UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(MARK ONE)
                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

                                       OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                FOR THE TRANSITION PERIOD FROM ______ TO ______

                       COMMISSION FILE NUMBER: 001-33694

                          CHINA AMERICA HOLDINGS, INC.
                (Name of registrant as specified in its charter)

            Florida                                        82-0326560
            -------                                        ----------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

              10871 NW 52 STREET, SUITE 2, SUNRISE, FLORIDA 33351
              ---------------------------------------------------
              (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (954) 726-1422

             Securities registered under section 12(b) of the act:

     Title of each class         Name of each exchange on which registered

            None                              Not applicable
            ----                              --------------

              Securities registered under section 12(g) of the act:

                                      None
                                      ----
                                (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 [X] No

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 [X] No

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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]


<PAGE>

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company:

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company:

Large accelerated filer                 [ ]    Accelerated filer             [ ]
Non-accelerated filer (Do not check if  [ ]    Smaller reporting company     [X]
smaller reporting company)

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

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter. $4,625,734 on June 29, 2007.

Indicated the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. 135,810,792 shares of common
stock are issued and outstanding as of March 26, 2008.

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). None.

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                                TABLE OF CONTENTS

                                                                            Page
Part I                                                                      ----
Item 1.     Business. ......................................................   5
Item 1A.    Risk Factors ...................................................  16
Item 1B.    Unresolved Staff Comments. .....................................  24
Item 2.     Properties. ....................................................  24
Item 3.     Legal Proceedings. .............................................  24
Item 4.     Submission of Matters to a Vote of Security Holders. ...........  24
Part II
Item 5.     Market for Registrant's Common Equity, Related Stockholder
            Matters and Issuer Purchases of Equity Securities. .............  25
Item 6.     Selected Financial Data. .......................................  26
Item 7.     Management's Discussion and Analysis of Financial
            Condition and Results of Operation. ............................  26
Item 7A.    Quantative and Qualitative Disclosures About Market Risk. ......  35
Item 8.     Financial Statements and Supplementary Data. ...................  35
Item 9.     Changes In and Disagreements With Accountants on Accounting
            and Financial Disclosure. ......................................  35
Item 9A.(T) Controls and Procedures. .......................................  35
Item 9B.    Other Information. .............................................  36
Part III
Item 10.    Directors, Executive Officers and Corporate Governance. ........  36
Item 11.    Executive Compensation. ........................................  40
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters. ....................  44
Item 13.    Certain Relationships and Related Transactions, and
            Director Independence. .........................................  46
Item 14.    Principal Accountant Fees and Services. ........................  46
Part IV
Item 15.    Exhibits, Financial Statement Schedules. .......................  47

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         This report contains forward-looking statements. These forward-looking
statements 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, the risk of doing business in the People's Republic of
China ("PRC"), our ability to implement our strategic initiatives, our access to
sufficient capital, the effective integration of our subsidiaries in the PRC
into a U.S. public company structure, economic, political and market conditions
and fluctuations, government and industry regulation, Chinese 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 herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this report in
its entirety, including the risks described in "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 report, and you should not rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business.

                                       3
<PAGE>

                           OTHER PERTINENT INFORMATION

         Our web sites are www.senseme.com, www.chinaamericaholdings.com,
www.china-aohong.com and www.bigtreetoysusa.com. The information which appears
on our web sites is not part of this report.

               INDEX OF CERTAIN DEFINED TERMS USED IN THIS REPORT

   o "China America" "we," "us," "ours," and similar terms refers to China
     America Holdings, Inc., a Florida corporation formerly known as Sense
     Holdings, Inc.,

   o "Sense Technologies" refers to Sense Technologies, Inc., a Florida
     corporation and a wholly-owned subsidiary of China America,

   o "China Chemical" refers to China Chemical Group, Inc., a Florida
     corporation and a wholly owned subsidiary of China America,

   o "Micro Sensor" refers Micro Sensor Technologies, Inc., a Florida
     corporation and a wholly-owned subsidiary of China America,

   o "AoHong" refers to Shanghai AoHong Industry Co., Ltd., a Chinese limited
     liability company which is a majority owned subsidiary of China America,
     together with AoHong's wholly-owned subsidiaries Shanghai Binghong Trading
     Co., Ltd., a Chinese limited liability company, and Shanghai Wuling
     Environmental Material Co., Ltd., a Chinese limited liability company,

   o "Mengda" refers to Shanghai Mengda Chemical Co., Ltd., a Chinese company
     which is AoHong's joint venture partner in Mengjin. Mengda is owned by
     unrelated third parties,

   o "Mengjin" refers to Shanghai Mengjin Chemical Co., Ltd., a Chinese joint
     venture between Aohong and Mengda,

   o "Big Tree" refers to Big Tree Toys, Inc., a Florida corporation formerly
     known as Big Tree Group Corp., and a majority owned subsidiary of China
     America,

   o "Jieyang Big Tree" refers to Jieyang Big Tree Toy Enterprise Co, Ltd., a
     Chinese limited liability company and wholly-owned subsidiary of Big Tree,

   o "PRC" or "China" refers to the People's Republic of China, and

   o "2006," "2007," and "2008" refers to the fiscal years ended December 31,
     2006 and 2007, respectively, and the fiscal year ending December 31, 2008,
     unless the context otherwise specifically provides.

                                       4
<PAGE>

                                     PART I

ITEM 1. BUSINESS.

         We operate our business in three segments:

   o AoHong,
   o Biometrics, and
   o Big Tree.

AOHONG

         AoHong sells and distributes assorted liquid coolants which are
utilized in a variety of applications, primarily as refrigerants in air
conditioning systems for automobiles, residential and commercial air
conditioning systems, refrigerators, fluororubbers, fluoroplastic, heat
insulation, fire extinguishing agents and assorted aerosol sprays. We acquired
our majority interest in AoHong in June 2007 and financial statements included
elsewhere herein include AoHong's results of operations from the date of
acquisition through December 31, 2007. Revenues from AoHong represented in
excess of 99% of our consolidated net revenues for 2007.

         AoHong's operations are comprised of three basic functions:

   o Repackaging bulk quantities of liquid coolants into smaller packaging for
     resale and distribution,

   o Custom mixing of various raw materials in accordance with customer
     specifications into a new product. AoHong employs two engineers who work
     with customers to derive proper mixture of chemicals, and

   o Distribution of bulk quantities of liquid coolants directly to customers
     who in turn resell the product.

         AoHong holds various certifications related to its operations,
including:

   o Environmental Management System ISO14001: 2004 certificate,
   o ISO9001:2000 quality system certificate, and
   o TS 16949 (international quality management certificate for the automotive
     industry).

         AoHong's customers include manufacturers and retailers of air
conditioning systems, refrigerators, automobiles, coolants, fluororubber,
fluoroplastic, heat insulation, pharmaceuticals and chemicals. In 2007
approximately 55% of its net revenues were from manufacturers, approximately 25%
of its net revenues were from air condition and refrigerator retailers and
approximately 20% of its net revenues were from the export of products. Because
approximately 50% of its sales are to automobile, refrigerator manufacturers and
air conditioning manufacturers, historically AoHong has witnessesed a seasonal
surge in demand for refrigerant products from November to June.

         AoHong distributes products within China to 16 provinces and districts
including Liaoning, Jilin, Beijing, Xinjiang, Shangxi, Chongqing, Sichuan,
Jiangshu, Zhejiang, Anhui, Guangdong, Hainan, Hong Kong and Taiwan. AoHong
exports to countries such as Russia and Thailand.

         AoHong utilizes a purchase order system for orders and it signs annual
supply agreements with its major customers. Typically it will deliver products
within 15 to 30 days from the time an order is placed. AoHong generally offers
its customers terms of net 60 days to net 90 days. One customer represented
approximately 13% of AoHong's net revenue in 2007, primarily attributable to
sales of R22.

                                       5
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PRODUCT OFFERINGS

         Following are a list of products sold by AoHong:

PRODUCT               STRUCTURAL FORMULA                APPLICATION
-------------------   ------------------     -----------------------------------
R12                       CCI2F2             Refrigerant, fire extinguishing
                                             agent, insecticide and spray, etc.

R22 Difluorochloro-       CHCLF2             Compressor, refrigerant for
methane                                      industrial and residential air
                                             conditioning systems; insecticides,
                                             painting spray, and fire
                                             extinguishing agent

R406A                  CHCLF2/CH3CCLF2/      Refrigerant; Substitute for R12
                       CH3(CH3)/CHCH3

THT                                          (Scentinel) (CH2)4S C4H8S Clear,
                                             colorless liquid with a strong
                                             unpleasant odor. Due to its smell,
                                             tetrahydrothiophene is occasionally
                                             used as an odorant in natural gas

         Revenues from the sale of R22 represented approximately 42% of its net
revenues in 2007.

         AoHong places emphasis on the sale and distribution of environmentally
friendly products. The Montreal Protocol on Substances that Deplete the Ozone
Layer ("Montreal Protocol") was adopted on September 16, 1987 and later ratified
on January 1, 1989 by 29 countries and the European Community (EC). The Montreal
Protocol was designed to address the need for stronger measures to reduce the
production and consumption of a number of chlorofluorocarbons (CFCs). According
to the Montreal Protocol, all non-environmental friendly refrigerants should be
replaced by environmental friendly refrigerants by the end of 2008. China, as a
developing country, has agreed to implement the measures gradually and in 2006
began to implement the regulation. All coolant products proven to be harmful to
the environment will be banned by December 31, 2008. AoHong is striving to be a
leader in its industry in the sale and distribution of environmentally friendly
products within China. Approximately 37% and approximately 20%, respectively, of
AoHong's net revenues for 2007 and 2006 were derived from environmentally
friendly products.

         Environmentally friendly products offered by AoHong include:

PRODUCT          STRUCTURAL FORMULA                      APPLICATION
-------        ----------------------         ----------------------------------
R134A          CH2FCF3                        Refrigerant, common in automobile
                                              air conditioners and refrigerators

R600A          CH3(CH3) CHCH3                 Refrigerant

R404A          CF3CHF2/CH3CF3/CF3CH2F         Refrigerant, substitute for R22

R407C          CH2F2/CF3CHF2/CF3CH2F          Refrigerant, substitute for R22

R410A          CH2F2/CF3CHF2                  Refrigerant, substitute for R22

R142B          CCIF2CH3                       Refrigerant

SALES AND MARKETING

         AoHong employs six full time sales persons. AoHong also employs two
part-time sales persons, with one sales person dedicated to covering the
Shandong Province and the other sales person dedicated to covering the Sichuan
Province. These two sales persons travel frequently to these provinces. Full

                                       6
<PAGE>

time sales persons are compensated with base salary and commission, and
part-time sales persons are hired on a contractual basis under a commission only
compensation structure. Sales persons earn a sales commission based on net
profit generated in excess of a predetermined benchmark. The base salary, profit
benchmark and commission percentage vary across products. AoHong also markets
and promotes their products through a variety of venues, including industry
trade shows, online advertising, marketing literature, and referrals.

SUPPLIERS

         AoHong purchases products from a variety of sources, including:

             SUPPLIER                                  PRODUCT
--------------------------------------    --------------------------------
JiangSu MeiLan Chemical Co., Ltd.         R12, R22

Chevron Phillips Chemical
(China) Co., Ltd.                         R6001, THT (Tetrahydrothiophene)

Sinochem Modern Environmental
Protection Chemicals (Xi'an) Co., Ltd.    R134A

Daikin Chemical International
Trading Co., Ltd.                         R 404, R407C, R410A

         Approximately 65% of the coolant products sold during 2007 were
supplied by JiangSu MeiLan Chemical Co., Ltd. AoHong has been a distributor of
products from this company since 2005. AoHong is also a supplier of liquid
coolants manufactured by Chevron Phillips Chemical (China) Co., Ltd., JiangSu
MeiLan Chemical Co., Ltd., Sinochem Modern Environmental Protection Chemicals
(Xi'An) Co., Ltd., and Daikin Chemical International Trading Co., Ltd. In
January 2003 AoHong signed a distribution agreement with Chevron Phillips
Chemical (China) Co., Ltd. pursuant to which AoHong was named a distributor in
mainland China for R600A and in January 2004 it signed a distribution agreement
with Chevron Phillips Chemical (China) Co., Ltd. designating AoHong as a
distributor in mainland China for THT (tetrahydrothiophene) products. Since 2005
AoHong has been a distributor of Daikin Chemical International Trading Co., Ltd.
for R404A, R407C and R410A and since 2003 it has been a distributor of Sinochem
Modern Environmental Protection Chemicals (Xi'an) Co., Ltd. for R134A.

         AoHong generally inventories a one month supply of liquid coolants.
AoHong utilizes disposable steel cylinders to store various gases or liquids
purchased in bulk quantities. These cylinders come in 30lb and 50lb capacity and
meet the standards of European and U.S. markets. Because approximately 90% of
its customers have an existing business relationship with AoHong which is in
excess of three years, it is able to estimate customer demand and maintain
inventory levels in accordance with the anticipated orders from customers.
Taking advantage of its large warehouse space, AoHong generally increases its
inventory levels during its off peak season which enables it to offer shorter
delivery times and in some cases better pricing during its peak selling season.
Terms offered by AoHong's suppliers are generally net 60 days.

COMPETITION

         The market for the sale of liquid coolants in China is very
competitive. There are approximately 13 coolant distributors operating within
China, of which AoHong estimates approximately four or five are large companies
and the remaining eight to nine are smaller companies. AoHong's principal
competitors include:

                                       7
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                COMPETITORS                                   BACKGROUND
----------------------------------------------       ---------------------------
Zhejiang Ju Hua Co., Ltd.                            Manufacturer for R11, R12,
                                                     R22, R134a

Shandong Dongyue Chemical Co., Ltd.                  Manufacturer for R22, R134a

Beijing Jinxin Jiaye Chemical Co., Ltd.              Repack processing company

Shanghai Zhiyang Trading Co., Ltd.                   Distributor

Zhejiang Yonghe New Type Refrigerant Co., Ltd.       Repack processing company

         AoHong believes it differentiates itself from its competitors through
its ability to accommodate a variety of orders in the form of repacking,
combining, or distributing products and its warehouse capacity enables it to
meet customer demand on short notice.

MENGJIN

         In February 2007, AoHong partnered with Mengda to form Mengjin.
Mengjin, which commenced operations in January 2008, was founded to distribute
environmentally-friendly refrigeration lubricants in China. Under the terms of
this joint venture, AoHong agreed to contribute approximately $41,700
(RMB300,000) and owns a 60% interest, and Mengda agreed to contribute
approximately $27,800 (RMB200,000) and owns a 40% interest.

         Refrigeration lubricant is an essential fluid conjunction with coolants
that lubricates refrigeration compressor system. The lubricant is added into
coolants and flow through the compressor to lubricate bearings, main part, and
controlling system. The series of refrigeration lubricants that Mengjin
distributes in China are designed to use with ozone friendly refrigerants
including R-134a, R-407C, R-404A, R-410A, R-507 and R-508. Mengjin purchases
packaged lubricants from foreign manufacturers in the capacity of 2.2 lbs to 440
lbs. and directly distributes those packaged lubricants to customers. Its
customers include AoHong's customer base of manufacturers, retailers as well as
a few maintenance shops of industrial and household air conditioning,
refrigerators, and automobiles.

         We anticipate that we will begin reporting revenues from Mengjin during
the first quarter of 2008.

GOVERNMENT REGULATIONS

         The operations of AoHong must conform to Industrial Chemical Control
Law (ICCL) of People's Republic of China, The Management Regulation of Chemical
Industry Environmental Protection and rules for private (non-state owned)
companies doing business in China. AoHong is also subject to registration and
inspection by The Ministry of China Chemical Industry with respect to the
distribution of chemical products in China and it is licensed by the Shanghai
Government for the distribution of chemical products. Supervision of the
manufacturing of steel cylinders is governed by the General Administration of
Quality Supervision, Inspection and Quarantine of the PRC (GAQSIQ).
Manufacturers must obtain a gas cylinder filling license, which AoHong obtained
on December 31, 2004.

BIOMETRICS

         Until our acquisition of AoHong, our Biometrics segment represented all
of our operations. Biometrics technology uses fingerprint based identification
products and systems to verify a person's identity. We have developed two
turnkey integrated applications that incorporate our proprietary BioClock(R)
hardware platform which include:

   o our "CheckPrint(R) T/A" systems which are designed primarily for use by
     employers who desire to verify the presence of employees at the workplace,
     and to monitor their time and attendance at work; and,

                                       8
<PAGE>

   o our "CheckPrint(R) A/C" systems which are designed to permit access to
     locked buildings, offices or other secured areas only to selected
     individuals, whose identities can be verified using our fingerprint
     identification software.

         Less than 1% of our consolidated net revenues in 2007 were attributable
to our biometrics division. Our modest revenue-generation to date in this
division has been derived primarily from our sales of our biometric BioClock(R)
and CheckPrint(R) products. During 2007 all of our revenue was for maintenance
contracts from one customer.

RESEARCH AND DEVELOPMENT COSTS

         From the inception of our current biometrics activities in July 1998
through December 31, 2007 we have spent approximately $2,409,000 on research and
development activities. For the years ended December 31, 2007 and 2006, research
and development, consisting mainly of salaries and research and development fees
associated with a Cooperative Research and Development Agreement, amounted to $0
and $578,979, respectively.

MICRO ELECTRO MECHANICAL SENSORS

         In addition to our core business in this division, we hold eight
exclusive worldwide patent licenses for Micro Electro Mechanical Sensors, or
MEMS, technology covering use in the field of explosive detection which was
developed by Oak Ridge National Laboratory(ORNL). ORNL, located in Oak Ridge,
Tennessee, is one of the premier National Scientific Laboratories in the United
States and is operated by UT-Battelle, LLC for the United States Department of
Energy (DOE). UT-Battelle LLC is the technology transfer management company
created at ORNL.

         MEMS technology is comprised of micro cantilevers that molecules of
explosive material attach to, thus causing the cantilevers to diffract or bend.
When diffraction is detected, the sensors are alerted to the presence of an
explosive molecule. On May 31, 2001, we acquired all of the outstanding shares
of Micro Sensor and we indirectly acquired the rights and obligations of Micro
Sensor under various agreements to which it is a party, including a Patent
License Agreement with UT-Battelle LLC. Under the original Patent License
Agreement, Micro Sensor became the exclusive licensee of UT-Battelle LLC with
respect to certain patented technology owned by UT-Battelle LLC relating to the
use, sale or offer for sale of intellectual property incorporating MEMS
technology for the detection of explosives.

         Effective August 1, 2005, we entered into an Exclusive Patent License
Agreement with UT-Battelle LLC which replaced the original Patent License
Agreement. Under the August 1, 2005 Patent License Agreement, UT-Battelle LLC
granted us the exclusive right to manufacture, use, sell, offer for sale and
sublicense yet to be developed products incorporating the licensed patents,
relating to chemical vapor detection and the detection of unexploded ordnance,
including bombs, hand grenades, rockets and other unexploded devices. We were
also been granted for a 24-month right of first refusal to negotiate a patent
license agreement with UT-Battelle LCC for its proprietary technology relating
to the detection of biological warfare agents in security applications, such as
anthrax, cholera, Ebola, plague, ricin, smallpox and tularemia. This right of
first refusal to negotiate an additional patent license expired unexercised on
August 1, 2007.

         As consideration for the license grants by UT-Battelle LLC, we:

   o paid UT-Battelle LLC an aggregate of $150,000 in cash proceeds;

   o issued UT-Battelle LLC 833,333 shares of our common stock;

   o agreed to pay to UT-Battelle LLC a royalty equal to 4% of net sales of
     products incorporating the licensed patents, subject to minimum royalty
     payments, as amended on December 1, 2006, of $10,000 for 2007, $20,000 for
     2008 and $25,000 for 2009 and thereafter;

                                       9
<PAGE>

   o agreed to pay to UT-Battelle LLC, in the event we sublicenses the licensed
     patents, the greater of 50% of our revenues from sublicensing and the
     minimum required royalties described above; and

   o agreed to reimburse UT-Battelle LLC for certain costs and expenses of
     securing patent protection for the licensed patented technology.

