                
                -
                
                
                
                2,158,077Total
      current assets
                
                
                15,653,686
                
                
                
                12,978,967NON-CURRENT
      ASSETSProperty, plant and equipment -
      net
                
                
                2,057,758
                
                
                
                703,935Intangible
      assets, net
                
                
                513,648
                
                
                
                -Total
      Non-current assets
                
                
                2,571,406
                
                
                
                703,935Total
assets
                
                $
                18,225,092
                
                
                $
                13,682,902LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESLoans
      payable
                
                $
                380,774
                
                
                $
                744,069Accounts
      payable and accrued expenses
                
                
                2,092,995
                
                
                
                1,508,271Advances
      from customers
                
                
                142,138
                
                
                
                91,326Taxes
      payable
                
                
                257,824
                
                
                
                220,103Other
      payables
                
                
                154,673
                
                
                
                368,690Due
      to related parties
                
                
                518,631
                
                
                
                94,583Total
      current liabilities
                
                
                3,547,035
                
                
                
                3,027,042Put
      option liability
                
                
                2,400,000
                
                
                
                2,281,030Total
      liabilities
                
                
                5,947,035
                
                
                
                5,308,072STOCKHOLDERS'
      EQUITYPreferred
      Stock (No par value;10,000,000
      authorized,
                  no
      shares issued and outstanding at December 31, 2009
                  and
      2008, respectively)
                
                
                -
                
                
                
                -Common
      Stock ($.0005 par value,150,000,000
      authorized,
                  86,605,475  and  77,955,475
      shares issued and outstanding
                  at
      December 31, 2009 and 2008, respectively)
                
                
                43,303
                
                
                
                38,978Additional
      paid-in capital
                
                
                7,474,021
                
                
                
                6,512,346Statutory surplus
      reserve
                
                
                802,749
                
                
                
                561,222Retained
      earnings
                
                
                3,250,115
                
                
                
                430,849Deferred
      compensation
                
                
                (307,542
                )
                
                
                (318,556
                )Accumulated
      other comprehensive income
                
                
                633,970
                
                
                
                1,031,021Total company stockholders'
      equity
                
                
                11,896,616
                
                
                
                8,255,860NONCONTROLLING
      INTEREST
                
                
                381,441
                
                
                
                118,970TOTAL
EQUITY
                
                
                12,278,057
                
                
                
                8,374,830TOTAL LIABILITIES AND
      EQUITY
                
                $
                18,225,092
                
                
                $
                13,682,902
  F-3
  LINKWELL
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEYEARS
      ENDED DECEMBER 31,2009
                      
                      
                      2008NET
      SALESNon-related
      companies
                      
                      $
                      9,299,120
                      
                      
                      $
                      9,362,364Related
      companies
                      
                      
                      5,367,662
                      
                      
                      
                      2,623,560Total
      Net Sales
                      
                      
                      14,666,782
                      
                      
                      
                      11,985,924COST
      OF SALES
                      
                      
                      (6,501,335
                      )
                      
                      
                      (5,963,830
                      )GROSS
      PROFIT
                      
                      
                      8,165,447
                      
                      
                      
                      6,022,094OPERATING
      EXPENSESSelling
      expenses
                      
                      
                      1,598,134
                      
                      
                      
                      1,083,431General
      and administrative
                      
                      
                      2,409,104
                      
                      
                      
                      2,432,327Total
      Operating Expenses
                      
                      
                      4,007,238
                      
                      
                      
                      3,515,758INCOME
      FROM OPERATIONS
                      
                      
                      4,158,209
                      
                      
                      
                      2,506,336OTHER
      INCOME (EXPENSES)Other
      income expenses
                      
                      
                      (71,451
                      )
                      
                      
                      (66,554
                      )Put
      option expenses
                      
                      
                      -
                      
                      
                      
                      (281,030
                      )Interest
      income
                      
                      
                      4,752
                      
                      
                      
                      6,455Interest
      expense
                      
                      
                      (55,198
                      )
                      
                      
                      (64,191
                      )Total
      Other Expenses, net
                      
                      
                      (121,897
                      )
                      
                      
                      (405,320
                      )INCOME
      FROM CONTINUING OPERATION, BEFORE TAX
                      
                      
                      4,036,312
                      
                      
                      
                      2,101,016INCOME
      TAX EXPENSE
                      
                      
                      (594,078
                      )
                      
                      
                      (387,324
                      )INCOME
      FROM CONTINUING OPERATION, NET OF TAX
                      
                      
                      3,442,234
                      
                      
                      
                      1,713,692INCOME
      FROM DISCONTINUED OPERATIONS, NET OF TAX
                      
                      
                      -
                      
                      
                      
                      65,083NET
      INCOME INCLUDING NONCONTROLLING INTEREST
                      
                      
                      3,442,234
                      
                      
                      
                      1,778,775LESS:
      NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
                      
                      
                      (381,441
                      )
                      
                      
                      (149,505
                      )NET INCOME ATTRIBUTABLE TO
      LINKWELL CORP
                      
                      
                      3,060,793
                      
                      
                      
                      1,629,270OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation
                      
                      
                      (397,051
                      )
                      
                      
                      444,138COMPREHENSIVE
      INCOME
                      
                      $
                      2,663,742
                      
                      
                      $
                      2,073,408BASIC
      AND DILUTED INCOME PER COMMON SHAREBasic
      earnings per shares from continuing operation
                      
                      $
                      0.04
                      
                      
                      $
                      0.02Basic
      earnings per shares including discontinued operation
                      
                      $
                      -
                      
                      
                      $
                      0.02Diluted
      earnings per shares from continuing operation
                      
                      $
                      0.04
                      
                      
                      $
                      0.02Diluted
      earnings per shares including discontinued operation
                      
                      $
                      -
                      
                      
                      $
                      0.02WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING:Basic
                      
                      
                      79,275,338
                      
                      
                      
                      75,339,667Diluted
                      
                      
                      79,324,441
                      
                      
                      
                      75,549,558
  F-4
  LINKWELL CORPORATION AND
      SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES
      IN STOCKHOLDERS' EQUITYYEARS
      ENDED DECEMBER 31,  2009 AND 2008Additional
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  Other
                  