         On January 1, 2006, we entered into a stock exchange agreement with
UT-Battelle LLC under which UT-Battelle LLC returned 683,333 shares of common
stock previously issued by us for $150,000 in cash. The returned shares were
cancelled upon receipt.

         On November 7, 2005, we entered into a Cooperative Research and
Development Agreement ("CRADA") with UT-Battelle LLC under its U.S. Department
of Energy Contract No. DE-AC05-00OR22725. The CRADA was for the development of a
hand-held sensor with high sensitivity and selectivity for the detection of
explosives initially and then to expand the capabilities to include chemical and
biological warfare agents and narcotics. In connection with the CRADA, we agreed
to make payments aggregating $589,000. Through December 31, 2007, we paid
$560,000 towards these commitments. Under the CRADA we developed a first
generation working prototype with limited detection capabilities. As a result of
our lack of working capital we were forced to cease our research and development
activities under the CRADA. Accordingly, the remaining $29,000 due under
thereunder was forgiven. In 2006 we determined to impair our MEMS technology
related assets and recognized a one time expense of $230,000 related to those
intangible assets. In March 2008 we notified UT-Battelle LLC and ORNL of our
intent to terminate the licensing arrangement.

COMPETITION

         In this division we face competition from companies engaged in the time
and attendance industry, as well as in the security and access control industry.
Competition may come from companies using biometric fingerprint technology, as
well as from companies using other biometric identification methods. Competitors
also include companies marketing traditional forms of employee verification and
attendance products, including time clocks, ID badges, passwords and PIN
numbers. Most of our competitors may have longer operating histories and greater
financial and other resources than we have. We have never been able to
effectively compete as a result of limited resources and given our focus on our
other divisions it is unlikely that we will invest the funds necessary to market
our biometric products or otherwise compete in this market segment.

BIG TREE

         Big Tree, a development stage company which began operations in the
third quarter of 2007, is a toys sourcing company marketing to toy distributors,
wholesalers, and retailers. Under the supervision of our CEO who oversees the
operations, Big Tree utilizes independent sales representatives and agents to
market the business. These sales representatives are non-exclusive to Big Tree
and are paid on a commission basis. In addition, Big Tree seeks to market its
services at exhibition and trade shows and online promotion.

         In January 2008, Big Tree formed a Representative Office in Shantou,
China to manage suppliers, quality control and customer services. Shantou is
located in China's eastern Guangdong Province where approximately 3,000 toys
manufacturers are located. Establishment of a Representative Office has become
the most common means of establishing a long-term presence in China for
companies such as Big Tree which are not Chinese companies.

         Once one of Big Tree's independent sales representatives receives a
sales lead, the sales person consults with the Shantou Representative Office to
collect the latest information on cost and potential suppliers.
 If it is desired, potential customers are invited to visit the Shantou
Representative Office where Big Tree has a showroom for product overview.

                                       10
<PAGE>

         Big Tree has established order processing procedures which are
substantially similar to it competitors. Once a customer has indicated its
intent to place an order, the U.S. sales team will forward the customer a
proforma invoice that is regarded as an electronic sales contract between Big
Tree and the customer. Once the customer signs the proforma invoice and a 30%
deposit has been wired, the sales team transfers the order information on to the
Shantou Representative Office. Currently, a Hong Kong-based company, Pacific
Toys Co., Ltd., is Big Tree's principal supplier. Big Tree places an order with
Pacific Toys Co., Ltd. which then arranges for fulfillment and delivery of the
products to the port for shipment to Big Tree's customer. Pacific Toys also
handles custom services related to the shipment.

         When goods depart the port, Big Tree mails the original bill of lading,
packing list and commercial invoice to the customers. Big Tree's terms of sale
required customers to pay the balance within 30 days upon receipt of commercial
invoice. Pacific Toys requires a deposit of between 20% and 30% at the time the
order is placed and the balance is due within 45 days of the end of the month
during which the shipment is complete. As Big Tree continues to develop its
business it is anticipated that it will broaden its supplier base.

         During 2007 Big Tree received and executed orders from several
retailers operating in South America, Europe, Southeast Asia and Australia. Big
Tree will recognize the revenue from these sales in the first quarter of 2008.

         While Jieyang Big Tree was established in China in January 2007 as a
wholly owned foreign entity (WFOE) it has not conducted any business. Following
the establishment of Big Tree's Representative Office it is likely that we will
not conduct any business within Jieyang Big Tree and may decide to dissolve the
entity in the future.

TOYS TESTING CENTER

         On March 28, 2008 Big Tree entered into a five year Cooperation
Agreement with the Guangdong Test Center of Product Quality Supervision
("CEST"). Under the terms of the agreement, CEST will operate a toy testing
laboratory which is anticipated to begin operations once it receives approval
from the China National Accreditation Service for Conformity Assessment. The
laboratory will provide sample testing and finished product inspection. CEST
will assist Big Tree in providing the quality assurance services including
supplier evaluations, sample testing and finished product inspect.

         Big Tree, which will be responsible for marketing these services, will
not perform any of the services. CEST will charge the center for the sample
testing and finished products inspection at a 30% discount of the market price.
Big Tree agreed to use its best efforts to develop business for CEST of not less
than $428,571 (RMB3 million) annually beginning in 2009, increasing to not less
than $714,286 (RMB 5 million) in 2013.

         CEST will invest approximately $42,857 (RMB300,000) and provide
technology and lease various equipment. Big Tree is responsible for leasing the
facility at which the laboratory will operate and supervising the construction
in accordance with CEST's specifications. The agreement provides that the
laboratory is to be complete within three months of the execution of the
agreement. In addition, Big Tree committed to invest $500,000 (RMB3.5 million)
to purchase testing equipment and instruments, of which approximately $285,715
is to be funded within six months from the date of the agreement and the
remaining $214,286 within one year. Big Tree is entitled to 30% of annual net
profit of the laboratory starting from July 1, 2008 which for the purposes of
the agreement is considered rent expense. Net profit is defined as the total
revenue of testing services subtracted by total cost of the center, including
utility expenses, testing materials expenses, office supply, travel expenses of
testing engineers, salary and benefits (estimated to be approximately 30% of
total revenues), administration cost (estimated to be approximately 8% of total
revenue), marketing and sales cost (on actual basis) and related application
fees and expenses.

                                       11
<PAGE>

         During the first three years of the term the agreement may be
 terminated by either party without notice upon the payment to the
 non-terminating party of $14,286 (RMB100,000). During the remainder of the
 term, either party may terminate upon six months notice and the payment of this
 penalty.

GOVERNMENT REGULATION

         Chinese law restricts the scope of activity undertaken by
Representative Offices to indirect business activity. A Representative Office
may act as a liaison with Chinese contacts, implement contracts signed outside
China by the home office, and undertake market research, but these offices
cannot engage in trade, receive fees for services, sign contracts or directly
generate income. The Chinese Ministry of Commerce (MOFCOM) is responsible for
processing and approving applications to establish as Representative Office. The
failure to comply with the registration requirements can result in the
imposition of a RMB 10,000 fine (approximately $1,300) and in serious cases may
result in the involved party being prohibited from engaging in further business
activities in China. The State Administration for Industry and Commerce (SAIC)
enforces the regulations related to Representative Offices through random checks
and through informants in related Chinese companies.

COMPETITION

         Big Tree competes against many other Shantou-based trading companies.
Three primary competitors are Chenghai City MK Toys Co., Ltd., one of the
largest toys trading companies in Shantou. Yi Feng Import& Export Trading Co.,
Ltd., a trading company having strategic alliance with Guangdong Shifeng Toys
Industrial Co., Ltd., and Guangdong Huawei Toys Crafts (Group) Co., Ltd., a
large export-oriented enterprise focusing on R&D, manufacturing, and trading.

         As Big Tree is a new company with a limited history of operations it
faces all the challenges of a development stage company. For the future
development, Big Tree management focuses to provide high quality products and
expand distribution channels worldwide. Big Tree strives to improve the
capability of toys testing and quality control systems to ensure high quality
products. At the same time, Big Tree seeks to closely work with distributors and
agents worldwide to provide one-stop-toy shopping services. Notwithstanding the
foregoing, there are no assurances Big Tree will ever successfully compete in
its target market.

INTELLECTUAL PROPERTY

         While we do not claim any intellectual property rights with respect to
either AoHong or Big Tree, the intellectual property rights of out Biometrics
segment are material to its business. We currently have on file with the United
States Patent and Trademark Office, a utility patent that was converted from a
provisional patent covering the proprietary use of our technology and the
proprietary hardware used in our application. In addition, we have on file a
provisional patent regarding our CheckPrint(R) BDS, a biometric middleware
utility, and a utility patent regarding a handheld explosive detection unit. Our
goods and services are clearly marked as patent pending. There is no guarantee
that our patent applications will mature into registrations for patents.

         We maintain common law rights to our trademarks. The common law rights
protect the use of marks used to identify our goods and services since the time
of their first use in commerce. Our trademarks include Check Print(R),
BioClock(R), Sense(R), meCard(R), "Security Solutions at a Touch of a
Finger"(R), Explosive Sensing Protocol(TM) and Sense-It(TM).

         We currently have on file several copyright applications covering our
source code. We maintain common law rights to our proprietary copyrights. The
common law rights protect the actual programming code, the look and feel of its
display screens and material contained in our user manuals since the time of the
copyrightable works creation. In addition, we have an application on file with
the United States Copyright Office covering our proprietary source code, the
look and feel of our display screens and user manuals. There is no guarantee
that our application will mature into a registration for copyright.

                                       12
<PAGE>

         Whether or not we obtain formal protection for our products and/or
systems, we intend to vigorously protect our ownership rights. However,
protection of our rights will not prevent others from developing similar
technology on their own or developing other products that may be used for
purposes similar to ours.

         We have also obtained the rights to the domain names www.senseme.com,
www. chinaamericaholdings.com, www.china-aohong.com and www.bigtreetoys.com. As
with telephone numbers, we do not have and cannot acquire any property rights in
an Internet address. We do not expect to lose the ability to use these Internet
addresses; however, there can be no assurance in this regard and the loss of
either of these addresses could materially adversely affect our future business
financial condition and results of operations.

GOVERNMENT REGULATION AFFECTING OUR PRC SUBSIDIARIES IN GENERAL

Doing Business in the PRC

         Our operations in the PRC are subject to the 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 law exists in the PRC, it may
be difficult to obtain swift and equitable enforcement of such law, 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 future 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 few 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, the Renminbi (RMB), restrictions on the
availability of domestic credit, reducing the purchasing capability of certain
of its customers, and limiting re-centralization of the approval process for
purchases of some foreign products. 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. There
can be no assurance that the reforms to China's economic system will continue or
that there will not be changes in China's political, economic, and social
conditions and changes in policies of the Chinese government, such as changes in

                                       13
<PAGE>

laws and regulations, measures which may be introduced to control inflation,
changes in the rate or method of taxation, imposition of additional restrictions
on currency conversion and remittance abroad, and reduction in tariff protection
and other import restrictions.

EMPLOYEES

         At March 28, 2008 we had a total of 70 employees as follows:

   o One full time employee in the U.S. who is our Chief Executive Officer,

   o 55 full-time employees at Aohong, all located in the PRC, and

   o 16 full-time employees at Big Tree's Representative Office, all located in
     the PRC.

         We believe that relations with our employees are good. Our U.S.
employee is not subject to a collective bargaining agreement. For our employees
in China, each full-time employee is a member of a local trade union. Labor
relations have remained positive and we have not had any employee strikes or
major labor disputes. Unlike trade union in western countries, trade unions in
most parts of China are organizations mobilized jointly by the government and
the management of the corporation.

         We are required to contribute a portion of our Chinese employees' total
salaries to the Chinese government's social insurance funds, including medical
insurance, unemployment insurance and job injuries insurance, and a housing
assistance fund, in accordance with relevant regulations. We expect the amount
of our contribution to the government's social insurance funds to increase in
the future as we expand our workforce and operations.

CONSULTANTS

         We rely on the services of three consulting firms which are affiliates
to assist us in various areas, including:

         o CHINA DIRECT INVESTMENTS, INC. In November 2006 we entered into a
Consulting and Management Agreement with China Direct Investments, Inc. Under
the terms of the agreement, China Direct Investments agreed to provide general
business consulting, identification, evaluation and structure of potential
mergers and acquisitions, advice on corporate structure and financial
structuring transaction, advice on potential sources of investment capital and
assistance in connection with administrative matters pertaining to the PRC. As
compensation for its services, China Direct Investments was issued 5,000,000
shares of our common stock valued at $450,000 and may receive discretionary
award fees as determined by us. The agreement expired on December 31, 2006;
however, China Direct Investments continues to provide services to us under this
agreement at no cost pursuant to the terms of the stock purchase agreement with
China Direct, Inc. for Big Tree as described later in this report.

         o CDI SHANGHAI MANAGEMENT CO., LTD. In June 2007, we executed a
consulting agreement with CDI Shanghai Management Co., Ltd. for consulting
services which had been provided by that company to us since April 1, 2007,
including identifying suitable acquisition partners in Asia, structuring merger
and/or acquisition transactions and providing translation services. Under the
terms of the consulting agreement, we issued CDI Shanghai Management Co., Ltd.
5,000,000 shares of our common stock valued at $475,000. This agreement also
provides for the payment of discretionary award fees to be paid to the
consultant and/or its designees. Upon the mutual agreement of the parties, the
fees can be paid either in cash or marketable securities. The agreement expired
on September 30, 2007, however, CDI Shanghai Management Co., Ltd. continues to
provide services to us under this agreement at no cost.

         Mr. Andrew Goldrich, formerly an executive officer and director of our
company, is employed by China Direct, Inc., the parent company of both China
Direct Investments, Inc. and CDI Shanghai Management Co., Ltd.

                                       14
<PAGE>

         o SPC CONSULTANTS LLC. In January 2008 we entered into a two month
agreement with SPC Consultants LLC pursuant to which it agreed to arrange for
the release of our press releases and engage other financial public relations to
publicize our company. As compensation for these services, we paid SPC
Consultants LLC $100,000 and China Direct, Inc. transferred it 1,100,000 shares
of our common stock it owned. For accounting purposes, we will recognize an
expense equal to the fair market value of the common stock transferred by China
Direct, Inc. and such amount will be reflected as a capital contribution.

OUR HISTORY

         We were organized in Idaho, under the name Century Silver Mines, Inc.,
on February 5, 1968. Originally, we developed mining properties, but by 1998 we
had ceased those operations. Sense Technologies was organized under the laws of
the State of Florida on July 13, 1998. Sense Technologies was formed for the
purpose of engaging in developing and marketing biometric devices for use in
employee identification and security-related products.

         In January 1999, we acquired all of the outstanding shares of Sense
Technologies for a purchase price consisting of 4,026,700 of our shares issued
to the former shareholders of Sense Technologies. At the time of the
acquisition, Century Silver Mines had no operations and Sense Technologies was
developing its proprietary biometric security systems. Immediately following the
acquisition, the former shareholders of Sense Technologies owned approximately
93% of our outstanding shares. In June 1999, we changed our corporate domicile
from Idaho to Florida and, in connection with the domicile change we changed our
name to Sense Holdings, Inc.

         On May 31, 2001, we acquired all of the outstanding shares of Micro
Sensor from UTEK Corporation and UT-Battelle LLC, the shareholders of Micro
Sensor, in a stock-for-stock exchange, for total consideration of 2,000,000
shares of our common stock. Pursuant to the stock-for stock transfer, UTEK
received 1,850,000 common shares of Sense and UT-Battelle LLC received 150,000
common shares of our company.

         Effective June 27, 2007 we acquired a 56.08% membership interest in
AoHong from that company in exchange for $3,380,000 to be paid to AoHong
pursuant to the following schedule:

   o $800,000 on or before September 30, 2007;

   o $400,000 on or before June 30, 2008;

   o $600,000 on or before December 31, 2008; and

   o the remaining $1,580,000 on or before June 27, 2009.

         The initial $800,000 was paid in September 2007.

         In addition, we issued Mr. Aihua Hu, a member of AoHong and its CEO,
12,500,000 shares of our common stock valued at $1,187,500 as additional
consideration. Following the execution of the agreement, AoHong and the minority
members were required to promptly apply as necessary to obtain the documents
which represent the formal approvals of the relevant regulatory agencies in the
People's Republic of China to our purchase of a controlling interest in AoHong.

         AoHong was established in February 2000 as Shanghai AoHong Industry
Co., Ltd. by Mr. Aihua Hu, its CEO, and his wife Mrs. Ying Ye. On July 5, 2007
AoHong changed its name to Shanghai AoHong Chemical Co., Ltd. AoHong has two
wholly owned subsidiaries; Shanghai Binghong Trading Co., Ltd. which was
established in March 2002 and Shanghai Wuling Environmental Material Co., Ltd.
which was established in January 2005.

         On August 29, 2007, the Shanghai Foreign Investment Commission issued
the Certificate of Approval for the establishment of the Sino-U.S. joint-venture
between our company and AoHong. The registered capital of this joint venture is

                                       15
<PAGE>

$8,210,024, of which an aggregate of $3,380,000 is being contributed by our
company. In September 2007 following our remittance of the initial investment of
$800,000 to the joint venture, the Shanghai Industrial & Commercial
Administration Bureau issued the certificate of approval to the joint venture.
Aohong received a renewed business license on November 29, 2007.

         On August 31, 2007, we acquired a 60% percent equity interest in Big
Tree from CDI China, Inc., a wholly owned subsidiary of China Direct, Inc. Under
the terms of the agreement, we paid CDI China, Inc. $400,000 and agreed to issue
it 20,000,000 shares of our common stock valued at $20,000 as follows:

   o 2,500,000 shares at closing,

   o 2,500,000 shares on or before December 31, 2007,

   o 2,500,000 shares on or before March 31, 2008,

   o 2,500,000 shares on or before June 30, 2008,

   o 2,500,000 shares on or before September 30, 2008 conditional upon Big Tree
     revenues being equal or greater than $2,000,000 and not reporting a net
     income loss for the quarter ended June 30, 2008,

   o 2,500,000 shares on or before December 31, 2008 conditional upon Big Tree
     revenues being equal or greater than $2,000,000 and not reporting a net
     income loss for the quarter ended September 30, 2008,

   o 2,500,000 shares on or before March 31, 2009 conditional upon Big Tree
     revenues being equal or greater than $2,000,000 and not reporting a net
     income loss for the quarter ended December 31, 2008, and

   o 2,500,000 shares on or before June 30, 2009 conditional upon Big Tree
     revenues being equal or greater than $2,000,000 and not reporting a net
     income loss for the quarter ended March 31, 2009.

         During 2007 we issued all 10,000,000 shares due China Direct, Inc.,
including share payments which were not yet due, which represented shares not
contingent upon Big Tree's future revenues and income. For accounting purposes,
the value ascribed to the 10,000,000 shares of our common stock equals the par
value of our common stock. Since the remaining 10,000,000 shares issuable upon
the achievement of certain goals as described above, we have not reflected these
share as outstanding. The contingent shares will be value on the measurement if
the goals are met. Because China Direct, Inc. owned approximately 17% of our
common stock prior to the closing of the transaction, as a related party the
value of the 10,000,000 shares issued are required to equal par value under
generally accepted accounting principles.

         Big Tree was incorporated in the State of Florida on November 20, 2006
and its wholly owned subsidiary Jieyang Big Tree was established on January 22,
2007 as a wholly foreign owned entity (WFOE) in China. China Direct, Inc.
acquired 60% of Big Tree in February 2007 in exchange for shares of its common
stock and a commitment to provide a $1 million working capital loan subject to
the satisfaction of certain revenue milestones by Big Tree, which such
milestones were not met by the time we acquired the company. China Direct, Inc.
no longer has the obligation to provide such funds.

         In November 2007 we changed the name of our company to China America
Holdings, Inc. to better reflect is current business and operations.

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. If any of the following risks and uncertainties develop into

                                       16
<PAGE>

actual events, our business, financial condition or results of operations could
be materially adversely affected and you could lose your entire investment in
our company.

                          RISKS RELATED TO OUR COMPANY

WE HAVE RECENTLY EXPANDED OUR BUSINESS THROUGH THE ACQUISITION OF A MAJORITY
OWNERSHIP INTEREST IN AOHONG WHICH IS LOCATED IN THE PRC. OUR MANAGEMENT MAY NOT
BE SUCCESSFUL IN TRANSITIONING THE INTERNAL OPERATIONS OF A PRIVATELY HELD
CHINESE COMPANY TO A SUBSIDIARY OF A U.S. PUBLICLY HELD COMPANY.

         In June 2007 we closed on the acquisition of a majority ownership
interests in AoHong, a company located in the PRC. The original owners of AoHong
continue to own the remaining minority interest and are responsible for its day
to day operations. While we have reasonable expectations that the core
operations of this company will continue as it has historically, our acquisition
of AoHong provides certain challenges for our company, including, among others:

         o we have no experience with companies operating within AoHong's
industry segment and will remain completely dependent on AoHong's management to
oversee its day to day activities with little practical ability to supervise
their activities,

         o our CEO does not have any experience with operating a business in
China and he does not speak Chinese, and

         o we will need to upgrade the internal accounting systems at AoHong, as
well as educating its staff as to the proper collection and recordation of
financial data to ensure that we can continue to file our annual, quarterly and
other reports with the SEC on a timely basis.

         As described elsewhere herein, two subsidiaries of China Direct, Inc.
provide us with consulting services, including translation services. China
Direct, Inc., which is also a U.S.-based publicly held company with operations
in the PRC as well as a principal shareholder of our company, has internal
accounting staff which contain Chinese speaking individuals with U.S. accounting
experience. There can be no assurance that our efforts to integrate the
operations of AoHong will be successful or that the anticipated benefits of the
acquisition will be fully realized. There can be no assurance that there will
not be substantial costs associated with these activities or of the success of
our integration efforts, either of which could have a material adverse effect on
our future operating results. If we are unable to properly and timely integrate
the disclosure and accounting operations of AoHong into our company, our ability
to timely file our annual and quarterly reports, as well as other information we
are required to file with the Securities and Exchange Commission, could be in
jeopardy. Any failure on our part to meet the prescribed filing deadlines could
lead to a delisting of our common stock from the OTC Bulletin Board which could
adversely affect a stockholder's ability to resell his investment in our
company.

WE ANTICIPATE THAT WE WILL CONTINUE TO INCUR OPERATING LOSSES AND THERE ARE NO
ASSURANCES THAT WE WILL REPORT PROFITABLE OPERATIONS IN FUTURE PERIODS.

         We have incurred substantial operating and net losses since our
inception through December 31, 2007. For 2007 and 2006, we reported net losses
of $1,118,603 and $3,752,855, respectively, and at December 31, 2007, we had an
accumulated deficit of approximately $15,931,308. We acquired our majority
interest in AoHong on June 27, 2007. Our results of operations for 2007 include
AoHong's operations from the date of acquisition through December 31, 2007 and
represented in excess of 99% of our net revenues for 2007. While AoHong's
operations are profitable, those profits are not presently sufficient to offset
operating losses in the U.S. As a result, we may never achieve profitability on
a consolidated basis in the future. In addition, as a result of currency
restrictions profits from AoHong's operations are not available to us to offset
our cash needs in the U.S. Although we recently raised approximately $2,600,000

                                       17
<PAGE>

of additional capital, we will need to raise additional capital to fund our
commitments and for our operating needs. If we do not raise additional working
capital as necessary, we could be forced to cease operations at one or more of
our divisions.

RESTRICTIONS ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND USE OUR
REVENUES EFFECTIVELY. WE MAY NOT HAVE READY ACCESS TO CASH ON DEPOSIT IN BANKS
IN THE PRC.

         Because substantially all of our revenues are in the form of RMB, any
future restrictions on currency exchanges may limit our ability to use revenue
generated in RMB 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 RMB 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 RMB 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.
At December 31, 2007 our PRC subsidiary had approximately $1,014,000 on deposit
in banks, which represented approximately 50% of our cash. We cannot be certain
that we could have ready access to that cash should we wish to transfer it to
bank accounts outside the PRC nor can we be certain that the Chinese regulatory
authorities will not impose more stringent restrictions on the convertibility of
the RMB, especially with respect to foreign exchange transactions.

HISTORICALLY OUR BUSINESS HAS BEEN CAPITAL INTENSIVE. AS A RESULT OF THE TERMS
OF OUR MOST RECENT CAPITAL RAISE, WE MAY NOT BE ABLE TO RAISE ADDITIONAL
FINANCING WHEN NECESSARY. IF WE CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR
ABILITY TO EXECUTE OUR GROWTH STRATEGY AND FUND OUR ONGOING OPERATIONS WILL BE
IN JEOPARDY.

         Historically, our operations have been financed primarily through the
issuance of equity. Capital is typically needed not only to fund our ongoing
operations and to pay our existing obligations, but capital will be necessary to
fund our anticipated growth including the effective integration, operation and
expansion of AoHong and Big Tree. Our future capital requirements, however,
depend on a number of factors, including our ability to internally grow our
revenues, manage our business and control our expenses. We need to raise
additional capital to satisfy our obligations to AoHong, under the agreement to
establish the toy testing facility, to fund our ongoing operations, pay our
existing obligations and for future growth of our company. As described below
the terms of our recently concluded private placement may significantly restrict
our ability to raise working capital as needed. We cannot assure you that
additional working capital is available to us in the future upon terms
acceptable to us. If we do not raise funds as needed, our ability to provide for
current working capital needs and obligations to AoHong, grow our company, and
continue our existing business and operations is in jeopardy. In this event, you
could lose all of your investment in our company.

CONTRACTUAL TERMS MAY AVERSELY EFFECT OUR ABILITY TO RAISE WORKING CAPITAL AS
NEEDED.

         Under the terms of our recently completed private placement, we agreed
to a number of limitations on our future capital raising activities, including:

         o we agreed not to enter into any other financing transaction which
provides for the issuance of any shares of our common stock or securities
convertible into or exercisable for shares of our common stock for a period of
one year ending in September 2008, and

                                       18
<PAGE>

         o During the period which ends the earlier of July 4, 2008 or the date
on which all shares of common stock, including the shares underlying the
warrants issued in the offering, can be resold under Rule 144 of the Securities
Act without regard to volume, we also agreed not to undertake certain actions,
including:

            o  filing any other registration statements to register any
               additional securities, and

            o  entering into any agreement to issue, or issue, any equity,
               convertible debt or other securities convertible into common
               stock or equity, or modify and such securities which are
               presently outstanding without the prior written consent of the
               purchasers in the offering, and not entering into any equity line
               of credit or similar agreement or issuing any floating or
               variable priced equity linked securities or any equity with price
               reset rights.

         It is possible that we will need to raise additional capital prior to
the expiration of the above timeframes. If we are unable to secure the consent
of the purchasers in the offering to a subsequent offering and registration
statement, we may be unable to obtain additional capital as necessary to fund
our ongoing operations or anticipated growth or satisfy our obligations to
AoHong.

WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND THE LOSS OF THESE KEY PERSONNEL
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

         Our success is, to a certain extent, attributable to the management,
sales and marketing, and operational expertise of key personnel at AoHong and
Big Tree who perform key functions in the operation of AoHong and Big Tree. All
of these individuals are located in China and we do not exercise any day to day
supervision over their activities. We are not a party to any employment or
similar agreements with any of these individuals and there are no assurances
that they will remain employed by their respective companies or devote
sufficient time and attention to the operations of those entities. The loss of
one or more of these key employees could have a material adverse effect upon our
business, financial condition, and results of operations and the results of
operations at these subsidiaries could be adversely impacted.

CERTAIN AGREEMENTS TO WHICH WE ARE A PARTY AND WHICH ARE MATERIAL TO OUR
OPERATIONS LACK VARIOUS LEGAL PROTECTIONS WHICH ARE CUSTOMARILY CONTAINED IN
SIMILAR CONTRACTS PREPARED IN THE UNITED STATES.

         Our subsidiaries include AoHong which was organized under the laws of
the PRC and all of its business and operations are conducted in China. We are a
party to certain contracts related to those operations. 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 these
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 AoHong
will likely enter into contracts in the future which 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 protection will divert management's time
from the operation of our business and require us to expend funds attempting to
settle 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.

                                       19
<PAGE>

AOHONG'S OPERATIONS ARE SUBJECT TO GOVERNMENT REGULATION. IF IT FAILS TO COMPLY
WITH THE APPLICABLE REGULATIONS, ITS ABILITY TO OPERATE IN FUTURE PERIODS COULD
BE IN JEOPARDY.

         AoHong is subject to various state and local regulations related to the
distribution of chemicals. It is also licensed by the Shandong Bureau of Quality
and Technical Supervision to distribute chemicals. While AoHong is 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, any non-renewal by these authorities could result in the cessation of
its business activities which would have a material adverse effect on our
results of operations in future periods.

BIG TREE WILL FACE SIGNIFICANT COMPETITION IN THE TOY BUSINESS IN CHINA AND THE
RECENT U.S. RECALLS OF CHINESE MADE TOYS COULD ADVERSELY IMPACT THE TOY BUSINESS
IN CHINA.

         Big Tree will face significant competition in establishing its
operations as the toy industry within China is subject to intense competition.
China is the world's biggest toy manufacturer and exporter, producing
three-quarters of the entire world's toys. There are no assurances that it will
ever successfully develop its business and we may never recoup the funds we will
expend in those efforts. Additionally, as a result of the increasing scope of
U.S. recalls of Chinese-made toys, there are no assurances that new regulations
regarding the manufacture and/or importation of toys will not be enacted by
either the Chinese or U.S. governments which would further impede the ability of
Big Tree to develop its operations. The prospects of Big Tree must be considered
in light of the significant competition and adverse publicity surrounding the
toy business in China.

SUBSTANTIALLY ALL OF BIG TREE'S ASSETS ARE A RELATED PARTY LOAN WHICH DOES NOT
HAVE A FIXED REPAYMENT DATE.

         Prior to our acquisition of a controlling interest in Big Tree, in
January 2007 Jieyang Big Tree advanced $438,422 to Shantou Dashu Toy Enterprise
Co., Ltd., a company co-founded by Ms. Guihong Zheng and Mr. Wei Lin, officers
of Big Tree and Jieyang Big Tree. In addition, Ms. Zheng, the minority
shareholder in Big Tree, is the owner of Shantou Dashu Toy Enterprise Co., Ltd.
Ms. Zheng initially provided the funds to Big Tree as a capital contribution,
which were in turn used to provide the initial registered capital for Jieyang
Big Tree. Subsequent to the formation of Jieyang Big Tree, these funds were used
to make the loan to Shantou Dashu Toy Enterprise Co., Ltd. At December 31, 2007,
Big Tree held a due from this related party in the amount of $465,982 which
represents substantially all of the assets of Big Tree. This advance does not
bear interest and is due on demand. If for any reason this advance should not be
repaid, the amount of funds available to Big Tree for working capital in future
periods will be significantly reduced.

                    RISKS RELATED TO DOING BUSINESS IN CHINA

SUBSTANTIALLY 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

                                       20
<PAGE>

have been more successful in certain provinces than in others, and the
continuation or increases of such disparities could affect the political or
social stability of the PRC.

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

THE CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH OUR
CHINESE SUBSIDIARIES 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, and could require us to divest ourselves of
any interest we then hold in Chinese subsidiaries.

FUTURE INFLATION IN CHINA MAY INHIBIT ECONOMIC ACTIVITY IN CHINA.

         In recent years, the Chinese economy has experienced periods of rapid
expansion and high rates of inflation. During the past 10 years, the rate of
inflation in China has been as high as 20.7% and as low as -2.2%. These factors
have led to the adoption by the PRC government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate
growth and contain inflation. While inflation has been more moderate since 1995,
high inflation may in the future cause the PRC government to impose controls on
credit and/or prices, or to take other action, which could inhibit economic
activity in China. Any actions by the PRC government to regulate growth and
contain inflation could have the effect of limiting our ability to grow our
revenues in future periods.

ANY RECURRENCE OF SEVERE ACUTE RESPIRATORY SYNDROME, OR SARS, OR ANOTHER
WIDESPREAD PUBLIC HEALTH PROBLEM, COULD INTERRUPT OUR OPERATIONS.

         A renewed outbreak of SARS or another widespread public health problem
in China could have a negative effect on our operations. Our operations may be
impacted by a number of health-related factors, including the following:

   o quarantines or closures of some of our offices which would severely disrupt
     our operations,

   o the sickness or death of our key officers and employees, or

   o a general slowdown in the Chinese economy.

         Any of the foregoing events or other unforeseen consequences of public
health problems could result in a loss of revenues in future periods and could
impact our ability to conduct the operations of our Chinese subsidiaries as they
are presently conducted. If we were unable to continue the operations of our
Chinese subsidiaries as they are now conducted, our revenues in future periods
would decline and our ability to continue as a going concern could be in
jeopardy. If we were unable to continue as a going concern, you could lose your
entire investment in our company.

CHINESE LAWS AND REGULATIONS GOVERNING OUR CURRENT BUSINESS OPERATIONS ARE
SOMETIMES VAGUE AND UNCERTAIN. ANY CHANGES IN SUCH CHINESE LAWS AND REGULATIONS
MAY HAVE A MATERIAL AND ADVERSE EFFECT ON OUR BUSINESS.

                                       21
<PAGE>

         China's legal system is a civil law system based on written statutes,
in which system decided legal cases have little value as precedents unlike the
common law system prevalent in the United States. There are substantial
uncertainties regarding the interpretation and application of Chinese laws and
regulations, including but not limited to the laws and regulations governing our
business, or the enforcement and performance of our arrangements with customers
in the event of the imposition of statutory liens, death, bankruptcy and
criminal proceedings. The Chinese government has been developing a comprehensive
system of commercial laws, and considerable progress has been made in
introducing laws and regulations dealing with economic matters such as foreign
investment, corporate organization and governance, commerce, taxation and trade.
However, because these laws and regulations are relatively new, and because of
the limited volume of published cases and judicial interpretation and their lack
of force as precedents, interpretation and enforcement of these laws and
regulations involve significant uncertainties. New laws and regulations that
affect existing and proposed future businesses may also be applied
retroactively. We cannot predict what effect the interpretation of existing or
new Chinese laws or regulations may have on our businesses. If the relevant
authorities find us in violation of Chinese laws or regulations, they would have
broad discretion in dealing with such a violation, including, without
limitation, levying fines, revoking our business and other licenses, requiring
that we restructure our ownership or operations and requiring that we
discontinue any portion or all of our business.

WE MAY BE UNABLE TO ENFORCE OUR RIGHTS DUE TO POLICIES REGARDING THE REGULATION
OF FOREIGN INVESTMENTS IN CHINA.

         China's regulations and policies with respect to foreign investments
are evolving with respect to such matters as the permissible percentage of
foreign investment and permissible rates of equity returns. 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 business objectives. If we are unable to enforce 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.

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 resisted the adoption of 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. As a result, 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.

                                       22
<PAGE>

                        RISKS RELATED TO OUR COMMON STOCK

THE EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS AND THE COMMITMENT TO ISSUE
ADDITIONAL SHARES IN THE BIG TREE ACQUISITION WILL BE DILUTIVE TO OUR EXISTING
SHAREHOLDERS.

         At March 26, 2008 we had 135,810,792 shares of our common stock issued
and outstanding and the following securities which are convertible or
exercisable into shares of our common stock were outstanding:

         o 67,611,613 shares of our common stock issuable upon the exercise of
common stock purchase warrants with exercise prices ranging from $0.10 to $0.55
per share; and

         o 9,300,000 shares of our common stock issuable upon exercise of
outstanding options with exercise prices ranging from $0.07 to $0.35.

         Under the terms of the agreement for the purchase of Big Tree, we are
also obligated to issue up to an additional 10,000,000 shares of our common
stock. The exercise of these warrants or options and the issuance of the
additional shares in connection with the Big Tree acquisition may materially
adversely affect the market price of our common stock and will have a dilutive
effect on our existing shareholders.

WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN
THE ABSENCE OF WHICH, SHAREHOLDERS 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 and
Business Conduct, 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. 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, 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 in mind our
current lack of corporate governance measures in formulating their investment
decisions.

BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE
OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A "PENNY STOCK" WHICH CAN ADVERSELY
AFFECT ITS LIQUIDITY.

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

                                       23
<PAGE>

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

ITEM 1B. UNRESOLVED STAFF COMMENTS.

         Not applicable to a smaller reporting company.

ITEM 2. PROPERTIES.

         On February 1, 2008 we entered into a lease for our principal executive
offices which are located in 850 square feet of office/warehouse space in
Sunrise, Florida. We lease this space from an unrelated third party under a one
year lease expiring on January 2009 with an annual lease of approximately
$12,700. Mr. Dore Scott Perler, our CEO, is also a party to this agreement.
These facilities are suitable and adequate for our current needs.

         AoHong is located in the Huating Economic & Development Area, Jiading
District, Shanghai. AoHong owns a 98,100 square foot facility which includes
workshop and office spaces, 33,790 square feet of warehouse and 4,086 cubic
meters of storage tanks. This facility serves as AoHong's principal offices. In
December 2007 AoHong completed construction of a new facility of approximately
53,000 square feet which includes approximately 21,000 square feet of production
area and approximately 32,000 square feet of warehouse.

         AoHong has land use rights for the land on which these facilities are
constructed pursuant to an agreement with the Chinese government. The land use
rights are valued at a fixed amount RMB 567,926, fluctuated by the exchange rate
which at December 31, 2007 was $77,648. Under the terms of the agreement, AoHong
has rights to use certain land until November 3, 2053.

         AoHong leases approximately 860 square feet of warehouse space in
Shanghai, China from an unrelated third party for $171 per month under a lease
expiring in September 2008.

         Mengjin leases approximately 600 square feet of office space from an
unrelated third party for $715 per month under a lease expiring in November
2008.

         Big Tree leases approximately 9,700 square feet of office space from an
unrelated third party for $18,514 annually under a lease expiring in November
2010.

ITEM 3. LEGAL PROCEEDINGS

         We are not a party to any pending legal proceedings and, to our
knowledge, none of our officers, directors or principal shareholders are party
to any legal proceeding in which they have an interest adverse to US.

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

         Because we do not have a class of securities registered under either
Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934 we are not
subject to the proxy rules. On November 8, 2007 the holders of approximately
50.1% of our outstanding voting securities which represented a majority of the
shareholders approved Articles of Amendment to our Articles of Incorporation
changing the name of our company from Sense Holdings, Inc. to China America
Holdings, Inc. and increasing the number of our authorized shares of common
stock from 350,000,000 shares to 500,000,000 shares. This action was approved by
written consent in lieu of a meeting of shareholders in accordance with the
relevant sections of the Florida Business Corporation Act. In accordance with
the Florida Business Corporation Act we provided written notice to our
shareholders who did not execute the consent to this action.

                                       24
<PAGE>

                                     PART II

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

         Our common stock is quoted on the OTCBB under the symbol CAAH. The
reported high and low sales 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         LOW
                                                  ----         ---
Fiscal 2006

First quarter ended March 31, 2006 .......       $ 0.33      $ 0.30
Second quarter ended June 30, 2006 .......       $ 0.23      $ 0.22
Third quarter ended September 30, 2006 ...       $ 0.16      $ 0.155
Fourth quarter ended December 31, 2006 ...       $ 0.085     $ 0.065

Fiscal 2007

First quarter ended March 31, 2007 .......       $ 0.09      $ 0.04
Second quarter ended June 30, 2007 .......       $ 0.10      $ 0.05
Third quarter ended September 30, 2007 ...       $ 0.09      $ 0.05
Fourth quarter ended December 31, 2007 ...       $ 0.14      $ 0.07

Fiscal 2008

First quarter ended March 31, 2008 .......       $ 0.12      $ 0.05

         On April 8, 2008, the last sale price of our common stock as reported
on the OTCBB was $0.07. As of March 26, 2008, there were approximately 949
record owners of our common stock.