                  
                  TotalCommon
Stock
                  
                  
                  Common Stock
      Issuable
                  
                  
                  Paid-in
                  
                  
                  Statutory
                  
                  
                  Accumulated
                  
                  
                  Deferred
                  
                  
                  Comprehensive
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Reserve
                  
                  
                  Deficit
                  
                  
                  Compensation
                  
                  
                  Loss
                  
                  
                  EquityBalance at January 1,
      2008
                  
                  
                  73,731,675
                  
                  
                  $
                  36,866
                  
                  
                  
                  21,280
                  
                  
                  $
                  11
                  
                  
                  $
                  5,724,363
                  
                  
                  $
                  319,036
                  
                  
                  $
                  (829,956
                  )
                  
                  $
                  (51,389
                  )
                  
                  $
                  586,883
                  
                  
                  $
                  5,785,814Grant of common stock forservices
                  
                  
                  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
                  )Net income for the
      year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,629,270
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,629,270Foreign currency translation
      adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  444,138
                  
                  
                  
                  444,138Balance, December 31,
      2008
                  
                  
                  77,955,475
                  
                  
                  
                  38,978
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,512,346
                  
                  
                  
                  561,222
                  
                  
                  
                  430,849
                  
                  
                  
                  (318,556
                  )
                  
                  
                  1,031,021
                  
                  
                  
                  8,255,860Common stock issued for
      services
                  
                  
                  4,150,000
                  
                  
                  
                  2,075
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  394,925
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (397,000
                  )
                  
                  
                  -
                  
                  
                  
                  -Common stock issued for
      acquisitions
                  
                  
                  4,500,000
                  
                  
                  
                  2,250
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  566,750
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  569,000Amortization of deferred
      compensation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  408,014
                  
                  
                  
                  -
                  
                  
                  
                  408,014Adjustment to statutory
      reserve
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  241,527
                  
                  
                  
                  (241,527
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net income for the
      year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,060,793
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,060,793Foreign currency translation
      adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (397,051
                  )
                  
                  
                  (397,051
                  )Balance at December 31,
      2009
                  
                  
                  86,605,475
                  
                  
                  $
                  43,303
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  7,474,021
                  
                  
                  $
                  802,749
                  
                  
                  $
                  3,250,115
                  
                  
                  $
                  (307,542
                  )
                  
                  $
                  633,970
                  
                  
                  $
                  11,896,616
 
 F-5
  LINKWELL
      CORPORATION AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSYEARS
      ENDED DECEMBER 31,2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Income
      including noncontrolling interest
                  
                  $
                  3,442,234
                  
                  
                  $
                  1,778,775Adjustments
      to reconcile income including noncontrollinginterest
      to net cash provided by operating activities:Deferred
      compensation
                  
                  
                  408,014
                  
                  
                  
                  188,833Depreciation
      and amortization
                  
                  
                  160,447
                  
                  
                  
                  123,666Allowance
      for doubtful accounts
                  
                  
                  (328,323
                  )
                  
                  
                  427,561Allowance
      for doubtful accounts-related party
                  
                  
                  (58,646
                  )
                  
                  
                  155,078Gain
      from disposal of discontinued operation
                  
                  
                  -
                  
                  
                  
                  (25,322
                  )Stock-based
      compensation
                  
                  
                  -
                  
                  
                  
                  29,084Expense
      from derivative liabilities
                  
                  
                  -
                  
                  
                  
                  281,030Increase(decrease)
      in current assetsAccounts
      receivable
                  
                  
                  (435,660
                  )
                  
                  
                  (1,108,415
                  )Accounts
      receivable - related party
                  
                  
                  (1,343,194
                  )
                  
                  
                  (1,633,398
                  )Other
      receivables
                  
                  
                  72,720
                  
                  
                  
                  (46,645
                  )Inventories
                  
                  
                  143,350
                  
                  
                  
                  (391,443
                  )Prepaid
      and other current assets
                  
                  
                  (13,001
                  )
                  
                  
                  (339,378
                  )Deposits
                  
                  
                  276,029
                  
                  
                  
                  -Increase(decrease)
      in current liabilitiesAccounts
      payable and accrued expenses
                  
                  
                  (527,362
                  )
                  
                  
                  299,043Advances
      from customers
                  
                  
                  50,443
                  
                  
                  
                  66,682Taxes
      payable
                  
                  
                  123,276
                  
                  
                  
                  127,170Other
      payables
                  
                  
                  (299,616
                  )
                  
                  
                  193,986Changes
      in assets of discontinued operation
                  
                  
                  -
                  
                  
                  
                  (69,237
                  )Changes
      in liabilities of discontinued operation
                  
                  
                  -
                  
                  
                  
                  147,307NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                  
                  
                  1,670,710
                  
                  
                  
                  204,377CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of Likang Biological - related party
                  
                  
                  (292,783
                  )
                  
                  
                  -Cash
      acquired from acquisition of Likang Biological
                  
                  
                  145,747
                  
                  
                  
                  -Purchase
      of property, plant and equipment
                  
                  
                  (1,170,150
                  )
                  
                  
                  (108,988
                  )Cash
      paid for minority interest
                  
                  
                  -
                  
                  
                  
                  (399,057
                  )NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (1,317,186
                  )
                  
                  
                  (508,045
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      in due to related party
                  
                  
                  77,989
                  
                  
                  
                  52,782Increase
      in due from related parties
                  
                  
                  -
                  
                  
                  
                  (919,694
                  )Proceeds
      from loans payable
                  
                  
                  380,618
                  
                  
                  
                  732,517Repayment
      for loans payable
                  
                  
                  (746,596
                  )
                  
                  
                  (732,517
                  )Proceeds
      from issuance of Linkwell Tech shares
                  
                  
                  -
                  
                  
                  
                  2,000,000Proceeds
      from Warrants Exercised
                  
                  
                  -
                  
                  
                  
                  20,000NET
      CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
                  
                  
                  (287,989
                  )
                  
                  
                  1,153,088EFFECT
      OF EXCHANGE RATE ON CASH
                  
                  
                  6,138
                  
                  
                  
                  440,540NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                  
                  
                  71,673
                  
                  
                  
                  1,289,960CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
                  
                  
                  2,072,687
                  
                  
                  
                  782,727CASH
      AND CASH EQUIVALENTS, END OF YEAR
                  
                  $
                  2,144,360
                  
                  
                  $
                  2,072,687SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW  INFORMATION:Cash
      paid for:Interest
                  
                  $
                  54,520
                  
                  
                  $
                  64,191Income
      taxes
                  
                  $
                  595,612
                  
                  
                  $
                  278,367NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Issuance
      of stocks to buy minority interest
                  
                  $
                  -
                  
                  
                  $
                  285,000Receivable
      from sale of discontinued operation
                  
                  $
                  -
                  
                  
                  $
                  291,792Dividends
      for minority interest acquisition
                  
                  $
                  -
                  
                  
                  $
                  126,278
 
 F-6
 
 LINKWELL
CORPORATION AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (AUDITED)
 
 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. 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, the Company discontinued their
entertainment division and their technology division, except for the Aerisys
operations that continues 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”). 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 the Company’s 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 financial
statements reflect the change in the capital structure of the Company due to the
recapitalization and in the operations of the Company and its subsidiaries for
the periods presented.
 