DIVIDEND POLICY

         We have never paid cash dividends on our common stock. Payment of
dividends will be within the sole discretion of our Board of Directors and will
depend, among other factors, upon our earnings, capital requirements and our
operating and financial condition. In addition under Florida law, we may declare
and pay dividends on our capital stock either out of our surplus, as defined in
the relevant Florida statutes, or if there is no such surplus, out of our net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. If, however, the capital of our company, computed in
accordance with the relevant Florida statutes, has been diminished by
depreciation in the value of our property, or by losses, or otherwise, to an
amount less than the aggregate amount of the capital represented by the issued
and outstanding stock of all classes having a preference upon the distribution
of assets, we are prohibited from declaring and paying out of such net profits
any dividends upon any shares of our capital stock until the deficiency in the
amount of capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets shall have been repaired.

                                       25
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The following table sets forth securities authorized for issuance under
any equity compensation plans approved by our shareholders as well as any equity
compensation plans not approved by our shareholders as of December 31, 2007.
<TABLE>
<CAPTION>
                                                                              NUMBER OF
                                                                              SECURITIES
                                                                              REMAINING
                                         NUMBER OF                            AVAILABLE FOR
                                         SECURITIES TO                        FUTURE ISSUANCE
                                         BE ISSUED UPON    WEIGHTED AVERAGE   UNDER EQUITY
                                         EXERCISE OF       EXERCISE PRICE     COMPENSATION
                                         OUTSTANDING       OF OUTSTANDING     PLANS (EXCLUDING
                                         OPTIONS,          OPTIONS,           SECURITIES
                                         WARRANTS AND      WARRANTS AND       REFLECTED IN
                                         RIGHTS (A)        RIGHTS (B)         COLUMN (A)) (C)
                                         --------------    ----------------   ----------------
<S>                                      <C>               <C>                <C>
Plan category
Plans approved by shareholders:
    1999 Stock Option Plan ..........         900,000          $ 0.14             250,000
    2001 Equity Compensation Plan ...         350,000          $ 0.08             303,840
    2005 Equity Compensation Plan ...       1,000,000          $ 0.08             723,000
Plans not approved by shareholders ..       7,050,000          $ 0.092                n/a
</TABLE>
         A description of each of these plans is contained later in this report
under Part III, Item 11. Executive Compensation - Stock Option Plans.

RECENT SALES OF UNREGISTERED SECURITIES

         None.

ITEM 6.  SELECTED FINANCIAL DATA.

         Not applicable to a smaller reporting company.

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

OVERVIEW

         Historically, our operations were related to the design, development,
manufacture and sale of fingerprint-based identification products and systems
that incorporate state-of-the-art biometric technology to verify a person's
identity. We developed two turnkey integrated applications that incorporate our
proprietary BioClock(R) hardware platform. We have also devoted significant time
and resources to the development of products based upon the patent licenses we
acquired for Micro Electro Mechanical Sensors, or MEMS, technology covering use
in the field of explosive detection which were developed by Oak Ridge National
Laboratory (ORNL). Our current base of customers for our biometric products
consists of one large enterprise level client and revenues from this segment
represented less than 1% of our consolidated net revenues in 2007.

         Our ability to conduct significant marketing activities that we deem
critical to building broad market awareness of, and demand for, our systems was
severely limited due to financial constraints. The financial constraints were
brought on in part by the cash required to be spent in research and development.
During 2006 we limited our expenditures on research and development, and
eliminated non-critical personnel to reduce expenses and because our core
products are operational and saleable to a broad market with very little
modification. In 2007 we did not conduct any research and development and our
revenues in this segment were limited to revenues from a service agreement.

                                       26
<PAGE>

         Our ability to significantly grow the market for our biometrics
products was dependent on our ability to raise sufficient working capital to
fund our marketing and research and development efforts. While we were able to
raise limited amounts of capital from time to time, we have never been able to
secure the proper financing required. As a result, during 2007 our management
began efforts to identify and close an acquisition or other business combination
with an operating company. We believed that this would benefit our overall
operations.

         In June 2007 we closed the acquisition of a majority of AoHong, a
Chinese-based company which distributes assorted liquid coolants which are
utilized in a variety of applications, primarily as refrigerants in air
conditioning systems for automobiles, residential and commercial air
conditioning systems, refrigerators, fire extinguishing agents and assorted
aerosol sprays. The audited financial statements of AoHong for 2006 and 2005
reflect net revenues of approximately $21 million and approximately $14 million,
respectively, and net income of approximately $430,000 and approximately
$780,000, respectively. We selected AoHong as an acquisition target as we
believe that its business model has shown continuous historical growth over the
past several years and that there is potential for additional growth in this
sector. We began reporting AoHong's operations during the third quarter of 2007
and revenues from AoHong represent in excess of 99% of our total net revenues
for 2007.

         In August 2007 we closed the acquisition of a majority of Big Tree,
which together with its subsidiary Jieyang Big Tree, is a development stage
company based in China that intends to operate in the toy business. Big Tree's
operations are still developing and we anticipate that we will report revenues
from this segment during the first quarter of 2008.

         As a result of these transactions, in 2007 we were able to complete a
unit placement of our securities which resulted in net proceeds to us of
approximately $2,550,000. We used a portion of these proceeds to make the
initial cash payment due under the AoHong acquisition, for the cash portion of
the Big Tree acquisition and for working capital. As described later in this
section we will need to raise significant additional proceeds to satisfy our
obligations under the AoHong acquisition, to pay our operating expenses and for
the growth of our company.

         Our operations are now conducted in three segments as follows:

   o AoHong,
   o Biometrics, and
   o Big Tree.

         The minority owners of each of AoHong and Big Tree are responsible for
the day to day operations at those companies. Our biometric division will
continue operating as it has historically and requires minimal funding to
operate. We have not allocated any proceeds from our recently completed offering
for additional research and development or marketing activities as they relate
to our biometric segment as a result of our focus on AoHong and Big Tree.

         In addition to the challenges we will face as a result of the rapid
expansion of our company through the acquisition of businesses and operations
located in the PRC, in order to maximize the benefits of these transactions we
will need to successfully integrate AoHong's operations into our company as well
as guiding the development of Big Tree's business and operations. Our commitment
to AoHong required us to provide an aggregate of $3,380,000 of additional
registered capital between September 2007 and June 2009. We used $800,000 from
our recently completed unit offering for the initial commitment of this
obligation, but will be required to raise additional capital to fund the balance
of the obligation. As described elsewhere herein, the terms of that unit
offering restrict our ability to raise capital in future periods which could
adversely impact our ability to fulfill our contractual commitment. We believe
that AoHong's operations will continue as they have been historically operated
resulting in a significant increase in our revenues and operating results in
future periods.

                                       27
<PAGE>

         We used $400,000 from this recently completed unit offering to pay the
cash portion of the purchase price for Big Tree. The development of Big Tree's
operations will also be challenging to us, particularly in view of the intense
competition in the toy business in China and the growing concern over U.S.
recalls of Chinese-made toys. In addition, during 2007 we entered into an
agreement to participate in the establishment of a toy testing facility which
requires to us contribute a total of $500,000. While we believe that the
investments in Big Tree will provide a return over time, we are unable at this
time to predict its operating results in future periods or the impact of those
operations on our consolidated results and financial condition.

CRITICAL ACCOUNTING POLICIES

         A summary of significant accounting policies is included in Note 1 to
the audited consolidated financial statements included elsewhere in this report.
We believe that the application of these policies on a consistent basis enables
our company to provide useful and reliable financial information about our
operating results and financial condition. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.

         Effective January 1, 2006, we adopted the provisions of SFAS No.
123(R), "Share-Based Payment," under the modified prospective method. SFAS No.
123(R) eliminates accounting for share-based compensation transactions using the
intrinsic value method prescribed under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and requires instead that such transactions be
accounted for using a fair-value-based method. Under the modified prospective
method, we are required to recognize compensation cost for share-based payments
to employees based on their grant-date fair value from the beginning of the
fiscal period in which the recognition provisions are first applied. For periods
prior to adoption, the financial statements are unchanged, and the pro forma
disclosures previously required by SFAS No. 123, as amended by SFAS No. 148,
will continue to be required under SFAS No. 123(R) to the extent those amounts
differ from those in the Statement of Operations.

         Principles of consolidation

         The consolidated financial statements include the accounts of China
America and our wholly and majority-owned subsidiaries. All material
inter-company transactions have been eliminated.

         Inventories

         Inventories are stated at the lower of average cost or market price and
consists of raw materials and finished goods.

         Revenue recognition

         We follow the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements". In general, 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
collectability is reasonably assured.

         The following policies reflect specific criteria for our various
revenues streams:

         o We generate revenue from the sale of our products and records
revenues from the sale of products when the goods are shipped, title passes, and
collectibility is reasonably assured,

                                       28
<PAGE>

         o Revenue from periodic maintenance agreements is generally recognized
ratably over the respective maintenance periods provided no significant
obligations remain and collectibility of the related receivable is probable, and

         o Revenue from the performance of services is recognized upon
completion of the service.

         Fair value of financial instruments

         The carrying amounts reported in the balance sheet for cash,
receivables, inventory and accounts payable approximate their fair market value
based on the short-term maturity of these instruments.

RECENT ACCOUNTING PRONOUNCEMENTS

         In September 2006, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" ("FAS 157"). This Statement defines fair value as used in numerous
accounting pronouncements, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosure related to the
use of fair value measures in financial statements. The Statement is to be
effective for our financial statements issued in 2008; however, earlier
application is encouraged. We are currently evaluating the timing of adoption
and the impact that adoption might have on its financial position or results of
operations.

         In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when quantifying
Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 requires
companies to evaluate the materiality of identified unadjusted errors on each
financial statement and related financial statement disclosure using both the
rollover approach and the iron curtain approach, as those terms are defined in
SAB 108. The rollover approach quantifies misstatements based on the amount of
the error in the current year financial statement, whereas the iron curtain
approach quantifies misstatements based on the effects of correcting the
misstatement existing in the balance sheet at the end of the current year,
irrespective of the misstatement's year(s) of origin. Financial statements would
require adjustment when either approach results in quantifying a misstatement
that is material. Correcting prior year financial statements for immaterial
errors would not require previously filed reports to be amended. If a company
determines that an adjustment to prior year financial statements is required
upon adoption of SAB 108 and does not elect to restate its previous financial
statements, then it must recognize the cumulative effect of applying SAB 108 in
2006 beginning balances of the affected assets and liabilities with a
corresponding adjustment to the 2006 opening balance in retained earnings. SAB
108 is effective for interim periods of the first fiscal year ending after
November 15, 2006. The adoption of SAB 108 did not have an impact on our
consolidated financial statements.

         In December 2006, FASB Staff Position No. EITF 00-19-2, "Accounting for
Registration Payment Arrangements," was issued. The FSP specifies that 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, should be separately recognized and measured in accordance with SFAS
No. 5, "Accounting for Contingencies." We believe that our current accounting is
consistent with the FSP.

         In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial Liabilities, Including an Amendment of FASB
Statement No. 115", under which entities will now be permitted to measure many
financial instruments and certain other assets and liabilities at fair value on
an instrument-by-instrument basis. This Statement is effective as of the
beginning of an entity's first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on

                                       29
<PAGE>

or before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS 157. The adoption of this Statement did not have a material
impact on our financial statements.

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

RESULTS OF OPERATIONS

2007 AS COMPARED TO 2006

NET REVENUES, COST OF SALES AND TOTAL OPERATING EXPENSES

         Overall, for 2007 our revenues increased significantly as a result of
the acquisition of AoHong in the second quarter. A direct comparison of our
consolidated results of operations for 2007 to 2006 may not be meaningful as a
result of this acquisition which has transformed our company. We anticipate that
our revenues for 2008 will increase significantly when compared to prior periods
as a result of our acquisition of AoHong and the recognition of revenues from
this segment for an entire fiscal year as well as revenues from Big Tree. The
following table provides certain financial data on each of our operating
segments. This information is presented in U.S Dollars unless otherwise
indicated.
<TABLE>
<CAPTION>
                                                     AOHONG (1)   BIOMETRICS (2)  BIG TREE (3)   CONSOLIDATED
                                                    -----------   -------------   ------------   ------------
<S>                                                 <C>           <C>             <C>            <C>
Net revenues .....................................   16,197,391        92,962               0     16,290,353
Cost of sales ....................................   13,995,155         3,480               0     13,998,635
                                                    -----------   -----------     -----------    -----------
Gross profit .....................................    2,202,236        89,482               0      2,291,718
Gross profit margin ..............................        13.6%         95.2%             n/a          14.1%
Operating expenses (4) ...........................    1,223,261     1,759,100               0      2,982,361
Operating expenses as a percentage of net revenues         7.6%        1,892%             n/a          17.9%
Operating income (loss)(4) .......................      978,975   (1,669,618)               0       (690,643)
Operating margin (4) .............................         6.0%            NM             n/a          -4.2%
</TABLE>
NM = not meaningful

(1) Includes activity from date of acquisition of June 29, 2007.
(2) We include our corporate operating expenses with the operating expenses of
    this segment.
(3) Includes activity from the date of acquisition of August 31, 2007.
(4) Excludes depreciation and amortization.

         AoHong generates net revenues from the sale and distribution of
assorted liquid coolants which are utilized in a variety of applications.
Repackaging bulk quantities of liquid coolants into smaller packaging for resale
and distribution. During 2007 approximately 55% of its net revenue were from the
sales of liquid coolants which had been purchased in bulk and repackaged into
smaller qualities for resale, approximately 15% were from custom mixing of
various raw materials in accordance with customer specifications into a new
product, and the remaining approximate 30% of its net revenues were from
distribution of bulk quantities of liquid coolants directly to customers who in
turn resell the product. Cost of sales at AoHong represents costs of the raw
materials.

         The Biometrics segment does not incur any cost of sales associated with
the service and maintenance revenues and cost of sales represents costs
associated with the hardware sold.

                                       30
<PAGE>

         Total operating expenses decreased $463,518, or approximately 13.5%, in
2007 as compared to 2006. Included in this period to period change are increases
in:

         o selling expenses which consists of shipping and freight and other
selling expenses at AoHong. For 2007 these selling expenses were approximately
5.6% of AoHong's net revenues for the period,

         o compensation and related taxes of which approximately $42,271 is
attributable to compensation and related taxes at AoHong and $289,804 is
attributable to stock based compensation which is primarily attributable to the
value of shares of our common stock and options granted to Mr. Perler as
compensation. These increases were offset by a decrease in compensation and
related taxes of $249,792 in our Biometrics segment, and

         o general and administrative expenses which is attributable to general
and administrative expenses at AoHong of $288,614. This increase was offset by a
decrease of approximately $104,159 at our Biometrics segment which included
decreases in rent and other operating expenses such as office expense,
telephone, insurance, travel and entertainment and auto expenses.

         These increases in our operating expenses were offset by:

         o a reduction of approximately $821,000 in consulting and investor
relations expense which reflects the increase in the use of outside consultants
during 2007. As a result of our limited cash resources we structured the terms
of these agreements to provide for stock based compensation which generally
results in higher overall fees than had we paid the compensation in cash as a
result of the market risk the consultant is assuming. During 2007, we issued an
aggregate of 6,355,000 shares of common stock and granted 500,000 stock options
valued at $616,076 as compensation for accounting, business development services
and for services to identify suitable acquisition partners in Asia, structuring
merger and/or acquisition transactions and providing translation services to us.
During 2006, issued an aggregate of 6,351,500 shares of our common stock and
granted stock warrants valued at $717,670 as compensation for accounting,
business development, and investor relations services. In addition, consulting
and investors relations expenses during 2006 included the amortization of
deferred compensation expense for shares previously issued in 2005 amounting to
approximately $633,000,

         o the elimination of any research and development expenses for our
Biometrics segment in 2007, and

         o a loss in 2006 on impairment of intangible assets of $230,000 in
connection with our license rights for the MEMS technology for which there was
no comparable expense in 2007.

         During 2008 we anticipate that our operating expenses will increase
from 2007 both as a result of recordation of expenses associated with AoHong for
an entire fiscal period as well as operating expenses associated with Big Tree.
We are unable at this time to quantify the amount of any projected increase.

TOTAL OTHER INCOME (EXPENSES)

         Total other income (expenses) decreased substantially in 2007 as
compared to 2006 primarily as a result of reductions in debt issuance costs and
registration rights penalties totaling approximately $230,000 related to capital
raising transactions in 2006 for which we did not have comparable expenses in
2007. In addition, interest expense decreased by approximately $93,000 in 2007
from 2006 as a result of retirement of various debt obligations during 2007.
These decreases were offset by an increase in interest income of approximately
$9,100 attributable to higher cash balances during 2007.

         As it is likely that we will seek to raise additional capital during
2008, we are unable at this time to predict any increase or decrease in total
other income (expenses) in 2008 from those reported in 2007.

                                       31
<PAGE>

NET LOSS

         Our net loss for 2007 decreased substantially form 2006 which is
primarily attributable to net income of $536,577 from AoHong, adjusted for our
ownership interest.

COMPREHENSIVE INCOME

         As described elsewhere herein, the functional currency of AoHong is the
RMB. The financial statements of AoHong are translated to U.S. Dollars using
period-end rates of exchange for assets and liabilities, and average rates of
exchange for the period for revenues, costs, and expenses. Net gains and losses
resulting from foreign exchange transactions are included in the consolidated
statements of operations. As a result of this non-cash gain, we reported
comprehensive income of $15,696 for 2007 as compared to $0 for 2006 which served
to reduce our loss for the year.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is the ability of a company to generate funds to support its
current and future operations, satisfy its obligations and otherwise operate on
an ongoing basis. The following table provides certain selected financial
information from our balance sheets at December 31, 2007 and December 31, 2006.
All amounts are presented in U.S. Dollars expect as otherwise provided:

                                             DECEMBER 31,
                                           2007       2006        INCREASE
                                        ----------   -------     ----------
Working capital ...................      5,054,602    45,397      5,009,205
Cash ..............................      2,012,480   152,579      1,859,901
Total current assets ..............      8,107,182   172,954      7,934,228
Total assets ......................     11,274,292   222,380     11,051,912
Total current liabilities
  (total liabilities) .............      3,052,580   127,557      2,925,023

         As evidenced in the foregoing table, our acquisition of AoHong during
the second quarter of fiscal 2007 significantly impacted our balance sheet.

         At December 31, 2007, our cash is located in the following geographic
areas:
                                                           % OF
                                               $          TOTAL $
                                          ----------      -------
              United States ...........      998,222       49.6%
              China ...................    1,014,258       50.4%
                                          ----------       -----
                                          $2,012,480      100.0%

         Cash on deposit in China is subject to the regulations of the PRC which
restricts the transfer of cash from that country, except under certain specific
circumstances. Accordingly, such funds may not be readily available to us to
satisfy obligations which have been incurred outside the PRC.

         The following table provides certain comparative information on the
changes in our total assets and total liabilities at December 31, 2007 from
December 31, 2006:

                                       32
<PAGE>

                                                      DECEMBER 31,
                                                    2007       2006    INCREASE
                                                 ---------    ------   ---------

Accounts receivable, net ......................  4,220,692    11,918   4,208,774
Notes receivable ..............................    333,168         0     333,168
Inventories, net ..............................  1,100,023     7,436   1,092,587
Prepaid expense and other .....................    440,819     1,021     439,798
Restricted cash ...............................    437,511         0     437,511
Property and equipment, net and land use rights  2,004,941     6,263   1,998,678
Due from related party ........................    465,982         0     465,982
Notes payable .................................  1,665,667    25,000   1,640,667
Accounts payable and accrued expenses .........    966,454    89,439     877,015
Due to related parties ........................    308,346         0     308,346

         At December 31, 2007 accounts receivable included approximately
$4,202,912 due AoHong, net of an allowance for doubtful accounts of
approximately $180,910, and approximately $17,780 due our Biometrics division,
net of an allowance for doubtful accounts of approximately 6,300. At December
31, 2007 notes receivable of $333,168 represented amounts due AoHong from four
customers for the purchase of finished goods. These obligations, which are
similar to accounts receivable, were due between January 2008and June 2008.
Based upon historical experience with these customers, AoHong anticipates that
the balance of these notes receivable will be paid in accordance with each of
their terms.

         Inventories at December 31, 2007 represented approximately $1,097,000
at AoHong representing finished goods and approximately $2,900 of finished goods
at our Biometrics division.

         Prepaid expenses and others primarily consist of payments of $371,285
to AoHong's suppliers for merchandise that had not yet been delivered to us.

         Restricted cash at December 31, 2007 secures bank acceptances payable
by AoHong in the amount of $1,093,778 which are reflected in notes payable
described below.

         Property and equipment, net, and land use rights at December 31, 2007
include $2,001,805 attributable to AoHong with the balance of $3,136
attributable to our Biometrics segment.

         Due from related party at December 31, 2007 represents amounts Jieyang
Big Tree advanced to Shantou Dashu Toy Enterprise Co., Ltd., a company
co-founded by Ms. Guihong Zheng and Mr. Wei Lin, officers of Big Tree and
Jieyang Big Tree, which were made prior to our acquisition of a controlling
interest in Big Tree. This advance does not bear interest and is due on demand.

         Included in notes payable at December 31, 2007 was $546,889 due by
AoHong to banks with maturity dates between January 16, 2008 and February 28,
2008, which were satisfied on the respective due date. Included in notes payable
at December 31, 2007 is $1,093,778 due by AoHong under bank acceptance payables
which are similar to factored receivables in that AoHong assigned the receivable
from its customer to a bank and received cash in an amount equal to the full
amount of the receivable, less the restricted cash which remains on deposit at
the bank to secure the advance. The bank acceptance payable is satisfied by
AoHong at the time its customer pays the receivable. If the customer does pay
the receivable, AoHong is still liable for the payable to the bank. Finally,
included in notes payable at December 31, 2007 is $25,000 attributable to our
Biometrics segment and represents the remaining principal amount due under notes
issued by us in a 2003 private placement. This amount is due on demand.

         At December 31, 2007 accounts payable and accrued expenses included
approximately $640,000 attributable to AoHong and approximately $61,200
attributable to our biometrics division. Advances from customers of $96,624 at
December 31, 2007 represent prepayments from AoHong's customers.

                                       33
<PAGE>

         Due to related parties at December 31, 2007 represents amounts loaned
to AoHong by its Chairman and members of his family for working capital
purposes. These loans, which were primarily made during the three months ended
June 30, 2007, do not bear any interest and are due on demand.

         For 2007 net cash provided by operating activities amounted to
$681,381. In 2007 we used cash to fund our net loss of $1,118,603 as well as for
an increase in accounts receivables of $63,102 and other assets of $220,135 and
a reduction in accounts payable and accrued expenses of $62,975. This was offset
by decreases of $433,094 in inventory, $971,452 in prepaid expenses, advances
from customers of $856,508 and deferred revenue of $2,371 as well as an add-back
of $1,600,529 for non cash expenses including stock-based compensation of
$1,071,755, depreciation and amortization of $73,032, impairment of $35,512 on
intangible assets related to our Biometrics segment and the minority interest of
$420,230.

         For 2006 net cash used by operating activities amounted to $1,285,399
and was primarily attributable to the net loss of $3,752,855 offset by
stock-based compensation of $1,500,240, depreciation of $7,297, the amortization
of the debt offering costs of $89,692, the amortization of the discount on notes
payable of $92,994, the amortization of license rights of $45,000, the
registration rights penalty of $140,432, impairment of intangible asset of
$230,000, a decrease in accounts receivable of $399,484, and other non-cash
items and changes in assets and liability accounts of $(37,683).

         Net cash used in investing activities for 2007 was $296,726 as compared
to $150,000 in 2006 and principally reflects the acquisition of AoHong in 2007.

         Net cash provided by financing activities was $1,424,340 for 2007 as
compared to $1,559,282 for 2006. In 2007 we raised $2,633,664 from the sale of
our securities, net of placement fees and expenses, and used $1,209,324 for the
repayment of notes and related party advances. In 2006 we raised $2,086,282 from
the sale of our securities, net of placement fees and expenses, and used
$527,000 to payments on convertible notes payable.

         As a result of the above, net cash increased by $1,859,901 during 2007,
which included $50,906 which was the effect of the exchange rate on our cash, as
compared to $0 during 2006.

         We have financed our growth and cash requirements through equity
investments and debt and equity financing. We do not currently have any material
commitments for capital expenditures. However, under the terms of our purchase
agreement with AoHong, we are required to contribute an additional $2,580,000 to
its registered capital. We have also committed to invest $500,000 in the
development of a toy testing facility and we require working capital to pay our
general operating expenses. As portion of these costs will be funded from the
proceeds of our recently completed private offering in which we raised
approximately $2,550,000, however, these funds are not sufficient for all of our
capital needs. Accordingly, we will be required to raise additional capital to
fund these commitments and to pay our operating expenses. While AoHong has
historically reported profitable operations, under Chinese law we are not able
to use funds from that company to pay operating expenses in the U.S. In
addition, we have contractually agreed not to sell additional securities until
at least September 2008. As a result, we may not have access to the capital
necessary to fully develop our operations and satisfy our obligations as they
become due.

         As long as our cash flow from operations remains insufficient to
completely fund operations, we will continue depleting our financial resources
and seeking additional capital through equity and/or debt financing subject to
the contractual limitations we have agreed to with the purchasers in our
recently completed unit offering. Even if we are successful in raising
additional capital as necessary, such a raise will further impact our
shareholders. If we raise additional capital through the issuance of debt, this
will result in increased interest expense. If we raise additional funds through
the issuance of equity or convertible debt securities, the percentage ownership
of our company held by existing shareholders will be reduced and those
shareholders may experience significant dilution. In addition, new securities
may contain certain rights, preferences or privileges that are senior to those
of our common stock.

                                       34
<PAGE>

         There can be no assurance that acceptable financing to fund our ongoing
operations can be obtained on suitable terms, if at all. If we are unable to
obtain the financing necessary to support our operations, we may be unable to
continue as a going concern. In that event, we may be forced to cease operations
and our shareholders could lose their entire investment in our company.

OFF-BALANCE SHEET ARRANGEMENTS

         Under SEC regulations, we are required to disclose our off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. An off-balance sheet
arrangement means a transaction, agreement or contractual arrangement to which
any entity that is not consolidated with us is a party, under which we have:

   o Any obligation under certain guarantee contracts;

   o Any retained or contingent interest in assets transferred to an
     unconsolidated entity or similar arrangement that serves as credit,
     liquidity or market risk support to that entity for such assets;

   o Any obligation under a contract that would be accounted for as a derivative
     instrument, except that it is both indexed to our stock and classified in
     shareholder's equity in our statement of financial position; and

   o Any obligation arising out of a material variable interest held by us in an
     unconsolidated entity that provides financing, liquidity, market risk or
     credit risk support to us, or engages in leasing, hedging or research and
     development services with us.

         As of the date of this report, we do not have any off-balance sheet
arrangements that we are required to disclose pursuant to these regulations. In
the ordinary course of business, we enter into operating lease commitments,
purchase commitments and other contractual obligations. These transactions are
recognized in our financial statements in accordance with generally accepted
accounting principles in the United States.

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

         Not applicable to a smaller reporting company.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         Our financial statements are contained in pages F-1 through F-37,
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

         Under the supervision and with the participation of our management,
including our Chief Executive Officer who also serves as our principal financial
and accounting officer, and our consultant, Accretive Solutions, Inc., we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934, as amended, as of the end of the period covered
by this report (the "Evaluation Date"). Based on this evaluation, our Chief
Executive Officer concluded as of the Evaluation Date that our disclosure
controls and procedures were effective such that the information relating to
China America, including our consolidating subsidiaries, required to be
disclosed in our Securities and Exchange Commission reports (i) is recorded,

                                       35
<PAGE>

processed, summarized and reported within the time periods specified in SEC
rules and forms and (ii) is accumulated and communicated to our management,
including our Chief Executive Officer, to allow timely decisions regarding
required disclosure. Our evaluation included business activities which were part
of our company for the entire 2007 period and excluded all businesses which were
acquired during 2007. The excluded businesses are Aohong and Big Tree which
represented approximately 99.4% of our consolidated net revenues, and
contributed $536,577 of net income as part of our consolidated net loss of
$1,118,603,respectively, for 2007, and represented approximately 90.7% of our
consolidated assets at December 31, 2007.

         Our management, including our Chief Executive Officer, does not expect
that our disclosure controls and procedures or our internal controls will
prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints and the
benefits of controls must be considered relative to their costs. Due to the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2007. 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. Our management has concluded that, as
of December 31, 2007, our internal control over financial reporting is effective
based on these criteria.

         This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Our 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 us to provide only management's report in
this annual report.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         There have been no changes in our internal control over financial
reporting during our fourth fiscal quarter that has materially affected, or is
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 GOVERNANCE.

DIRECTORS AND EXECUTIVE OFFICERS

         The following individuals serve as our executive officers and members
of our Board of Directors:

NAME                   AGE     POSITIONS
----                   ---     ---------
Dore Scott Perler       47     Chief Executive Officer,
                               President and Chairman of the Board
Shawn Tartaglia         38     Director
Julie Slater            50     Director

                                       36
<PAGE>

         DORE SCOTT PERLER. Mr. Perler has served as our Chief Executive
Officer, President and Chairman of our Board of Directors since July 1998. He
also serves as our Director of Sale for Big Tree. From 1996 to 1998, Mr. Perler
was Vice President of Sales for Ansel Communications, a manufacturer of network
interfaces and servers, hubs, and LAN workstations, and from 1993 to 1996 Vice
President of Sales for LatinRep Associates/LatinChannels, Inc., a manufacturer's
representative organization, where he assisted in the development of the
company's organizational infrastructure, designed business processes and
operating procedures, planned and executed strategies, recruited and managed
professional staff, and created and implemented marketing and business
development campaigns.

         SHAWN TARTAGLIA. Mr. Tartaglia has been a member of our Board of
Directors since July 1998 and served as our Vice President, Chief Technical
Officer and Director from July 1998 until December 2006. Since 2007 he has
provided consulting services to our Biometrics segment on a part-time basis
which are substantially similar to those he provided as Chief Technical Officer.
From November 1997 to July 1998, Mr. Tartaglia was Manager of Information
Systems for CompScript, Inc., a privately held pharmaceutical provider. From
February 1993 to November 1997, Solopak Pharmaceuticals, a privately held
pharmaceutical supplier, employed him as its Systems and Telecommunications
Manager.

         JULIE SLATER. Ms. Slater as served as a member of our Board of
Directors since January 1999. From 1984 and continuing until the present, Ms.
Slater has been Vice President of All Eyes Optical, a privately held optometry
and retail eyewear provider. She is Mr. Perler's sister-in-law.

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

KEY EMPLOYEES

         Both AoHong and Big Tree are located in China. The day to day
operations of AoHong and Big Tree are the responsibility of officers at those
subsidiaries. Following is biographical information on those persons whom we
consider key employees of our company:


NAME                AGE      TITLE
----                ---      -----
Aihua Hu             46      Chief Executive Officer, AoHong
Huayan Zhi           52      Chief Financial Officer, AoHong
Wei Lin              37      Chief Executive Officer, Jieyang Big Tree
Guihong Zheng        34      Vice President, Big Tree

         AIHUA HU. Mr. Hu has served as CEO of AoHong since co-founding the
company in February 2000. From May 1993 to April 2000, Mr. Hu served as Vice
General Manager of Shanghai Lixin Gas Co., Ltd., an industrial gas and
refrigerant manufacturer located in Shanghai. As Vice General Manager Mr. Hu was
responsible for sales and business development. From September 1982 to May 1993,
Mr. Hu worked for Shanghai Chemical Light Industry Co., Ltd. responsible for
sales and marketing.

         HUAYAN ZHI. Mrs. Zhi has served as CFO of AoHong since October, 2002.
Mrs. Zhi served as an accountant for Singapore Liquan Information (Shanghai)
Co., Ltd. from April 2001 to September 2002. From October 1993 to March 2001,
Mrs. Zhi was an accountant and then director of the accounting department at
Shanghai Lixin Gas Co. Ltd. one of the largest industrial gas and refrigerant
manufacturers in Shanghai. Mrs. Zhi was responsible for budget forecasting,
financial analysis and other accounts payable and accounts receivable related
issues. From November 1973 to September 1993, Ms. Zhi was an accountant for
Shanghai Hongkong Hardware Electric Co., Ltd.

                                       37
<PAGE>

         WEI LIN. Mr. Lin has served as CEO of Jieyang Big Tree since its
formation in January 2007. He oversees the day to day operations and serves as
Big Tree's agent in the Representative Office in Shantou. Mr. Lin, along with
his wife Ms. Guihong Zheng, co- founded Shantou Dashu Toy Corporation, Ltd, a
toy export and import company, and he served as General Manager from November
2003 to January 2007. From June 2001 to August 2003, Mr. Lin served as Director
and Vice General Manager of Guangdong Bao Qianli Electronic Corp, Ltd. an OEM
manufacturer for TOYANI Security & Protection products including video
monitoring series, guard against theft, and alarm series and from May 2000 to
August 2003, Mr. Lin was General Manager for Shanghai Xikang Electronic
Technology Co. Ltd, a company that develops and distributes for mobile phone
network software. From November 1996 to March 2000, Mr. Lin served as General
Manager of Guangdong Guangtong Call Center Yuedong Branch and from September
1994 to October 1996, Mr. Lin was Manager Assistant of Shantou Telecom, a SOE
telecommunication company. Mr. Lin holds MBA degree from China Central South
University.

         GUIHONG ZHENG. Ms. Zheng has served as Vice President of Big Tree since
its formation in November 2006. In her role as Vice President, Ms. Zheng is
responsible for sales, customer service and logistics. Ms. Zheng, along with her
husband Mr. Wei Lin, co- founded Shantou Dashu Toy Corporation, Ltd, a toy
export and import company in November 2003. From November 2006 until August 2007
she was Executive Vice President of CDI Shanghai Management Company, Limited.
CDI Shanghai Management Company, Limited was the majority shareholder of Big
Tree prior to our acquisition of a controlling interest in August 2007. From
2004 to 2006, Ms. Zheng served as General Manager of Big Tree Hong Kong
International Trading Co. Ltd. responsible for exports. From 2002 to 2004, Ms.
Zheng was the regional manager of Guangzhou Tian En Jin Telecommunication
Equipment Company responsible for sales, market research and customer service in
the Guangdong Area. From 1998 to 2002, Ms. Zheng served as Director of Customer
Service of Shantou Xin Zhong Di Advertising Company, Ltd. In this role Ms. Zheng
was responsible for all customer related issues, including customer development,
customized service plan and maintain good relations with customers. From 1996 to
1998, Ms. Zheng was Director of Customer Service of Shantou Wei Tai Wei Brand
Vision Design Co. Ltd responsible for all customer related issues, including
maintain and development good customer relations. Ms. Zheng graduated from
Shangtou Broadcast University, major in Sales and Marketing in 1995.

         Mr. Hu and Ms. Zhi are the minority members of AoHong and Ms. Zheng is
the minority shareholder of Big Tree. Mr. Lin and Ms. Zheng are husband and
wife.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         We are not currently subject to Section 16(a) of the Securities
Exchange Act of 1934, and, therefore, our directors and executive officers, and
persons who own more than 10% of our common stock are not required to file with
the Securities and Exchange Commission reports disclosing their initial
ownership and changes in their ownership of our common stock.

CODE OF BUSINESS CONDUCT AND ETHICS

         We have adopted a Code of Business Conduct and Ethics to provide
guiding principles to all of our employees. Our Code of Business Conduct and
Ethics does not cover every issue that may arise, but it sets out basic
principles to guide our employees and provides that all of our employees must
conduct themselves accordingly and seek to avoid even the appearance of improper
behavior. Any employee which violates our Code of Business Conduct and Ethics
will be subject to disciplinary action, up to an including termination of his or
her employment.

         A copy of our Code of Business Conduct and Ethics has been filed with
the Securities and Exchange Commission as an exhibit to this report. 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, 10871 NW 52 Street, Sunrise,
Florida 33351, Attention: Corporate Secretary.

                                       38
<PAGE>

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, any
committee performing a similar function. The functions of those committees are
being undertaken by the entire board as a whole. Notwithstanding that a majority
of our Board of Directors are independent, 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 shareholders, 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 shareholders, 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 our relative size and lack of directors
and officers insurance coverage, we do not anticipate that any of our
shareholders will make such a recommendation in the near future. While there
have been no nominations of additional directors proposed, in the event such a
proposal is made, all members of our Board will participate in the consideration
of director nominees.

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

   o understands generally accepted accounting principles and financial
     statements,

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

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

   o understands internal controls over financial reporting, and

   o understands audit committee functions.

         Since our formation we have relied upon the personal relationships of
our CEO to attract individuals to our Board of Directors. While we would prefer
that one or more of our directors be an audit committee financial expert, the
individuals whom we have been able to attract to our Board do not have the
requisite professional backgrounds. As with most small companies until such time
our company further develops its business, achieves a stronger revenue base and
has sufficient working capital to purchase directors and officers insurance, we
do not have any immediate prospects to attract additional independent directors.
When we are able to expand our Board of Directors to include one or more
additional independent directors, we intend to establish an Audit Committee of
our Board of Directors. 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 are we required to
establish or maintain an Audit Committee or other committee of our Board of
Directors.

                                       39
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

         The following table summarizes all compensation recorded by us in 2007
for:

   o our principal executive officer or other individual serving in a similar
     capacity,

   o our two most highly compensated executive officers other than our principal
     executive officer who made in excess of $100,000 in 2007 and who were
     serving as executive officers at December 31, 2007 as that term is defined
     under Rule 3b-7 of the Securities Exchange Act of 1934, and

   o up to two additional individuals for whom disclosure would have been
     required but for the fact that the individual was not serving as an
     executive officer at December 31, 2007.

         For definitional purposes in this annual report these individuals are
sometimes referred to as the "named executive officers". The value attributable
to any option awards is computed in accordance with FAS 123R.
<TABLE>
<CAPTION>
                                                SUMMARY COMPENSATION TABLE
                                                --------------------------
                                                                  NON-EQUITY
                                                                  INCENTIVE       NONQUALIFIED    ALL
NAME AND                                      STOCK     OPTION    PLAN            DEFERRED        OTHER
PRINCIPAL                  SALARY    BONUS    AWARDS    AWARDS    COMPENSATION    COMPENSATION    COMPENSATION    TOTAL
POSITION            YEAR   ($)       ($)      ($)       ($)       ($)             EARNINGS ($)    ($)             ($)
(A)                 (B)    (C)       (D)      (E)       (F)       (G)             (H)             (I)             (J)
-----------------   ----   --------  -------  ------    --------  ------------    ------------    ------------    -------
<S>                 <C>    <C>       <C>      <C>       <C>       <C>             <C>             <C>             <C>
Dore Scott Perler   2007    162,000   77,500       0     354,304             0               0          39,400    633,204
(1)
                    2006    165,063        0       0      50,000             0               0          28,000    243,063
</TABLE>
(1) Mr. Perler has served as our Chief Executive Officer and President since
July 1998. The bonus for 2007 represents the fair market value of 500,000 shares
of our common stock issued to Mr. Perler upon the closing of the AoHong
acquisition and the fair market value of 500,000 shares of our common stock
issued to Mr. Perler upon the closing of the Big Tree acquisition. Option awards
for 2007 represents the value of options to purchase 6,650,000 shares of our
common stock with exercise prices ranging from $0.07 to $0.08 granted to Mr.
Perler in 2007. Other compensation for 2007 included $6,500 for a car allowance,
health insurance premiums of $14,900 and $18,000 related to the forgiveness of
debt. Option awards for 2006 represents the value of options to purchase 250,000
shares of our common stock with an exercise price of $0.20 granted to Mr. Perler
in 2006. Other compensation for 2006 included $6,000 for a car allowance, health
insurance premiums of 12,000.and $10,000 related to the forgiveness of debt.