 Linkwell
Tech was founded on June 22, 2004, as a Florida corporation. On June 30, 2004,
Linkwell Tech acquired 90% of Shanghai LiKang Disinfectant High-Tech Company,
Ltd. (“LiKang Disinfectant”) through a stock exchange. This transaction resulted
in the formation of a U.S. holding company by the shareholders of LiKang
Disinfectant 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 and sale, 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 has
developed a line of disinfectant product offerings. LiKang Disinfectant regards
hospital disinfectant products as the primary segment of its business and has
developed and manufactured several series of products in the field of skin
mucous disinfection, hand disinfection, surrounding articles disinfection,
medical instruments disinfection and air disinfection.
  F-7
 
 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.
 
 On April
6, 2007, the Company’s subsidiary, Linkwell Tech, entered into two material
stock purchase agreements as follows:
 
 i)
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 Director, 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 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 amendment to
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 RMB 2, 000,000, approximately $292,500
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 registered in PRC. This transaction closed on March 5,
2009. During the quarter ended September 30, 2009, the LiKang Disinfectant
increased its investment into Likang Biological by injecting RMB 2.5 million
cash and intangible assets (patents) of RMB 5.5 million.  Likang
Biological is mainly engaged in producing the disinfectant
concentrate.
 
 ii)
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.
  F-8
  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 90%
owned subsidiary Linkwell Tech owns 100% of the equity interest in LiKang
Disinfectant.
  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. 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, 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,
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
  The
financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America and are
expressed in US dollars.  All material intercompany transactions and
balances have been eliminated in the consolidation.
 
 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
(“U.S. GAAP”). The consolidated financial statements of the Company include the
accounts of its 90% owned subsidiary, Linkwell Tech, and 100% owned
subsidiaries LiKang Disinfectant and Likang Biological. 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, 2009 and
2008 include the allowance for doubtful accounts, stock-based compensation,
useful life of property and equipment, inventory reserve and option
value.
 
 NON-CONTROLLING
INTEREST
  Effective
January 1, 2009, the Company adopted Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,”
which established new standards governing the accounting for and reporting of
noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and
the loss of control of subsidiaries. Certain provisions of this standard
indicate, among other things, that NCIs (previously referred to as minority
interests) be treated as a separate component of equity, not as a liability (as
was previously the case), that increases and decreases in the parent’s ownership
interest that leave control intact be treated as equity transactions rather than
as step acquisitions or dilution gains or losses, and that losses of a partially
owned consolidated subsidiary be allocated to the NCI even when such allocation
might result in a deficit balance. This standard also required changes to
certain presentation and disclosure requirements. Losses attributable to the NCI
in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The
excess attributable to the NCI is attributed to those interests. The NCI shall
continue to be attributed its share of losses even if that attribution results
in a deficit NCI balance.
  F-9
 
 FAIR
VALUE OF FINANCIAL INSTRUMENTS
 
 For
certain of the Company’s financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses,
advances from customers, short-term loans payable and amounts due from or to
related parties, the carrying amounts approximate their fair values due to their
short maturities.  ASC Topic 820, “Fair Value
Measurements and Disclosures,” requires disclosure of the fair value of
financial instruments held by the Company. ASC Topic 825, “Financial
Instruments,” defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures.  The carrying amounts reported in the
consolidated balance sheets for receivables and current liabilities each qualify
as financial instruments and are a reasonable estimate of their fair values
because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The
three levels of valuation hierarchy are defined as follows:
 Level 1
inputs to the valuation methodology are quoted prices for identical assets or
liabilities in active markets.
 Level 2
inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument.
 Level 3
inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
 The
Company analyzes all financial instruments with features of both liabilities and
equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC
815.
 As
of December 31, 2009, the Company did not identify any assets and liabilities
that are required to be presented on the balance sheet at fair
value.
 
 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.
  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, 2009 and 2008, the Company
had established, based on a review of its third party accounts receivable
outstanding balances, allowances for doubtful accounts in the amounts of
$476,491 and $801,895, respectively. At December 31, 2009 and 2008, the Company
had established, based on a review of its related party accounts receivable
outstanding balances, allowances for doubtful accounts in the amounts of
$319,200 and $376,437, respectively.
  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, 2009 and 2008, the reserve for obsolete
inventory amounted to $0 and $145,031, respectively.
  F-10
  PROPERTY
AND EQUIPMENT
 
 Property
and equipment are carried at cost. Depreciation is 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
 
 Long-lived
assets, which include property, plant and equipment and intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
 
 Recoverability
of long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the assets. Fair value is generally determined using the asset’s
expected future discounted cash flows or market value, if readily determinable.
Based on its review, the Company believes that, as of December 31, 2009 and
2008, there were no significant impairments of its long-lived
assets.
 
  ADVANCES
FROM CUSTOMERS
 
 As of
December 31, 2009 and 2008, advances from customers were $142,137 and $91,326,
respectively, which consisted 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 prepayments 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. In 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
“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
cumulative effect of accounting changes (if applicable).
 
 On May
31, 2008, LiKang Disinfectant entered into a stock sale agreement under which it
sold 100% shares of its wholly-owned subsidiary, LiKang International to
Linkwell International Trading Co., Ltd, a company registered in Hong Kong.
For the period before May 31, 2008, the income statement of the Company reported
the results of operations of LiKang International as discontinued
operations.
  F-11
 
 INCOME
TAXES
 
 The
Company utilizes Statement of Financial Accounting Standards ("SFAS") No. 109,
“Accounting for Income Taxes,” (codified in Financial Accounting Standard Board
(“FASB”) Accounting Standard Codification (“ASC” Topic 740), which requires
recognition of deferred tax assets and liabilities for expected future tax
consequences of events that were included in the financial statements or tax
returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
 
 The
Company adopted the provisions of the Financial Accounting Standards Board's
("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
(codified in FASB ASC Topic 740) on January 1, 2007. As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48. As a result of the implementation of Interpretation 48,
the Company recognized no material adjustments to liabilities or
shareholders’ equity. When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained. The benefit of
a tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely
than not that the position will be sustained upon examination, including the
resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet
the more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities
upon examination.
 
 Interest
associated with unrecognized tax benefits is classified as interest expense and
penalties are classified as selling, general and administrative expense in the
statements of income. The adoption of FIN 48 did not have a material impact on
the Company’s financial statements.
 BASIC
AND DILUTED EARNINGS PER SHARE
 
 The
Company presents net income (loss) per share (“EPS”) in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per
Share” (codified in FASB ASC Topic 740). 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 if-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.
  F-12
 
 The
following table presents a reconciliation of basic and diluted earnings per
share:
  2009
              
              
              2008Net
      income
              
              $
              3,060,793
              
              
              $
              1,629,270Weighted
      average shares outstanding - basic
              
              
              79,275,338
              
              
              
              75,339,667Effect
      of dilutive securities:Unexercised
      warrants
              
              
              49,103
              
              
              
              209,891Weighted
      average shares outstanding - diluted
              
              
              79,324,441
              
              
              
              75,549,558Earnings
      per share from continuing operation - basic
              
              $
              0.04
              
              
              $
              0.02Earnings
      per share from continuing operation - diluted
              
              $
              0.04
              
              
              $
              0.02Earnings
      per share from discontinued operation - basic
              
              $
              -
              
              
              $
              0.02Earnings
      per share from discontinued operation - diluted
              
              $
              -
              
              
              $
              0.02
 
  
 The
Company’s outstanding warrants as of December 31, 2009 and   2008
include the following:
 
 December
      31,
                2009
              
              
              December 31,
                2008Warrants
              
              
              33,469,795
              
              
              
              33,469,795
  REVENUE
RECOGNITION
 
 In
general, the Company's revenue recognition policies are in compliance with SEC
Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 480). The
Company records revenue when persuasive evidence of an arrangement exists,
services have been rendered or product delivery has occurred, the sales price to
the customer is fixed or determinable, and collectibility is reasonably assured.
The following policies reflect specific criteria for the various revenue streams
of the Company. The Company's revenues from the sale of products are recorded
when the goods are shipped, title passes, and collectibility is reasonably
assured.
 
 The
Company's revenues from the sale of products to related parties are recorded
when the goods are shipped to the customers from our related parties. Upon
shipment, title passes, and collectibility is reasonably assured. The Company
receives purchase orders from our related parties on an as need basis from the
related party customers. Generally, 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.
  F-13
 
 STATEMENT
OF CASH FLOWS
 
 In
accordance with SFAS No. 95, “Statement of Cash Flows,” codified in FASB ASC
Topic 230, cash flows from the Company's operations are calculated based upon
the local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows may not necessarily agree with changes
in the corresponding balances on the balance sheet.
 
 CONCENTRATION
OF CREDIT RISK
 
 Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and trade accounts receivable. The Company
places its cash with high credit quality financial institutions in the U.S. and
in China. Almost all of the Company's sales are credit sales which are primarily
to customers whose ability to pay is dependent upon the industry economics
prevailing in these areas; however, concentrations of credit risk with respect
to trade accounts receivables is limited due to generally wide distribution of
our products and shorter payment terms than customary in the PRC. The Company
also performs ongoing credit evaluations of its customers to help further reduce
credit risk. For the years ended at December 31, 2009 and 2008, sales to related
parties accounted for 37% and 22% of net revenues, respectively.
 
 FOREIGN
CURRENCY TRANSLATION AND COMPREHENSIVE INCOME
 
 The
accounts of the Company’s Chinese subsidiaries are maintained in the Chinese
Yuan Renminbi (RMB) and the accounts of the U.S. parent company are maintained
in the U.S. Dollar (USD). The accounts of the Chinese subsidiaries were
translated into USD in accordance with SFAS No. 52, "Foreign Currency
Translation," (codified FASB ASC Topic 830), with the RMB as the functional
currency for the Chinese subsidiaries. According to the Statement, all assets
and liabilities were translated at the exchange rate on the balance sheet date,
stockholders’ equity are translated at the historical rates and statement of
operations items are translated at the weighted average exchange rate for the
year. The resulting translation adjustments are reported under other
comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive
Income” (codified in FASB ASC Topic 220).
   SHIPPING
COSTS
 
 Shipping
costs are included in selling expenses and totaled $441,950 and $269,518 for the
years ended December 31, 2009 and 2008, respectively.
 
 ADVERTISING
 
 Advertising
is expensed as incurred and included in selling expenses. For the years ended
December 31, 2009 and 2008, advertising expenses amounted to $108,026 and
$64,773 respectively.
 
 STOCK-BASED
COMPENSATION
  The
Company accounts for its stock-based compensation in accordance with SFAS No.
123R, “Share-Based Payment, an Amendment of FASB Statement No.
123” (codified in FASB ASC Topics 718 & 505). The Company recognizes in
the income statement the grant-date fair value of stock options and other
equity-based compensation issued to employees and non-employees.
  F-14
  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, “Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services”.
  REGISTRATION
RIGHTS AGREEMENTS
 
 The
Company accounts for payment arrangements under registration rights agreement in
accordance with FASB Staff Position EITF 00-19-2 (codified in FASB ASC Topic
815), which requires the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, be separately recognized and measured in
accordance with FASB Statement No. 5, Accounting for Contingencies (codified in
FASB ASC Topic 450).
 
 The
Company has adopted “Effect of a Liquidated Damages Clause on a Freestanding
Financial Instrument. 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. Accordingly, (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.
   RESEARCH AND DEVELOPMENT
COST
 
 Research
and development costs are expensed as incurred. These costs primarily consist of
cost of materials used and salaries paid for the development department of the
Company and fees paid to third parties. Research and development costs for the
years ended at December 31, 2009 and 2008 were $108,026 and $63,552,
respectively.
  SEGMENT
REPORTING
 
 SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information"
(codified in FASB ASC Topic 280) requires use of the “management approach” model
for segment reporting. The management approach model is based on the way a
company's management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company.
 