EMPLOYMENT AGREEMENT AND NARRATIVE REGARDING EXECUTIVE COMPENSATION

         On April 1, 2005, we entered into a three-year employment contract with
Mr. Perler expiring on April 1, 2008 to serve as our Chief Executive Officer.
The amount of compensation to be paid to Mr. Perler and the terms of the
employment agreement were determined by the Board of Directors of which he was
one of the three members at the time the agreement was finalized and executed.
Accordingly, he had a significant influence in the terms thereof.

         The terms of this agreement provided for an annual base salary of
$156,000 and a car allowance of $500 per month. The additional terms of the
agreement were substantially similar to those of the current employment
agreement with Mr. Tartaglia as described below. On May 1, 2007, we entered into
a new three-year employment contract with Mr. Perler to serve as our Chief
Executive Officer which expires on May 1, 2010.

                                       40
<PAGE>

         In accordance with the terms of the employment agreement, in
consideration for his services, we will pay Mr. Perler a base salary of $156,000
per annum. On each successive anniversary date of the agreement, the Board of
Directors will review the base compensation and at its sole discretion may elect
to increase the base salary. In addition, Mr. Perler is entitled to a car
allowance of up to $500 per month. In addition to the base salary, Mr. Perler is
entitled to receive, as incentive compensation in respect of each calendar year
(or portion thereof), an amount determined in accordance with any bonus or short
term incentive compensation program, which may be based upon achieving certain
specified performance criteria, which may be established by our Board of
Directors, of which he is a member.

         Under the terms of the employment agreement Mr. Perler is entitled to
paid vacation days and such other paid holidays in accordance with our policy,
and up to six months salary continuation in the event of short-term disability.
We will dues to professional associations and societies and to such service
organizations and clubs of which Mr. Perler is a member, which has been approved
by the Board of Directors as being in the best interests of our company. He is
also entitled to receive all other fringe benefits to which all other employees
of our company are entitled.

         In the event of involuntary termination without "cause" or disability,
Mr. Perler will be entitled to compensation for the succeeding 24 months
following the date of termination in an amount equal to 200% of his base
compensation in effect on the date of the employment termination plus 200% of
his annual incentive bonus earned on a quarterly basis as of the date of the
termination, assuming he was employed on the last day of the quarter in which
termination of employment occurred. In the event Mr. Perler is terminated for
"cause" as defined in the employment agreement he will be entitled to any unpaid
salary through the date of termination and deferred compensation will be
forfeited. In the event there is a "change in control" of our company as defined
in the agreement, we will be required to pay Mr. Perler a lump sum equal to 299%
of his base compensation in effect on the date plus 299% of his prior year's
incentive bonus. Mr. Perler may, at his discretion, elect to terminate the
contract with 90 days prior written notice and in such event he would not be
entitled to severance benefits.

                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

         The following table provides information concerning unexercised
options, stock that has not vested and equity incentive plan awards for each
named executive officer outstanding as of December 31, 2007:

                                       41
<PAGE>
<TABLE>
<CAPTION>
                                 OPTION AWARDS                                              STOCK AWARDS
         -----------------------------------------------------------------   ------------------------------------------
                                                                                                             Equity
                                                                                                             incentive
                                                                                        Market    Equity      plan
                                                                                        value    incentive   awards:
                                          Equity                                          of       plan      Market or
                                        incentive                                       shares    awards:     payout
                                           plan                               Number      or     Number of   value of
                                         awards:                                of      units    unearned    unearned
          Number of      Number of      Number of                             shares      of      shares,     shares,
          securities     securities     securities                           or units   stock    units or    units or
          underlying     underlying     underlying                           of stock    that      other       other
         unexercised    unexercised    unexercised    Option                   that      have     rights      rights
           options        options        unearned    exercise     Option     have not     not    that have   that have
             (#)            (#)          options       price    expiration   vested     vested      not         not
Name     exercisable   unexercisable       (#)          ($)        date         (#)       ($)    vested(#)   vested(#)
(a)          (b)            (c)            (d)          (e)        (f)          (g)       (h)       (i)         (j)
------   -----------   -------------   -----------   --------   ----------   --------   ------   ---------   ----------
<S>      <C>           <C>             <C>           <C>        <C>          <C>        <C>      <C>         <C>
Dore         250,000               0             0       0.19     12/30/09          0        0           0            0
Scott        400,000               0             0       0.07     12/13/12          0        0           0            0
Perler       250,000               0             0       0.08     01/31/12          0        0           0            0
           1,000,000               0             0       0.08     06/27/12          0        0           0            0
             150,000               0             0       0.20     05/13/10          0        0           0            0
             250,000               0             0       0.20     09/01/11          0        0           0            0
           5,000,000               0             0       0.07     09/23/12          0        0           0            0
</TABLE>

INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

         We currently have three incentive plans, our 1999 Stock Option Plan,
our 2001 Equity Compensation Plan and our 2005 Equity Compensation Plan.
Following are descriptions of these plans:

1999 Stock Option Plan

         On July 19, 1999, the Board of Directors and shareholders adopted our
1999 Stock Option Plan. We reserved 1,500,000 shares of common stock for
issuance upon exercise of options granted from time to time under the 1999 Stock
Option Plan. The 1999 Stock Option Plan is intended to assist us in securing and
retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options. Under the stock option plan we may grant incentive stock
options only to key employees and employee directors, or we may grant
non-qualified options to our employees, officers, directors and consultants. Our
Board of Directors currently administers the 1999 Stock Option Plan.

         Subject to the provisions of the stock option plan, the Board will
determine who will receive options, the number of shares of common stock that
may be purchased under the options, the time and manner of exercise of options
and exercise prices. The term of options granted under the stock option plan may
not exceed 10 years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 10% holder of our voting stock are
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the Board, in its discretion, but in no event can the
exercise price be less than 75% of the fair market value of the shares of common
stock on the date of grant. The exercise price may be payable in cash or, with
the approval of the Board, by delivery of shares or by a combination of cash and
shares. Shares of common stock received upon exercise of options will be subject
to restrictions on sale or transfer. As of December 31, 2007 we have outstanding

                                       42
<PAGE>

options to purchase 900,000 shares and have awarded 350,000 shares under the
1999 Stock Option Plan and there are 250,000 shares remaining available for
grant under the 1999 Stock Option Plan.

2001 Equity Compensation Plan

         On November 28, 2001, the Board of Directors adopted our 2001 Equity
Compensation Plan, and on November 28, the 2001 Equity Compensation Plan was
ratified by holders of a majority of our outstanding common stock. We have
reserved 2,000,000 shares of common stock for issuance as stock grants and upon
exercise of options granted from time to time under the 2001 Equity Compensation
Plan. The 2001 Equity Compensation Plan is intended to assist us in securing and
retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options, as well as direct stock grants.

         Under the 2001 Equity Compensation Plan, we may grant incentive stock
options only to key employees and employee directors. We may grant non-qualified
options and issue direct stock awards to our employees, officers, directors and
consultants. Our Board of Directors currently administers the 2001 Equity
Compensation Plan.

         Subject to the provisions of the 2001 Equity Compensation Plan, the
Board will determine who shall receive options or grants, the number of shares
of common stock that may be purchased under the options, the time and manner of
exercise of options and exercise prices. The term of options granted under the
stock option plan may not exceed 10 years or five years for an incentive stock
option granted to an optionee owning more than 10% of our voting stock. The
exercise price for incentive stock options will be equal to or greater than 100%
of the fair market value of the shares of the common stock at the time granted.
However, the incentive stock options granted to a 10% holder of our voting stock
are exercisable at a price equal to or greater than 110% of the fair market
value of the common stock on the date of the grant. The exercise price for
non-qualified options will be set by the Board, in its discretion, but in no
event shall the exercise price be less than the par value for our common stock.
The exercise price may be payable in cash or, with the approval of the Board, by
delivery of shares or by a combination of cash and shares. The Board may also
direct the issuance of shares of our common stock as awards under the 2001
Compensation Plan. Absent registration under the Securities Act or the
availability of an applicable exemption there from, shares of common stock
received as stock grants and upon exercise of options will be subject to
restrictions on sale or transfer. As of December 31, 2007, we have outstanding
options to purchase or awarded shares in the amount of 1,696,160 under the 2001
Equity Compensation Plan and there were 303,840 shares remaining for grant under
the plan.

2005 Equity Compensation Plan

         On June 16, 2005, the Board of Directors adopted our 2005 Equity
Compensation Plan, and on June 16, 2005, the 2005 Equity Compensation Plan was
ratified by holders of a majority of our outstanding common stock. We have
reserved 5,000,000 shares of common stock for issuance as stock grants and upon
exercise of options granted from time to time under the 2005 Equity Compensation
Plan. The 2005 Equity Compensation Plan is intended to assist us in securing and
retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options, as well as direct stock grants. Under the 2005 Equity
Compensation Plan we may grant incentive stock options only to key employees and
employee directors. We may grant non-qualified options and issue direct stock
awards to our employees, officers, directors and consultants. Our Board of
Directors currently administers the 2005 Equity Compensation Plan.

         Subject to the provisions of the 2005 Equity Compensation Plan, the
Board will determine who shall receive options or grants, the number of shares
of common stock that may be purchased under the options, the time and manner of
exercise of options and exercise prices. The term of options granted under the

                                       43
<PAGE>

stock option plan may not exceed 10 years or five years for an incentive stock
option granted to an optionee owning more than 10% of our voting stock. The
exercise price for incentive stock options will be equal to or greater than 100%
of the fair market value of the shares of the common stock at the time granted.
However, the incentive stock options granted to a 10% holder of our voting stock
are exercisable at a price equal to or greater than 110% of the fair market
value of the common stock on the date of the grant. The exercise price for
non-qualified options will be set by the Board, in its discretion, but in no
event can the exercise price be less than the par value for our common stock.
The exercise price may be payable in cash or, with the approval of the Board, by
delivery of shares or by a combination of cash and shares. The Board may also
direct the issuance of shares of our common stock as awards under the 2005
Equity Compensation Plan. Absent registration under the Securities Act or the
availability of an applicable exemption there from, shares of common stock
received as stock grants and upon exercise of options will be subject to
restrictions on sale or transfer. At December 31, 2007 we have outstanding
options to purchase or awarded shares in the amount of 4,277,000 under the 2005
Equity Compensation Plan and there remain 723,000 shares available under the
plan.

DIRECTOR COMPENSATION

         Our Board of Directors is comprised of Messrs. Perler and Tartaglia and
Ms. Slater. Mr. Perler, who is also an executive officer of our company, does
not receive any compensation for his Board services. The following table
provides information concerning the compensation of Mr. Tartaglia and Ms. Slater
for their services as members of our Board of Directors for 2007.
<TABLE>
<CAPTION>
                                              DIRECTOR COMPENSATION
                                              ---------------------
                                                           Non-equity
                                                            incentive    Nonqualified
                  Fees earned                                 plan         deferred       All other
                   or paid in      Stock       Option     compensation   compensation   compensation
     Name           cash ($)    awards ($)   awards ($)        ($)       earnings ($)        ($)       Total ($)
      (a)             (b)           (c)         (d)            (e)            (f)            (g)          (h)
---------------   -----------   ----------   ----------   ------------   ------------   ------------   ---------
<S>               <C>           <C>          <C>          <C>            <C>            <C>            <C>
Shawn Tartaglia             0            0            0              0              0              0           0
Julie Slater                0            0            0              0              0              0           0
</TABLE>

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

         At March 26, 2008 we had 135,810,792 shares of common stock issued and
outstanding. The following table sets forth information known to us as of March
26, 2008 relating to the beneficial ownership of shares of our common stock by:

   o each person who is known by us to be the beneficial owner of more than 5%
     of our outstanding common stock;

   o each director;

   o each named executive officer; and

   o all named executive officers and directors as a group.

         Unless otherwise indicated, the business address of each person listed
is in care of 10871 NW 52 Street, Sunrise, Florida 33351. 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

                                       44
<PAGE>

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.

                                           AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP      % OF CLASS
-------------------------------------      --------------------      ----------
Dore Scott Perler (1) ...............           3,479,723                2.5%
Shawn Tartaglia (2) .................             993,585                   *
Julie Slater (3) ....................              53,703                   *
All officers and directors as a group
(three persons) 1, 2, (3) ...........           4,527,011                3.1%
Aihua Hu (4) ........................          10,000,000                7.4%
China Direct Investments, Inc. (5) ..          14,500,000               10.0%

* represents less than 1%

(1) Mr. Perler's holdings includes 1,479,723 shares of common stock which are
presently outstanding and an aggregate of 2,000,000 shares of our common stock
issuable upon the exercise of outstanding options with exercise prices ranging
from $0.08 to $0.20 per share.

(2) Mr. Tartaglia's holdings includes 193,585 shares of common stock which are
presently outstanding and an aggregate of 800,000 shares of our common stock
issuable upon the exercise of outstanding options with exercise prices ranging
from $0.08 to $0.20 per share.

(3) Ms. Slater's holdings includes 43,703 shares of common stock which are
presently outstanding and 10,000 shares of common stock issuable upon the
exercise of outstanding options with an exercise price of $0.19 per share.

(4) Mr. Hu is the CEO and minority member of AoHong.

(5) The number of securities beneficially owned by China Direct, Inc. includes:

    o 7,110,000 shares of our common stock presently outstanding owned of record
      by China Direct Investments, Inc., a subsidiary of China Direct, Inc.;

    o 4,000,000 shares of presently outstanding common stock which are held of
      record by CDI Shanghai Management Co., Ltd., a subsidiary of China Direct,
      Inc.; and

    o 2,500,000 shares of presently outstanding common stock which are held of
      record by Capital One Resource Co., Ltd., a subsidiary of China Direct,
      Inc.

         The securities beneficially owned by China Direct, Inc. in this table
excludes:

    o 737,340 shares of our common stock issuable upon the exercise of an
      outstanding common stock purchase warrant with an exercise price of $0.12
      per share; and

    o 3,000,000 shares of common stock issuable upon the exercise of an
      outstanding common stock purchase warrant with an exercise price of $0.12
      per share owned of record by China Direct Investments, Inc., a subsidiary
      of China Direct, Inc.

         The ability of either China Direct, Inc. or China Direct Investments,
Inc. to exercise the warrants held by each of those entities is limited in that
the holder is not entitled to exercise the warrant if the effect of such
exercise would be that the number of shares of common stock beneficially owned
by the holder after giving effect to such exercise would be result in beneficial
ownership by the holder and its affiliates of more than 4.99% of our then
outstanding shares of common stock on such date, except during the 45 day period
immediately prior to the expiration date of the warrant.

                                       45
<PAGE>

         Dr. James Wang and Messrs. Marc Siegel and David Stein have voting and
dispositive control over securities held by China Direct, Inc. The number of
securities held by China Direct, Inc. in this table exclude securities owned by
Messrs. Siegel and Stein individually.

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

         Between 2000 and 2002 prior to the adoption of the Sarbanes-Oxley Act
of 2002, we loaned Mr. Perler, our CEO, $42,000. This loan bore interest at 4%
per annum and was payable on December 31, 2006. During the year ended December
31, 2006 approximately $10,000 of this loan was forgiven and recorded as
additional compensation to Mr. Perler. During 2007 an additional $18,000 of this
loan was forgiven and recorded as additional compensation to him. The remainder
was applied against advances due to Mr. Perler for operating expenses he paid on
behalf of the Company. At December 31, 2007, amounts outstanding under this
obligation were $0.

         Prior to our acquisition of a controlling interest in Big Tree, in
January 2007 Jieyang Big Tree advanced $438,422 to Shantou Dashu Toy Enterprise
Co., Ltd., a company co-founded by Ms. Guihong Zheng and Mr. Wei Lin, officers
of Big Tree and Jieyang Big Tree. In addition, Ms. Zheng, the minority
shareholder in Big Tree, is the owner of Shantou Dashu Toy Enterprise Co., Ltd.
Ms. Zheng initially provided the funds to Big Tree as a capital contribution,
which were in turn used to provide the initial registered capital for Jieyang
Big Tree. Subsequent to the formation of Jieyang Big Tree, these funds were used
to make the loan to Shantou Dashu Toy Enterprise Co., Ltd. At December 31, 2007,
Big Tree held a due from this related party in the amount of $465,982 which
represents substantially all of the assets of Big Tree. This advance does not
bear interest and is due on demand.

         From time to time AoHong borrows funds from its Chairman and members of
his family for working capital purposes. At December 31, 2008 these amounts
totaled $308,346. These loans, which were primarily made during the three months
ended June 30, 2007 prior to our acquisition of AoHong, do not bear any interest
and are due on demand.

DIRECTOR INDEPENDENCE

         Mr. Tartaglia and Ms. Slater are "independent" directors within the
meaning of Marketplace Rule 4200 of the National Association of Securities
Dealers, Inc.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         Sherb & Co., LLP served as our independent registered public accounting
firm for 2007 and 2006. The following table shows the fees that were billed for
the audit and other services provided by such firm for 2007 and 2006.

                                      2007              2006
                                      ----              ----

Audit Fees ...............          $ 89,500          $ 39,500
Audit-Related Fees .......                 0                 0
Tax Fees .................                 0                 0
All Other Fees ...........            65,000                 0
                                    --------          --------
                 Total ...          $154,500          $ 39,500

         Audit Fees -- This category includes the audit of our annual financial
statements, review of financial statements included in our Form 10-QSB 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.

                                       46
<PAGE>

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

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

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

         Our Board of Directors has adopted a procedure for pre-approval of all
fees charged by the our independent auditors. Under the procedure, the Board
approves the engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Board, or, in the period between
meetings, by a designated member of Board. Any such approval by the designated
member is disclosed to the entire Board at the next meeting. The audit and tax
fees paid to the auditors with respect to 2007 were pre-approved by the entire
Board of Directors.