 SFAS 131
has no effect on the Company's financial statements as substantially all of the
Company's operations are conducted in one industry segment. All of the Company's
assets are located in the PRC.
 
 
 RECENT
ACCOUNTING PRONOUNCEMENTS
 
 In
October 2009, the FASB issued an ASU regarding accounting for own-share lending
arrangements in contemplation of convertible debt issuance or other
financing.  This ASU requires that at the date of issuance of the
shares in a share-lending arrangement entered into in contemplation of a
convertible debt offering or other financing, the shares issued shall be
measured at fair value and be recognized as an issuance cost, with an offset to
additional paid-in capital. Further, loaned shares are excluded from basic and
diluted earnings per share unless default of the share-lending arrangement
occurs, at which time the loaned shares would be included in the basic and
diluted earnings-per-share calculation.  This ASU is effective for
fiscal years beginning on or after December 15, 2009, and interim periods within
those fiscal years for arrangements outstanding as of the beginning
of those fiscal years. The Company is currently evaluating the impact
of this ASU on its consolidated financial statements.
  F-15
  In August
2009, the FASB issued an Accounting Standards Update (“ASU”) regarding measuring
liabilities at fair value. This ASU provides additional guidance clarifying the
measurement of liabilities at fair value in circumstances in which a quoted
price in an active market for the identical liability is not available; under
those circumstances, a reporting entity is required to measure fair value using
one or more of valuation techniques, as defined. This ASU is effective for the
first reporting period, including interim periods, beginning after the issuance
of this ASU. The adoption of this ASU did not have a material impact on the
Company’s consolidated financial statements.
 
 On July
1, 2009, the Company adopted Accounting Standards Update (“ASU”) No.
2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments
based on Statement of Financial Accounting Standards No. 168 , “The FASB
Accounting Standards CodificationTM and the Hierarchy of Generally Accepted
Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01
re-defines authoritative GAAP for nongovernmental entities to be only comprised
of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC
registrants, guidance issued by the SEC.  The Codification is a
reorganization and compilation of all then-existing authoritative GAAP for
nongovernmental entities, except for guidance issued by the SEC.  The
Codification is amended to effect non-SEC changes to authoritative
GAAP.  Adoption of ASU No. 2009-01 only changed the referencing
convention of GAAP in Notes to the Consolidated Financial
Statements.
 
 In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”), codified as FASB ASC Topic 810-10, which modifies how a
company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. SFAS 167
clarifies that the determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance. SFAS 167 requires an ongoing
reassessment of whether a company is the primary beneficiary of a variable
interest entity. SFAS 167 also requires additional disclosures about a company’s
involvement in variable interest entities and any significant changes in risk
exposure due to that involvement. SFAS 167 is effective for fiscal years
beginning after November 15, 2009. The Company does not believe the adoption of
SFAS 167 will have an impact on its financial condition, results of operations
or cash flows.
 
 In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets — an amendment of FASB Statement No. 140” (“SFAS 166”), codified as FASB
Topic ASC 860, which requires entities to provide more information regarding
sales of securitized financial assets and similar transactions, particularly if
the entity has continuing exposure to the risks related to transferred financial
assets. SFAS 166 eliminates the concept of a “qualifying special-purpose
entity,” changes the requirements for derecognizing financial assets and
requires additional disclosures. SFAS 166 is effective for fiscal years
beginning after November 15, 2009. The Company does not believe the adoption of
SFAS 166 will have an impact on its financial condition, results of operations
or cash flows.
  In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”) codified in
FASB ASC Topic 855-10-05, which provides guidance to establish general standards
of accounting for and disclosures of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
SFAS 165 also requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected.
SFAS 165 is effective for interim and annual periods ending after June 15, 2009,
and accordingly, the Company adopted this pronouncement during the second
quarter of 2009. SFAS 165 requires that public entities evaluate subsequent
events through the date that the financial statements are issued.
 
 In April
2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, “Interim Disclosures
about Fair Value of Financial Instruments,” which is codified in FASB ASC Topic
825-10-50. This FSP essentially expands the disclosure about fair value of
financial instruments that were previously required only annually to also be
required for interim period reporting. In addition, the FSP requires certain
additional disclosures regarding the methods and significant assumptions used to
estimate the fair value of financial instruments. These additional disclosures
are required beginning with the quarter ending June 30, 2009. This FSP had no
material impact on the Company’s financial position, results of operations or
cash flows.
  F-16
 
 In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition
and Presentation of Other-Than-Temporary Impairments,” which is codified in FASB
ASC Topic 320-10. This FSP modifies the requirements for recognizing
other-than-temporarily impaired debt securities and changes the existing
impairment model for such securities. The FSP also requires additional
disclosures for both annual and interim periods with respect to both debt and
equity securities. Under the FSP, impairment of debt securities will be
considered other-than-temporary if an entity (1) intends to sell the security,
(2) more likely than not will be required to sell the security before recovering
its cost, or (3) does not expect to recover the security’s entire amortized cost
basis (even if the entity does not intend to sell). The FSP further indicates
that, depending on which of the above factor(s) causes the impairment to be
considered other-than-temporary, (1) the entire shortfall of the security’s fair
value versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulate other comprehensive income. The Company adopted FSP No. SFAS 115-2
and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on the
Company’s financial position, results of operations or cash flows.
 
 In April
2009, the Financial Accounting Standards Board (“FASB”) issued FSP
No. SFAS 157-4, “Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly” (“FSP No. SFAS 157-4”). FSP
No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and
820-10-50-2, provides additional guidance for estimating fair value and
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009.
This FSP had no material impact on the Company’s financial position, results of
operations or cash flows.
 
  NOTE
2 – INVENTORIES
 
 A summary
of inventories by major category as of December 31, 2009 and 2008 are as
follows:
  December
      31
              
              
              December 31,2009
              
              
              2008Raw
      materials
              
              $
              870,559
              
              
              $
              592,380Work-in-process
              
              
              2,604
              
              
              
              47,621Finished
      goods
              
              
              1,182,823
              
              
              
              712,382Less:
      Reserve for obsolescence
              
              
              -
              
              
              
              (145,031)Net
      inventories
              
              $
              2,055,986
              
              
              $
              1,207,352
 
 F-17
 
 NOTE
3 – PROPERTY AND EQUIPMENT
 
 At
December 31, 2009 and 2008, property and equipment consisted of the
following:
 
 EstimatedUseful Life
              
              
              December
      31,
              
              
              December 31,(In years)
              
              
              2009
              
              
              2008Office
      equipment and furniture
              
              
              3-7
              
              
              $
              356,950
              
              
              $
              158,187Autos
      and trucks
              
              
              5
              
              
              
              294,554
              
              
              
              201,723Manufacturing
      equipment
              
              
              2-10
              
              
              
              637,910
              
              
              
              346,420Building
              
              
              5-20
              
              
              
              1,528,404
              
              
              
              458,752-Less:
      Accumulated depreciation
              
              
              
              
              
              
              (760,060)
              
              
              
              (461,147)Property
      and equipment, net
              
              
              
              
              
              $
              2,057,758
              
              
              $
              703,935
 
 For the
years ended December 31, 2009 and 2008, depreciation expenses amounted to
$160,447 and $82,583, respectively.
 
 
 NOTE
4 - INTANGIBLE ASSETS
 
 At
December 31, 2009, intangible assets consisted of customers lists arising from
the acquisition of Likang Biological, amortizing over 5 years. Intangible assets
as of December 31, 2009 totaled $513,648. Annual amortization expense for the
next five years is expected to be as follows
 
 Year
      2010
              2011
              2012
              2013
              2014$     102,730
              102,730
              102,730
              102,730
              102,728
 
 NOTE
5 - DEPOSIT
 
 Deposit
represented prepaid application fee of $559,445 for acquiring the land use right
and $544,000 deposit for purchasing an acquisition target in China.
 
 
 NOTE
6 – LOANS PAYABLE
 
 Loans
payable consisted of the following at December 31, 2009 and 2008:
 
 December
      31,
              
              
              December 31,2009
              
              
              2008Loans
      from Shanghai Rural Commercial Bank, Dachang Branch due on June 16, 2010
      with interest rate at 6.90% per annum, Guaranteed by Shanhai Group (RMB
      2,600,000)
              
              $
              380,774
              
              
              $
              379,329Loans
      from Shanghai Rural Commercial Bank, Dachang Branch due on December 10,
      2009   with interest rate 6.70% per annum. Guaranteed by
      Shanhai Group and Mr. Bian, Chairman of the Company (RMB
      2,500,000)
              
              
              -
              
              
              
              364,740$
              380,774
              
              
              $
              744,069
 
 F-18
 
 NOTE
7 – RELATED PARTY TRANSACTIONS
 
 Linkwell
Tech's wholly-owned subsidiary, LiKang Disinfectant, is engaged in business
activities with four related parties: Shanghai ZhongYou Pharmaceutical High-Tech
Co., Ltd., (“ZhongYou”), Shanghai LiKang Biological High-Tech Co., Ltd. (“Likang
Biological”), Shanghai Jiuqing Pharmaceuticals Company, Ltd (“Shanghai Jiuqing”)
and Linkwell International Trading Co., Ltd (“Linkwell Trading ”). Shanghai
LiKang Meirui Pharmaceuticals High-Tech Co., Ltd (“Meirui”), a company of which
Shanhai is a majority shareholder, and had owned 68% of its Meirui equity shares
used to be a related party,however due to the
fact that Linkwell Tech acquired Shanhai’s 10% equity interest in LiKang
Disinfectant for total consideration of $684,057 which included the cash payment
of $399,057 and 1,500,000 common shares at value of $0.19 per share.As a result
of this transaction, Meirui was no longer a related party.  Likang
Disinfectant completed its acquisition of Likang Biological on March 3, 2009;
therefore, Likang Biological was no longer a related party of the Company since
then, all the sales and purchase with Likang Biological were eliminated during
the consolidation.
 
 The
Company’s Chairman and Chief Executive Officer, Xuelian Bian, and Vice President
and Director, Wei Guan, own 90% and 10% respectively, of the capital stock of
ZhongYou. In March 2007, Wei Guan sold his 10% shares to Bing Chen, President of
LiKang Disinfectant. In August 2007, 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 ZhongYou to Shanghai Jiuqing
Pharmaceuticals Company, Ltd., whose 100% owner is Shanghai Ajiao Shiye Co. Ltd.
Mr. Bian is a 60% shareholder of Shanghai Ajiao Shiye Co. Ltd.
 For the
years ended December 31, 2009 and 2008, the Company recorded net revenues of
$4,983,962 and $1,748,547 to ZhongYou respectively. At December 31, 2009 and
2008, accounts receivable from sales to ZhongYou were $3,322,044 and $2,114,681,
respectively.
 
 Shanghai
Ajiao Shiye Co. Ltd. owns 100% of Shanghai Jiuqing Pharmaceuticals Company, Ltd
(“Shanghai Jiuqing”). Xuelian Bian is a 60% shareholder of Shanghai Ajiao Shiye
Co. Ltd. For the years ended December 31, 2009 and 2008, the Company recorded
net revenues of $3,222 and $18,255 to Shanghai Jiuqing, respectively. At
December 31, 2009 and 2008, accounts receivable from sales to Shanghai Jiuqing
were $85,451 and $81,112, respectively.  As of December 31, 2009,
accounts receivable from sales to other related parties was
$2,390,873.
 
 As of
December 31 2008, the Company loaned LiKang Biological $1,764,157, and had due
from Linkwell International Trading for $393,920 for the proceeds of disposal of
Likang International.
 
 As of
December 31, 2009, the Company owed its management $54,000, Zhongyou $175,520
and other related parties of $78,220.  As of December 31, 2008, the
Company had due to LiKang Biological for $93,707, and due to LiKang
Pharmaceuticals of $876.
  F-19
  NOTE
8 – TAXES PAYABLE
 
 
 Taxes
payable consisted of the following at December 31, 2009 and 2008,
respectively:
 
 2009
              
              
              2008Income
      tax payable
              
              $
              136,823
              
              
              $
              125,527Value
      added tax payable
              
              
              114,720
              
              
              
              102,718Other
      taxes payable
              
              
              6,281
              
              
              
              1,885$
              257,824
              
              
              $
              220,103
  
 NOTE
9 –PUT OPTION LIABILITY
 
 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 (“Stockholders Agreement”), whereby
both the Company and Ecolab are subject to, and benefit by, certain pre-emptive
rights, transfer restrictions and take along rights relating to the shares of
Linkwell Tech, the Company and Ecolab each hold.
 