                                     PART IV

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:

  NO.                              DESCRIPTION
------                             -----------
2.1      Agreement and Plan of Merger between Century Silver Mines, Inc. and
         Sense Holdings, Inc. (1)
3.1(a)   Articles of Incorporation of Sense Holdings, Inc. (1)
3.1(b)   Articles of Merger of Century Silver Mines, Inc. into Sense Holdings,
         Inc. (FL) (1)
3.1(c)   Articles of Merger of Century Silver Mines, Inc. into Sense Holdings,
         Inc. (ID) (1)
3.1(d)   Articles of Amendment to the Articles of Incorporation filed
         February 23, 2007 (11)
3.1(e)   Articles of Amendment to the Articles of Incorporation filed
         May 30, 2000 (5)
3.1(f)   Articles of Amendment to the Articles of Incorporation filed
         February 7, 2002 (5)
3.1(g)   Articles of Amendment to the Articles of Incorporation filed
         July 13, 2007 *
3.2      Bylaws (1)
4.1      Trilogy Capital Partners, Inc. Warrant Agreement dated August 29, 2005
         (6)
4.2      Form of $0.10 common stock purchase warrant (16)
4.3      Form of $0.12 common stock purchase warrant (10)
10.1     1999 Stock Option Plan (1)
10.2     Technology License Agreement, as amended, with SAC Technologies, Inc.
         (1)
10.3     Lease principal executive offices (11)
10.4     Manufacturing and Non-Compete Agreement with Test Systems Engineering
         (1)
10.5     Sales Agreement with Integrated Design, Inc.(1)
10.6     Agreement and Plan of Acquisition dated May 31, 2001 with Micro Sensor
         Technologies, Inc. (2)
10.7     Patent License Agreement dated March 26, 2001, between Micro Sensor
         Technologies, Inc. and UT-Battelle, LLC (2)
10.8     Work for Others Agreement dated June 4, 2001, between UT-Battelle, LLC
         and Micro Sensor Technologies, Inc. (2)
10.9     Form of Promissory Note(4)
10.10    2001 Equity Compensation Plan (3)

                                       47
<PAGE>

10.11    Employment Agreement between the company and Dore Scott Perler as of
         May 1, 2007 (16)
10.12    Employment Agreement between the company and Shawn Tartaglia as of
         April 1, 2005 (8)
10.13    Form of Subscription Agreement (10)
10.14    Cooperative Research and Development Agreement (CRADA) between
         UT-Battelle, LLC and Sense Holdings Incorporated (6)
10.15    2005 Equity Compensation Plan (7)
10.16    Consulting and Management Agreement with China Direct Investments, Inc.
         (9)
10.17    Exclusive Patent License Agreement dated August 1, 2005, by and between
         UT-Battelle, LLC and Sense Holdings, Inc. (11)
10.18    Membership Interest Purchase Agreement by and among Sense Holdings,
         Inc. and its wholly owned subsidiary China Chemical Group, Inc. and
         Shanghai AoHong Industry Co., Ltd. (12)
10.19    Consulting and Management Agreement dated June 27, 2007 by and between
         Sense Holdings, Inc. and CDI Shanghai Management Co., Ltd. (12)
10.20    Amendment No. 1 to the 2005 Equity Compensation Plan (13)
10.21    Stock Purchase Agreement dated August 24, 2007 by and between CDI
         China, Inc., China Direct, Inc. and Sense Holdings, Inc. (14)
10.22    Form of subscription agreement (14)
10.23    Amendment to Stock Purchase Agreement by and between CDI China, Inc.,
         China Direct, Inc. and Sense Holdings, Inc. (15)
10.24    Amendment to Membership Interest Purchase Agreement (16)
10.25    Cooperation Agreement between Guangdong Test Center of Product Quality
         Supervision and Big Tree Toys, Inc. *
14.1     Code of Business Conduct and Ethics (8)
21.1     Subsidiaries of the Registrant (16)
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 and principal
         financial and accounting officer *

*        filed herewith

(1)      Incorporated by reference to the registration statement on Form SB-2,
         SEC File No. 333-87293.
(2)      Incorporated by reference to the registration statement on Form SB-2,
         SEC File No.333-62874.
(3)      Incorporated by reference to the registration statement on Form S-8,
         SEC File No.333-81306.
(4)      Incorporated by reference to the Quarterly Report on Form 10-QSB for
         the period ended June 30, 2003.
(5)      Incorporated by reference to the registration statement on Form SB-2,
         SEC File No. 333-86206.
(6)      Incorporated by reference to the Quarterly Report on Form 10-QSB/A for
         the period ended September 30,
         2005.
(7)      Incorporated by reference to the registration statement on Form S-8,
         SEC File No. 333-125905.
(8)      Incorporated by reference to the Annual Report on Form 10-KSB for the
         fiscal year ended December 31,
         2004.
(9)      Incorporated by reference to the Current Report on Form 8-K as filed on
         November 28, 2006.
(10)     Incorporated by reference the Current Report on Form 8-K as filed on
         August 31, 2007.
(11)     Incorporated by reference to the Annual Report on Form 10-KSB for the
         fiscal year ended December 31, 2006.
(12)     Incorporated by reference to the Current Report on Form 8-K as filed on
         July 3, 2007.
(13)     Incorporated by reference to the registration statement on Form S-8,
         SEC File No. 333-144412.
(14)     Incorporated by reference to the Current Report on Form 8-K as filed on
         August 28, 2007.
(15)     Incorporated by reference to the Current Report on Form 8-K as filed on
         August 31, 2007.
(16)     Incorporated by reference to the Registration Statement on Form SB-2,
         SEC File No. 333-146830.

                                       48
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                             CHINA AMERICA HOLDINGS, INC.

                             By: /s/ Dore Scott Perler
                                ----------------------
                                Dore Scott Perler, Chief Executive Officer,
                                President, director, principal executive officer
                                and principal accounting and financial office

                             Date: April 14, 2008


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Dore Scott Perler      Chief Executive Officer,               April 14, 2008
---------------------      President, Chairman of the Board
Dore Scott Perler


/s/ Shawn Tartaglia        Vice President,                        April 14, 2008
-------------------        Chief Technical Officer
Shawn Tartaglia            and Director


/s/ Julie Slater           Director                               April 14, 2008
----------------
Julie Slater

                                       49
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

                                    CONTENTS

Report of Independent Registered Public Accounting Firm......................F-2

 Consolidated Financial Statements:

     Consolidated Balance Sheets.............................................F-3

     Consolidated Statements of Operations...................................F-4

     Consolidated Statement of Shareholders' Equity..........................F-5

     Consolidated Statements of Cash Flows...................................F-6

Notes to Consolidated Financial Statements...........................F-7 to F-37

                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
China America Holdings, Inc. and Subsidiaries
Coral Springs, Florida

         We have audited the accompanying consolidated balance sheets of China
America Holdings, Inc. and Subsidiaries as of December 31, 2007 and 2006 and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for the years ended December 31, 2007 and 2006. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

            In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of China
America Holdings, Inc. and Subsidiaries as of December 31, 2007 and 2006, and
the results of their operations and their cash flows for the years ended
December 31, 2007 and 2006, in conformity with accounting principles generally
accepted in the United States of America.

                                                 /s/ Sherb & Co., LLP
                                                 --------------------
                                                 Certified Public Accountants

Boca Raton, Florida
March 31, 2008

                                      F-2
<PAGE>
<TABLE>
                         CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SENSE HOLDINGS, INC.)
                                  CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                            December 31,
                                                                    ---------------------------
                                                                        2007           2006
                                                                    ------------   ------------
<S>                                                                 <C>            <C>
                                             ASSETS
                                             ------
CURRENT ASSETS:

   Cash ..........................................................  $  2,012,480   $    152,579
   Accounts receivable, net of allowance for doubtful
      accounts of $187,210 and $0, respectively ..................     4,220,692         11,918
   Notes receivable ..............................................       333,168              -
   Inventories, net ..............................................     1,100,023          7,436
   Prepaid expense and other current assets ......................       440,819          1,021
                                                                    ------------   ------------

      Total current assets .......................................     8,107,182        172,954
                                                                    ------------   ------------
LONG-TERM ASSETS:
   Restricted cash ...............................................       437,511              -
   Property and equipment, net ...................................     1,928,137          6,263
   Land use rights, net ..........................................        76,804              -
   Due from related party ........................................       465,982         41,121
   Other assets ..................................................       258,676          2,042
                                                                    ------------   ------------

      Total other assets .........................................     3,167,110         49,426
                                                                    ------------   ------------

      Total assets ...............................................  $ 11,274,292   $    222,380
                                                                    ============   ============

                              LIABILITIES AND SHAREHOLDERS' EQUITY
                              ------------------------------------
CURRENT LIABILITIES:
   Notes payable .................................................  $  1,665,667   $     25,000
   Accounts payable and accrued expenses .........................       701,172         89,439
   Advances from customers .......................................        96,624              -
   Taxes payables ................................................       265,282              -
   Due to related parties ........................................       308,346              -
   Deferred revenue ..............................................        15,489         13,118
                                                                    ------------   ------------

      Total current liabilities ..................................     3,052,580        127,557
                                                                    ------------   ------------

MINORITY INTEREST ................................................     4,378,042              -
                                                                    ------------   ------------
SHAREHOLDERS' EQUITY:
   Common stock, $.001 par value, 500,000,000 shares authorized;
      135,700,792 and 55,814,057 shares issued and outstanding
      at December 31, 2007 and 2006, respectively ................       135,701         55,814
   Additional paid-in capital ....................................    19,541,062     14,851,714
   Statutory reserves ............................................       628,017              -
   Accumulated deficit ...........................................   (16,559,325)   (14,812,705)
   Other comprehensive income - foreign currency .................        98,215              -
                                                                    ------------   ------------

      Total shareholders' equity .................................     3,843,670         94,823
                                                                    ------------   ------------

      Total liabilities and shareholders' equity .................  $ 11,274,292   $    222,380
                                                                    ============   ============

                        See notes to consolidated financial statements.
                                              F-3
</TABLE>
<PAGE>

                  CHINA AMERICA HOLDNGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         For the Year Ended
                                                            December 31,
                                                    ----------------------------
                                                        2007            2006
                                                    ------------   -------------
Net revenues .....................................  $ 16,290,353   $     81,517

Cost of sales ....................................    13,998,635         48,977
                                                    ------------   ------------

Gross profit .....................................     2,291,718         32,540
                                                    ------------   ------------
Operating expenses:
   Selling expenses ..............................       899,515              -
   Consulting and investor relation expense ......       740,785      1,561,577
   Compensation and related taxes ................       678,879        596,596
   Research and development ......................             -        578,979
   General and administrative ....................       663,182        478,727
   Loss on impairment ............................             -        230,000
                                                    ------------   ------------

      Total operating expenses ...................     2,982,361      3,445,879
                                                    ------------   ------------

Loss from operations .............................      (690,643)    (3,413,339)
                                                    ------------   ------------

Other income (expenses):
   Interest income ...............................        28,546         19,493
   Interest expense ..............................       (36,276)      (128,885)
   Debt issuance costs ...........................             -        (89,692)
   Registration rights penalties .................             -       (140,432)
                                                    ------------   ------------

      Total other income (expenses) ..............        (7,730)      (339,516)
                                                    ------------   ------------

Loss before minority interest ....................      (698,373)    (3,752,855)

Minority interest in income of subsidiaries ......      (420,230)             -
                                                    ------------   ------------

Net loss .........................................  $ (1,118,603)  $ (3,752,855)
                                                    ============   ============

Comprehensive loss:
      Net loss ...................................  $ (1,118,603)  $ (3,752,855)

      Other comprehensive income:
         Unrealized foreign currency
         translation gain ........................        98,215              -
                                                    ------------   ------------

      Comprehensive loss .........................  $ (1,020,388)  $ (3,752,855)
                                                    ============   ============

Net loss per common share - basic and diluted ....  $      (0.01)  $      (0.08)
                                                    ============   ============

Weighted average number of shares
   outstanding - basic and diluted ...............    86,105,495     48,859,080
                                                    ============   ============

                 See notes to consolidated financial statements.
                                       F-4
<PAGE>
<TABLE>
                                      CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARY
                                            (FORMERLY SENSE HOLDINGS, INC.)
                              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                    FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

<CAPTION>
                                                                    Common Stock,
                                                                   $.001 Par Value
                                                             ---------------------------    Additional
                                                              Number of                      Paid-in        Deferred
                                                                Shares         Amount        Capital      Compensation
                                                             ------------   ------------   ------------   ------------
<S>                                                          <C>            <C>            <C>            <C>
Balance, December 31, 2005 ................................    35,042,191   $     35,042   $ 11,763,679   $   (632,570)

Common stock issued for debt ..............................       647,727            648        163,775              -

Common stock issued for services ..........................     6,151,500          6,151        678,019       (112,000)

Common stock issued for liquidated damages ................       665,036            665        120,718              -

Common stock cancelled pursuant to stock exchange agreement      (683,333)          (683)      (149,317)             -

Grant of warrants for services ............................             -              -         33,500        (33,500)

Grant of warrants for liquidated damages ..................             -              -         19,049              -

Grant of stock options to employees .......................             -              -        150,000              -

Common stock issued for exercise of warrants ..............       399,025            399           (399)             -

Sale of common stock pursuant to private placement ........    13,591,911         13,592      2,072,690              -

Amortization of deferred compensation .....................             -              -              -        778,070

Net loss for the year .....................................             -              -              -              -
                                                             ------------   ------------   ------------   ------------

Balance, December 31, 2006 ................................    55,814,057         55,814     14,851,714              -

Common stock issued for services ..........................     7,580,000          7,580        666,785              -

Common stock issued in acquisition ........................    12,500,000         12,500      1,175,000              -

Common stock issued in acquisition - related party ........    10,000,000         10,000              -              -

Prior year appropriation of statutory reserves ............             -              -              -              -

Appropriation of statutory reserves .......................             -              -              -              -

Distribution in connection with acquisition - related party             -              -       (133,684)             -

Grant of stock options to employees .......................             -              -        397,390              -

Sale of common stock pursuant to private placement, net ...    49,806,735         49,807      2,583,857              -

Net loss for the year .....................................             -              -              -              -

Foreign currency translation adjustment ...................             -              -              -              -
                                                             ------------   ------------   ------------   ------------

Balance, December 31, 2007 ................................   135,700,792   $    135,701   $ 19,541,062   $          -
                                                             ============   ============   ============   ============
                                                                                                           (CONTINUED)
                                    See notes to consolidated financial statements.
                                                          F-5A
</TABLE>
<PAGE>
<TABLE>
                                      CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARY
                                            (FORMERLY SENSE HOLDINGS, INC.)
                              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                    FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
                                                      (CONTINUED)
<CAPTION>


                                                                                              Other           Total
                                                              Statutory      Accumulated   Comprehensive  Shareholders'
                                                               Reserves        Deficit        Income         Equity
                                                             ------------   ------------   ------------   ------------
<S>                                                          <C>            <C>            <C>            <C>
Balance, December 31, 2005 ................................  $          -   $(11,059,850)  $          -   $    106,301

Common stock issued for debt ..............................             -              -              -        164,423

Common stock issued for services ..........................             -              -              -        572,170

Common stock issued for liquidated damages ................             -              -              -        121,383

Common stock cancelled pursuant to stock exchange agreement             -              -              -       (150,000)

Grant of warrants for services ............................             -              -              -              -

Grant of warrants for liquidated damages ..................             -              -              -         19,049

Grant of stock options to employees .......................             -              -              -        150,000

Common stock issued for exercise of warrants ..............             -              -              -              -

Sale of common stock pursuant to private placement ........             -              -              -      2,086,282

Amortization of deferred compensation .....................             -              -              -        778,070

Net loss for the year .....................................             -     (3,752,855)             -     (3,752,855)
                                                             ------------   ------------   ------------   ------------

Balance, December 31, 2006 ................................             -    (14,812,705)             -         94,823

Common stock issued for services ..........................             -              -              -        674,365

Common stock issued in acquisition ........................             -              -              -      1,187,500

Common stock issued in acquisition - related party ........             -              -              -         10,000

Prior year appropriation of statutory reserves ............       476,144       (476,144)             -              -

Appropriation of statutory reserves .......................       151,873       (151,873)             -              -

Distribution in connection with acquisition - related party             -              -              -       (133,684)

Grant of stock options to employees .......................             -              -              -        397,390

Sale of common stock pursuant to private placement, net ...             -              -              -      2,633,664

Net loss for the year .....................................             -     (1,118,603)             -     (1,118,603)

Foreign currency translation adjustment ...................             -              -         98,215         98,215
                                                             ------------   ------------   ------------   ------------

Balance, December 31, 2007 ................................  $    628,017   $(16,559,325)  $     98,215   $  3,843,670
                                                             ============   ============   ============   ============

                                    See notes to consolidated financial statements.
                                                          F-5B
</TABLE>
<PAGE>
<TABLE>
                    CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                           (FORMERLY SENSE HOLDINGS, INC.)
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                             For the Year Ended
                                                                 December 31,
                                                         ---------------------------
                                                             2007           2006
                                                         ------------   ------------
<S>                                                      <C>            <C>
Cash flows from operating activities:
   Net loss ...........................................  $ (1,118,603)  $ (3,752,855)
                                                         ------------   ------------
   Adjustments to reconcile net loss to net cash
    provided by (used in) operations:
      Depreciation and amortization ...................        73,032          7,297
      Common stock, warrants and options issued
        for services ..................................     1,071,755        722,170
      Amortization of deferred compensation ...........             -        778,070
      Interest income on shareholder loans ............             -         (1,746)
      Amortization of debt issuance costs .............             -         89,692
      Amortization of discount of notes payable .......             -         92,994
      Amortization of license rights ..................             -         45,000
      Common stock issued in connection with debt .....             -         21,923
      Loss on impairment of intangible assets .........             -        230,000
      Bad debts .......................................        35,512         19,496
      Allowance for slow moving inventory .............        (4,000)        39,570
      Registration rights penalty .....................             -        140,432
      Minority interest ...............................       420,230              -
   Changes in assets and liabilities:
      Accounts receivable .............................       (63,102)       399,484
      Inventories .....................................       437,094         (6,986)
      Prepaid expenses and other ......................       971,452         70,114
      Due from shareholders ...........................             -         20,000
      Other assets ....................................      (220,135)         7,765
      Accounts payable and accrued expenses ...........       (62,975)      (177,330)
      Advances from customers .........................      (856,508)             -
      Due to related parties ..........................             -         (5,464)
      Other payables ..................................             -        (14,811)
      Deferred revenue ................................        (2,371)       (10,214)
                                                         ------------   ------------

         Total adjustments ............................     1,799,984      2,467,456
                                                         ------------   ------------

Net cash provided by (used in) operating activities ...       681,381     (1,285,399)
                                                         ------------   ------------
Cash flows from investing activities:
   Cash acquired in acquisition .......................       703,577              -
   Cash used in acquisition ...........................      (398,661)             -
   Increase in notes receivable .......................       (94,106)             -
   Purchase of property and equipment .................      (845,626)             -
   Proceeds from refund on land use rights ............        24,539              -
   Decrease in due from related party .................       208,526              -
   Decrease in restricted cash ........................       105,025              -
   Purchase of intangible asset .......................             -       (150,000)
                                                         ------------   ------------

Net cash flows used in investing activities ...........      (296,726)      (150,000)
                                                         ------------   ------------
Cash flows from financing activities:
   Payments on convertible notes payable ..............             -       (527,000)
   Repayment of notes payable .........................      (525,127)             -
   Repayment of related party advances ................      (684,197)             -
   Proceeds from sale of common stock .................     2,967,404      2,451,000
   Payment of placement fees and expenses .............      (333,740)      (364,718)
                                                         ------------   ------------

Net cash flows provided by financing activities .......     1,424,340      1,559,282
                                                         ------------   ------------
                                                                         (CONTINUED)
</TABLE>
                                         F-6A
<PAGE>
<TABLE>
                    CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                           (FORMERLY SENSE HOLDINGS, INC.)
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (CONTINUED)
<CAPTION>
                                                             For the Year Ended
                                                                 December 31,
                                                         ---------------------------
                                                             2007           2006
                                                         ------------   ------------
<S>                                                      <C>            <C>
Effect of exchange rate on cash .......................        50,906              -
                                                         ------------   ------------

Net increase in cash ..................................     1,859,901        123,883

Cash - beginning of year ..............................       152,579         28,696
                                                         ------------   ------------

Cash - end of year ....................................  $  2,012,480   $    152,579
                                                         ============   ============

Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest ........................................  $     35,026   $     28,813
                                                         ============   ============
      Income taxes ....................................  $          -   $          -
                                                         ============   ============

NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Common stock issued for debt .......................  $          -   $    142,500
                                                         ============   ============
   Common stock cancelled pursuant to share exchange
    agreement .........................................  $          -   $    150,000
                                                         ============   ============
      Acquisition details:
         Fair value of assets acquired ................  $ 10,241,543   $          -
                                                         ============   ============
         Liabilities assumed ..........................  $  8,779,066   $          -
                                                         ============   ============
         Common stock issued for acquisitions .........  $  1,187,500   $          -
                                                         ============   ============
         Goodwill from related party acquisition
          reflected as distribution ...................  $    123,684   $          -
                                                         ============   ============

                   See notes to consolidated financial statements.

                                         F-6B
</TABLE>
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

China America Holding, Inc. (formerly Sense Technologies, Inc. or "Sense") (the
"Company") is a Florida corporation formed on July 13, 1998. Prior to June 27,
2007, the Company's core business was the design, develop, manufacture and
selling of fingerprint-based identification products and systems that
incorporate state-of-the-art biometric technology to verify a person's identity.
The Company had also licensed certain patented technology designed to detect
chemical vapors and unexploded ordinance including bombs, grenades, shells,
rockets, and other explosive devices. Currently, Sense is maintaining its
existing customer base and maintenance agreements and is not pursuing new
business or performing additional research and development.

Effective June 27, 2007, the Company entered into a membership interest exchange
agreement with Shanghai Aohong Industry Co., Ltd. ("Aohong"), a Chinese limited
liability company, and its sole members Mr. Aihua Hu and his wife, Mrs. Ying Ye.
Under the terms of the agreement, the Company acquired 56.08% of the membership
interests of Aohong from that company in exchange for $3,380,000 to be invested
in Aohong between September 30, 2007 and July 27, 2009. In 2007, the Company
paid $800,000 of this investment. As part of the transaction, 12,500,000 shares
of the Company's common stock valued at $1,187,500 were issued to Mr. Hu (see
Note 2).