 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, cash in the amount of
$2,400,000 or the lesser of (a) 10,000,000 shares of Linkwell common stock, or
(b) such number of shares of Linkwell common stock as is determined by dividing
(i) 3,500,000 by (ii) the average daily closing price of Linkwell common stock
for the twenty days on which Linkwell 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 May 30, 2008, or upon the occurrence of certain events
including material breach by Linkwell Tech or its subsidiaries, of the
Consulting Agreement, Distributor Agreements or 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 is subject to a change of control transaction, to
require Linkwell to sell to Ecolab all of the equity interests in Linkwell Tech,
or any of Linkwell Tech’s subsidiaries, then owned by Linkwell. The Company
recognized the maximum expenses of the put option and the call option described
above as $2,400,000 put option liability.
  F-20
 
 NOTE
10 - 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.
 
  As of May
31, 2008, the Company has classified the LiKang International business as
discontinued operation. The initial investment to LiKang International was
$291,754 (RMB 2,000,000). 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.
 
 
 NOTE
11 - INCOME TAXES
 
 The
Company is subject to income taxes by entity on income arising in or derived
from the tax jurisdiction in which each entity is domiciled.
 
 Linkwell
Corp and Linkwell Tech were incorporated in the US and have net operating losses
(NOL) for income tax purposes.  Linkwell Corp and Linkwell Tech had
net operating loss carry forwards for income taxes of approximately $1,807,000
at December 31, 2009 which may be available to reduce future years’ taxable
income as NOL’s can be carried forward up to 20 years from the year the loss is
incurred. 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. Management believes the realization of benefits from these losses
uncertain due to the Company’s limited operating history and continuing losses.
Accordingly, a 100% valuation allowance has been provided on the deferred
tax asset of approximately $690,000.
 
 Likang
Disinfectant and Likang Biological are governed by the Income Tax Law of the PRC
concerning privately-run enterprises, which are generally subject to tax at a
statutory rate of 25% on income reported in the statutory financial statements
after appropriated tax adjustments.  Likang Disinfectant is subject to
preferential income tax rate of 12.5% for 2009 and 2008; Likang Bio is subject
preferential income tax rate of 20% for 2009.
 
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the years ended December 31, 2009 and 2008:
 
 2009
              
              
              2008US
      statutory rates
              
              
              34.0
              %
              
              
              34.0
              %State
      income tax, net of federal benefit
              
              
              4.0
              %
              
              
              4.0
              %Permanent
      difference on deferred tax
              
              
              
              
              
              
              4.1
              %Tax
      rate difference
              
              
              (14.8)
              %
              
              
              (19.8)
              %Effect
      of tax holiday on PRC taxable income
              
              
              (12.4)
              %
              
              
              (15.4)
              %Other
              
              
              (1.3)
              %
              
              
              -
              %Valuation
      allowance on US NOL
              
              
              5.2
              %
              
              
              11.5
              %Tax
      per financial statements
              
              
              14.7
              %
              
              
              16.9
              %
 
 
 NOTE
12 - STATUTORY RESERVES
 
 Pursuant
to the corporate law of the PRC effective January 1, 2006, the Company is now
only required to maintain one statutory reserve by appropriating from its
after-tax profit before declaration or payment of dividends. The statutory
reserve represents restricted retained earnings.
  F-21
 
 Surplus
Reserve Fund
 
 The
Company is now only required to transfer 10% of its net income, as determined
under PRC accounting rules and regulations, to a statutory surplus reserve fund
until such reserve balance reaches 50% of the Company’s registered
capital.
 
 The
surplus reserve fund is non-distributable other than during liquidation and can
be used to fund previous years’ losses, if any, and may be utilized for business
expansion or converted into share capital by issuing new shares to existing
shareholders in proportion to their shareholding or by increasing the par value
of the shares currently held by them, provided that the remaining reserve
balance after such issue is not less than 25% of the registered
capital.
 
 The
Company made reserve allocations of $241,527 and $242,186 to this fund for the
years ended December 31, 2009 and 2008, respectively.
 
 Common
Welfare Fund
 
 The
common welfare fund is a voluntary fund that provides that the Company can elect
to transfer 5% to 10% of its net income to this fund. This fund can only be
utilized on capital items for the collective benefit of the Company’s employees,
such as construction of dormitories, cafeteria facilities, and other staff
welfare facilities. This fund is non-distributable other than upon
liquidation.  The Company did not make any reserve to this fund during
2009 and 2008.
 
 
 NOTE
13 – STOCKHOLDERS’ EQUITY
 
 Common
Stock
 
 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 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, 2009, amortization of consulting compensation amounted
to $20,556.
 
 On
November 20, 2007, the Company entered into a one year 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 16,000 shares of common stock per month. From November 20, 2007 to June 30,
2008, the Company recorded a total of 116,800 common shares issuable valued at
$24,064 as stock-based consulting expense. On February 27, 2008, 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 at $0.19 per share and recorded consulting expense of $13,300, of
which,  $3,938 was allocated to the year ended December 31, 2007, and
$9,362 was allocated to the six months ended June 30, 2008. On August 13, 2008,
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 expense of $13,072 in
2008. The Company terminated its services agreement with Segue Ventures LLC on
September 11, 2008, and no shares are unissued.
 
 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 pays $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.
 
 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. The Company fully amortized $280,000
and $140,000 as stock-based compensation for the year ended December 31, 2009
and 2008, respectively.
  F-22
 
 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.
  On July
1, 2009, the Company entered into a two year agreement with First Trust. In
connection with this agreement, the Company issued 1,800,000 shares of Common
Stock valued at $0.09 per share to First Trust and recorded $162,000 as deferred
compensation. The Company amortized $40,500 as stock-based compensation for the
year ended December 31, 2009. This agreement has a penalty to the stock
recipient for non-compliance to its terms.
 
 On August
1, 2009, the Company entered into a two year agreement with Shanghai Hai Mai Law
Firm. In connection with this agreement, the Company issued 2,350,000 shares of
Common Stock valued at $0.10 per share to Shanghai Hai Mai Law Firm and
recorded $235,000 as deferred compensation. The Company amortized $48,958 as
stock-based compensation for the year ended December 31, 2009. This agreement
has a penalty to the stock recipient for non-compliance to its
terms.
 
 On
December 30, 2009, the Company issued 4,000,000 shares of common stock for
acquiring an acquisition target in China for $544,000 accounted for as a deposit
as of December 31, 2009. The Company is in the process of closing the
acquisition.
 
 On
December 30, 2009, the Company issued 500,000 shares of common stock for paying
the stock consideration portion of the acquisition price for Likang
Biological.
 
 Common
Stock Warrants
 
 During
the year ended December 31, 2009, there were no warrants granted or
exercised.
 
  The
following table summarizes the Company's Common Stock warrants outstanding at
December 31, 2009:
 
 Warrants Outstanding and ExercisableRange of
              
              Number
              
              
              Weighted Average
              
              
              Weighted AverageExercise
              
              Of
              
              
              Remaining
              
              
              ExercisePrice
              
              Warrants
              
              
              Exercise Life
              
              
              Price$
              
              0.10
              
              
              540,130
              
              
              
              1.50
              
              
              $
              0.10$
              
              0.20
              
              
              17,055,000
              
              
              
              1.75
              
              
              $
              0.20$
              
              0.30
              
              
              15,866,665
              
              
              
              1.99
              
              
              $
              0.30$
              
              1.00
              
              
              8,000
              
              
              
              -
              
              
              $
              1.0033,469,795
 
 
 NOTE
14 - COMMITMENTS
 
 On March
1, 2008, the Company entered a three-year lease agreement for its warehouse with
expiration date on March 31, 2011, for monthly rent of $3,830 (RMB 26,158) up to
May of 2009, the monthly rent increased to $5,255 (RMB 35,892) after May of
2009. The Company ceased this lease in July of 2009.
  F-23
  On July
16, 2008, the Company entered a two-year lease agreement for its administrative
office with expiration date on July 15, 2010, for  monthly rent of
$4,400 (RMB 30,237) until April of 2009, the monthly rent increased to $9,470
(RMB 64,669) after April of 2009, the Company has the option to renew this lease
upon the expiration.
 On
November 1, 2008, the Company entered another two-year lease agreement for its
branch office with expiration date on October 31, 2010, for monthly rent of
$3,500 (RMB 24,000), the Company has the option to renew this lease upon the
expiration.
 Future
minimum rental payments required under these operating leases are as
follows:
 
 Year
      Ended December 31,2010
              
              $
              96,542
 
 For the
years ended December 31, 2009 and 2008, rent expense amounted to $226,325 and $
123,964, respectively.
 
 NOTE
15 – ACQUISITION OF LIKANG BIOLOGICAL
  On March
5, 2009, the Company closed the acquisition of all the outstanding capital stock
of Likang Biological. The purchase price for Likang Biological was RMB2, 000,000
(approximately $292,500) and 500,000 shares of common stock equivalent to
approximately US$25,000, which was determined bymultiplying
the500,000 shares by the average stock price of Linkwell Corp. two days
before and two days after the closing date . This acquisition was a related
party transaction. Mr. Xuelian Bian, the Company’s Chief Executive Officer,
owned 90% of LiKang Pharmaceutical. Mr. Bian and LiKang Pharmaceutical owned 60%
and 40% of LiKang Biological, respectively.
 
 For
convenience of reporting the acquisition for accounting purposes, March 1, 2009
was designated as the acquisition date.
 
 The
following table summarizes the fair values of the assets acquired and
liabilities assumed at the date of acquisition.   The purchase price
exceeded the fair value of the net assets acquired by approximately $469,000,
which was recorded as intangible assets, customer list.
 
 Cash
              
              $
              145,749Other
      receivables
              
              
              121,573Inventory
              
              
              986,043Property
      and equipment
              
              
              340,542Construction
      in progress
              
              
              834,401Intangible
      assets
              
              
              469,084Accounts
      payable
              
              
              (970,235
              )Other
      current liabilities
              
              
              (1,609,657
              )Purchase
      price
              
              $
              317,500
 
 
 The
following unaudited pro forma consolidated results of operations of the Company
for the years ended December 31, 2009 and 2008 presents the operations of the
Company and Likang Biological as if the acquisition of Likang Biological
occurred on January 1, 2009 and 2008, respectively.  The pro forma
results are not necessarily indicative of the actual results that would have
occurred had the acquisitions been completed as of the beginning of the periods
presented, nor are they necessarily indicative of future consolidated
results.
  F-24
 
 For
      the Years Ended December 31,2009
                                            
                                            
                                            2008Net
      revenue
                                            
                                            $
                                            14,806,452
                                            
                                            
                                            $
                                            12,103,665Cost
      of revenue
                                            
                                            
                                            6,625,574
                                            
                                            
                                            
                                            6,093,369Gross
      profit
                                            
                                            
                                            8,180,878
                                            
                                            
                                            
                                            6,010,296Selling
      expense
                                            
                                            
                                            1,598,134
                                            
                                            
                                            
                                            1,083,431General
      & administrative expense
                                            
                                            
                                            2,436,968
                                            
                                            
                                            
                                            2,491,269Total
      operating expenses
                                            
                                            
                                            4,035,102
                                            
                                            
                                            
                                            3,574,700Income  from
      operations
                                            
                                            
                                            4,145,776
                                            
                                            
                                            
                                            2,435,596Non-operating
      (expenses), net
                                            
                                            
                                            (121,964)
                                            
                                            
                                            
                                            (654,493)Income
      from discontinued operations
                                            
                                            
                                            -
                                            
                                            
                                            
                                            65,083Income
      before income tax
                                            
                                            
                                            4,023,812
                                            
                                            
                                            
                                            1,846,186Income
      tax expense
                                            
                                            
                                            594,078
                                            
                                            
                                            
                                            389,257Net
      income including noncontrolling interest
                                            
                                            
                                            3,429,734
                                            
                                            
                                            
                                            1,456,929Less:
      noncontrolling interest
                                            
                                            
                                            381,440
                                            
                                            
                                            
                                            149,505Net
      income attributableto
      Linkwell Corp
                                            
                                            $
                                            3,048,294
                                            
                                            
                                            $
                                            1,307,424
 
  NOTE
16–CONTINGENCY
 
 The
Company is a defendant in a lawsuit filed in November 2009 in the
Supreme Court of the State of New York, County of New York, by
two warrant holders of the Company, seeking damages of as at least
$800,000.  As of December 31, 2009 and April 15, 2010, the Company is
vigorously defending its position in this litigation matter and
has not made for a provision with regards to this lawsuit in the event of
an unfavorable outcome. The Company has filed a motion to dismiss the complaint
and proceedings relating to the motion to dismiss are ongoing.
 NOTE
17 – 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 People’s Republic of China
(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 domestic 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 profit 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-25