Aohong sells and distributes assorted liquid coolants which are utilized in a
variety of applications, primarily as refrigerants in air conditioning systems
for automobiles, residential and commercial air conditioning systems,
refrigerators, fire extinguishing agents and assorted aerosol sprays.

The operations of Aohong are comprised of three basic functions:

   o  Repackaging bulk quantities of liquid coolants into smaller packaging for
      resale and distribution. Approximately 45% and approximately 50%,
      respectively, of its net revenues were generated from this activity in
      fiscal 2007 and fiscal 2006,

   o  Custom mixing of various raw materials in accordance with customer
      specifications into a new product. Aohong employs two engineers who work
      with customers to derive proper mixture of chemicals. Approximately 15%
      and 10% of its net revenues were generated from this activity in each of
      fiscal 2007 and fiscal 2006, respectively, and

   o  Distribution of bulk quantities of liquid coolants directly to customers
      who in turn resell the product. Approximately 30% and approximately 40%,
      respectively, of its net revenues were generated from this activity in
      each of fiscal 2007 and fiscal 2006.

Customers of Aohong include manufacturers of automobiles, refrigerators and air
conditioners as well as distributors of coolants. In 2007 and 2006 approximately
55% and 33% of its net revenues were from manufacturers, including automobile,
air conditioners and refrigerator manufacturers, approximately 25% and 32% of
its net revenues were from air conditioners and refrigerator retailers and
approximately 20% and 35% of its net revenues were from the export of products.
Approximately 60% of its sales are to automobile and refrigerator manufacturers,
respectively. As a result, historically Aohong has witnessed a seasonal surge in
demand for refrigerant products from November to June.

                                       F-7
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Aohong was established in February 2000 as Shanghai Aohong Industry Co., Ltd. On
July 5, 2007 Aohong changed its name to Shanghai Aohong Chemical Co., Ltd.
Aohong has two wholly-owned subsidiaries; Shanghai Binghong Trading Co., Ltd.
which was established in March 2002 and Shanghai Wuling Environmental Material
Co., Ltd. which was established in January 2005.

On August 31, 2007, the Company closed an acquisition of 60% of the issued and
outstanding common stock of Big Tree Toys, Inc, a Florida corporation ("Big
Tree"), from CDI China, Inc., a wholly-owned subsidiary of China Direct, Inc.
("China Direct").

Big Tree was incorporated in the State of Florida on November 20, 2006 and its
wholly owned subsidiary Jieyang Big Tree Toy Enterprise Co., Ltd. ("Jieyang Big
Tree"), a Chinese limited liability company, was established on January 22, 2007
as a wholly foreign owned entity ("WFOE") in China. China Direct acquired 60% of
Big Tree in February 2007 in exchange for shares of its common stock and a
commitment to provide a $1 million working capital loan subject to the
satisfaction of certain revenue milestones by Big Tree. Both Big Tree and
Jieyang Big Tree are development stage companies which have not yet commenced
operations. Big Tree's operations will be primarily conducted through its wholly
owned subsidiary Jieyang Big Tree which will operate in Shantou City, China. It
is anticipated that Jieyang Big Tree's operations will include the distribution
of toys and related entertainment products within China and sourcing third party
OEM manufacturing of toys and related entertainment products. Jieyang Big Tree
will offer a wide variety of toy and entertainment products ranging from plastic
toys, stuffed toys, electronic toys, ceramics toys and resin handicrafts. Big
Tree expects to commence operations in 2008 with the leasing of office and
warehouse space, employee hiring, marketing efforts and general working capital
(See Note 2).

Basis of Presentation

The consolidated financial statements include China America Holdings, Inc. and
all its subsidiaries, including those operating outside the United States of
America. The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
Our year end is December 31st. The year ended December 31, 2007 is referred to
as "2007", the year ended December 31, 2006 is referred to as "2006". Our
consolidated statements include the accounts of the Company and its controlled
entities, including wholly-owned and majority owned subsidiaries. All
significant inter-company account balances and transactions have been
eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates for the years ended December 31, 2007 and 2006 include provisions made
for sales and the related allowance for doubtful accounts, valuation of
stock-based compensation, and the useful lives of property and equipment and
other long-term assets.

                                       F-8
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid investments with original maturities of three months or less
to be cash equivalents.

Concentration of Credit Risks

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
United States and China. As of December 31, 2007, bank deposits in the United
States exceeded federally insured limits by $971,175. At December 31, 2007, the
Company had deposits of $1,014,258 in banks in China. In China, there is no
equivalent federal deposit insurance as in United States; as such these amounts
held in banks in China are not insured. The Company has not experienced any
losses in such bank accounts through December 31, 2007.
At December 31, 2007 and 2006, our bank deposits by geographic area were as
follows:

              COUNTRY                      2007                  2006
----------------------------------  -------------------   ------------------
United States ....................  $  998,222    49.6%   $  152,579  100.0%
China ............................   1,014,258    50.4%            -       -
                                    ----------  -------   ----------  ------
Total cash and cash equivalents ..  $2,012,480   100.0%   $  152,579  100.0%
                                    ==========  =======   ==========  ======

In an effort to mitigate any potential risk, the Company periodically evaluates
the credit quality of the financial institutions at which it holds deposits,
both in the United States and China

Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The
Company maintains allowances for doubtful accounts for estimated losses. The
Company reviews the accounts receivable on a periodic basis and makes general
and specific allowances when there is doubt as to the collectability of
individual balances. In evaluating the collectability of individual receivable
balances, the Company considers many factors, including the age of the balance,
customer's historical payment history, its current credit-worthiness and current
economic trends. Accounts are written off after exhaustive efforts at
collection. As of December 31, 2007 and 2006, the Company has recorded an
allowance for doubtful accounts of $187,210 and $0, respectively.

Inventories

Inventories are stated at the lower of average cost or market and consist of raw
materials and finished goods. The Company writes down inventory for estimated
obsolescence or unmarketable inventory based upon assumptions and estimates
about future demand and market conditions. If actual market conditions are less
favorable than those projected by the Company, additional inventory write-downs
may be required.

                                       F-9
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of prepayments to
vendors for merchandise that had not yet been shipped. At December 31, 2007 and
2006, our consolidated balance sheet includes prepaid expenses and other current
assets of $440,819 and $1,021, respectively.

Property and Equipment

Property and equipment are carried at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets. The cost of
repairs and maintenance is 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. The Company
examines the possibility of decreases in the value of fixed assets when events
or changes in circumstances reflect the fact that their recorded value may not
be recoverable.

Impairment of Long-Lived Assets

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

Advances from customers

Advances from customers represent prepayments to the Company for merchandise
that had not yet been shipped to customers. The Company will recognize these
advances as revenues as customers take delivery of the goods, in compliance with
our revenue recognition policy. At December 31, 2007 and 2006, the Company's
consolidated balance sheets reflect advances from customers of $96,624 and $0,
respectively.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosures of information about the
fair value of certain financial instruments for which it is practicable to
estimate the value. For the purpose of this disclosure, the fair value of a
financial instrument is the amount at which an instrument could be exchanged in
a current transaction between willing parties, other than in a forced sale or
liquidation.

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

                                      F-10
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Revenue Recognition

The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements". In general, 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
collectability is reasonably assured. The following policies reflect specific
criteria for the various revenues streams of the Company:

The Company generates revenue from the sale of its products and records revenues
from the sale of products when the goods are shipped, title passes, and
collectability is reasonably assured.

Revenue from periodic maintenance agreements is generally recognized ratably
over the respective maintenance periods provided no significant obligations
remain and collectability of the related receivable is probable.

Revenue from the performance of services is recognized upon completion of the
service.

Loss per Common Share

Basic net earnings (loss) per share equals net earnings (loss) divided by the
weighted average shares outstanding during the year. The computation of diluted
net earnings per share does not include dilutive common stock equivalents in the
weighted average shares outstanding as they would be anti-dilutive. The
Company's common stock equivalents at December 31, 2007 and 2006 include the
following:

                                        2007         2006
                                     ----------   ----------
         Options ................     9,550,000    4,120,000
         Warrants ...............    67,811,613   18,010,295
                                     ----------   ----------
                                     77,361,613   22,130,295
                                     ==========   ==========

Stock Based Compensation

The Company adopted Statement of Financial Accounting Standards No. 123 (revised
2004), Share Based Payment ("SFAS No. 123R"). SFAS No. 123R establishes the
financial accounting and reporting standards for stock-based compensation plans.
As required by SFAS No. 123R, the Company recognized the cost resulting from all
stock-based payment transactions including shares issued under its stock option
plans in the financial statements.

Non-Employee Stock-Based Compensation

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

                                      F-11
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Income Taxes

We accounted for income taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between the financial reporting basis and tax bases
of the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of our being able to realize the
future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or the
entire deferred tax asset will not be realized.

Foreign Currency Translation

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

The Company's reporting currency is the U.S. dollar. The functional currency of
the Company's Chinese subsidiaries is the Chinese dollar or Renminbi ("RMB").
For foreign operations with the local currency as the functional currency,
assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate prevailing at the balance sheet date and weighted
average rates of exchange for the period for revenues, costs, and expenses. Net
gains and losses resulting from foreign exchange transactions are included in
the consolidated statements of operations. The cumulative translation adjustment
and effect of exchange rate changes on cash at December 31, 2007 was $50,906.
Translation adjustments resulting from the process of translating the local
currency financial statements into U.S. dollars are included in determining
accumulated comprehensive loss. As of December 31, 2007, the exchange rate for
the local currency, the Chinese dollar or RMB was $1 for 7.3141 RMB.

Minority interest

Under generally accepted accounting principles when losses applicable to the
minority interest in a subsidiary exceed the minority interest in the equity
capital of the subsidiary, the excess is not charged to the majority interest
since there is no obligation of the minority interest to make good on such
losses. The Company, therefore, has absorbed all losses applicable to a minority
interest where applicable. If future earnings do materialize, the Company shall
be credited to the extent of such losses previously absorbed.

Comprehensive Income

The Company follows Statement of Financial Accounting Standards No. 130 (SFAS
130) "Reporting Comprehensive Income" to recognize the elements of comprehensive
income. Comprehensive income is comprised of net income and all changes to the
statements of stockholders' equity, except those due to investments by
stockholders, changes in paid-in capital and distributions to stockholders. For
the Company, comprehensive income for the year ended December 31, 2007 included
net income and foreign currency translation adjustments. The Company did not
have comprehensive income in fiscal 2006.

                                      F-12
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Shipping Costs

Shipping costs are included in selling expenses and totaled $820,731 and $0 for
the years ended December 31, 2007 and 2006, respectively.

Advertising

Advertising is expensed as incurred and was not material for the years ended
December 31, 2007 an 2006.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
157, "Fair Value Measurements". This Statement defines fair value as used in
numerous accounting pronouncements, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosure related
to the use of fair value measures in financial statements. The Statement is to
be effective for financial statements issued for fiscal years beginning after
November 15, 2007; however, earlier application is encouraged. The Company is
currently evaluating the timing of adoption and the impact that adoption might
have on its financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FAS 115".
SFAS 159 allows entities to choose, at specified election dates, to measure
eligible financial assets and liabilities at fair value that are not otherwise
required to be measured at fair value. If a company elects the fair value option
for an eligible item, changes in that item's fair value in subsequent reporting
periods must be recognized in current earnings. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently evaluating the
potential impact of SFAS 159 on our financial statements.

In December 2007, the FASB issued SFAS 141 (revised 2007), "Business
Combinations". SFAS 141R is a revision to SFAS 141 and includes substantial
changes to the acquisition method used to account for business combinations
(formerly the "purchase accounting" method), including broadening the definition
of a business, as well as revisions to accounting methods for contingent
consideration and other contingencies related to the acquired business,
accounting for transaction costs, and accounting for adjustments to provisional
amounts recorded in connection with acquisitions. SFAS 141R retains the
fundamental requirement of SFAS 141 that the acquisition method of accounting be
used for all business combinations and for an acquirer to be identified for each
business combination. SFAS 141R is effective for periods beginning on or after
December 15, 2008, and will apply to all business combinations occurring after
the effective date. The Company is currently evaluating the requirements of SFAS
141R.

In December 2007, the FASB issued SFAS 160, "Non-controlling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51, Consolidated Financial Statements" ("ARB 51"). This Statement amends ARB
51 to establish new standards that will govern the (1) accounting for and
reporting of non-controlling interests in partially owned consolidated
subsidiaries and (2) the loss of control of subsidiaries. Non-controlling
interest will be reported as part of equity in the consolidated financial
statements. Losses will be allocated to the non-controlling interest, and, if
control is maintained, changes in ownership interests will be treated as equity
transactions. Upon a loss of control, any gain or loss on the interest sold will
be recognized in earnings. SFAS 160 is effective for periods beginning after
December 15, 2008. The Company is currently evaluating the requirements of SFAS
160.

                                      F-13
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

In March 2008, the FASB issued SFAS 161, "Disclosures about Derivative
Instruments and Hedging Activities". The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. We are currently evaluating the impact of adopting SFAS 161 on our
consolidated financial statements.

NOTE 2 - ACQUISITIONS

Aohong

On June 27, 2007, the Company entered into a membership interest exchange
agreement with Aohong and its sole members, Mr. Aihua Hu and his wife, Mrs. Ying
Ye. The transaction was closed June 27, 2007. Under the terms of the agreement,
the Company acquired a 56.08% majority interest in Aohong in exchange for
12,500,000 shares of the Company's common stock, valued at $1,187,500 in the
aggregate ("Consideration Stock") and $3,380,000 in cash consideration to be
paid to Aohong to increase its registered capital pursuant to the following
schedule:

   a) $800,000 was paid to Aohong during September 2007;

   b) $400,000 shall be paid to Aohong on or before June 30, 2008;

   c) $600,000 shall be paid to Aohong on or before December 31, 2008; and

   d) the remaining $1,580,000 shall be paid to Aohong on or before June 27,
      2009.

The Company accounted for this acquisition using the purchase method of
accounting in accordance with SFAS No. 141. The fair value of the common stock
is based on the $0.095 quoted trading price of the common stock on the
acquisition date and amounted to $1,187,500. The purchase price was determined
based on an arm's length negotiation and no finder's fees or commissions were
paid in connection with this acquisition. Following the execution of the
agreement, AoHong and the minority members were required to promptly apply as
necessary to obtain the documents which represent the formal approvals of the
relevant regulatory agencies in the People's Republic of China to the Company's
purchase of a controlling interest in AoHong. On August 29, 2007, the Shanghai
Foreign Investment Commission issued the Certificate of Approval for the
establishment of the Sino-U.S. joint-venture between our company and AoHong. The
registered capital of this joint venture is approximately $8,200,000, of which
an aggregate of $3,380,000 is being contributed by the Company. In September
2007 following the Company's remittance of the initial investment of $800,000 to
the joint venture, the Shanghai Industrial & Commercial Administration Bureau
issued the business license to the joint venture. The results of operations of
Aohong are included in the consolidated results of operations of the Company
from the acquisition date of June 27, 2007 to December 31, 2007.

                                      F-14
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Big Tree
--------

On August 31, 2007, the Company closed an acquisition of 60% of the issued and
outstanding common stock of Big Tree from China Direct for a combination of
$400,000 of cash which was paid in September 2007 and up to 20,000,000 shares of
common stock. In connection with acquisition, the Company agreed to issue an
aggregate of 10,000,000 on a quarterly basis of 2,500,000 shares per quarter
commencing on or before September 30, 2007 and 2,500,000 shares of its common
stock each quarter on or before December 31, 2007, March 31, 2008, and June 30,
2008, respectively (the "Acquisition Shares"). Prior to December 31, 2007, the
Company issued to China Direct all of the 10,000,000 Acquisition Shares.

Additionally, the Company agreed to issue an aggregate of 10,000,000 shares of
its common stock to China Direct subject to Big Tree meeting certain revenues
and net income thresholds summarized as follows:

   i.    2,500,000 shares on or before September 30, 2008 conditional upon Big
         Tree revenues being equal or greater than $2,000,000 and not reporting
         a net income loss for the quarter ended June 30, 2008, and,

   ii.   an additional 2,500,000 shares on or before December 31, 2008
         conditional upon Big Tree revenues being equal or greater than
         $2,000,000 and not reporting a net income loss for the quarter ended
         September 30, 2008, and

   iii.  an additional 2,500,000 shares on or before March 31, 2009 conditional
         upon Big Tree revenues being equal or greater than $2,000,000 and not
         reporting a net income loss for the quarter ended December 31, 2008,
         and.

   iv.   an additional 2,500,000 shares on or before June 30, 2009 conditional
         upon Big Tree revenues being equal or greater than $2,000,000 and not
         reporting a net income loss for the quarter ended March 31, 2009.

The Company accounted for this acquisition using the purchase method of
accounting in accordance with SFAS No. 141.

For accounting purposes, the value ascribed to the initial 10,000,000 shares of
the Company's common stock issued or to be issued as partial consideration for
the purchase of the Big Tree interest was $0.001 per share, which is the par
value of the Company's common stock and amounted to $10,000. Because China
Direct owned approximately 17% of the Company's outstanding common stock prior
to the closing of the transaction, as a related party the value of the shares
issued were required to equal par value under generally accepted accounting
principles. No finder's fees or commissions were paid in connection with this
acquisition. The initial purchase price of $410,000 exceeded the fair value of
net assets acquired by $133,684. Because China Direct was an affiliate of the
Company prior to the transaction, the Company has recorded a decrease to
additional paid-in capital of $133,684. Additional contingent shares issuable
upon certain performance results shall be recorded at par value. The results of
operations of Big Tree are included in the consolidated results of operations of
the Company from the acquisition date of August 31, 2007 to December 31, 2007.

                                      F-15
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

         The purchase price and the adjustments to historical book value of the
acquired companies as a result of the acquisition are as follows:

                                         Aohong        Big Tree        Total
                                      -----------    -----------    ------------
Purchase price ....................   $ 4,567,500    $   410,000    $ 4,977,500
                                      ===========    ===========    ===========
Net Assets Acquired:
Total Assets:
Cash ..............................   $   703,577    $     1,339    $   704,916
Accounts receivable ...............     4,009,943              -      4,009,943
Inventory, prepaid expenses
and other assets ..................     3,093,567          5,819      3,099,386
  Property and equipment, net .....     1,123,552              -      1,123,552
Due from related party ............       161,316        453,368        614,684
Other assets ......................       717,338              -        717,338
                                      -----------    -----------    -----------
                                        9,809,293        460,526     10,269,819
                                      -----------    -----------    -----------
Total Liabilities:
Accounts payable ..................       970,589              -        970,589
Loans payable .....................     2,098,416              -      2,098,416
Advances from customers ...........       948,341              -        948,341
Due to related parties ............       979,297              -        979,297
                                      -----------    -----------    -----------
                                        4,996,643              -      4,996,643
                                      -----------    -----------    -----------
Net assets acquired ...............     4,812,650        276,316      5,088,966
Capital infusion ..................     3,380,000              -      3,380,000
                                      -----------    -----------    -----------
Total net assets ..................     8,192,650        276,316      8,468,966
                                      -----------    -----------    -----------
% acquired ........................        56.08%            60%              -

Net assets acquired ...............     4,594,438        133,684      4,728,122
                                      -----------    -----------    -----------
Negative goodwill allocated to
property and equipment ............   $    26,938    $         -    $    26,938
                                      ===========    ===========    ===========
Related party goodwill applied
to paid-in capital ................   $         -    $   133,684    $   133,684
                                      ===========    ===========    ===========

                                      F-16
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The following unaudited pro forma consolidated results of operations have been
prepared as if the acquisitions of Aohong and Big Tree had occurred as of the
following periods:

                                                  Year Ended        Year Ended
                                                 December 31,      December 31,
                                                     2007              2006
                                                 ------------      ------------
Net Revenues ..............................      $ 32,845,000      $ 21,197,000
Operating Costs and Expenses ..............        32,265,000       24,103,,000
Net Income (Loss) .........................           117,000        (3,324,000)
Net Income (Loss) per Share ...............      $        .00      $      (0.07)

Pro forma data does not purport to be indicative of the results that would have
been obtained had these events actually occurred at the beginning of the periods
presented and is not intended to be a projection of future results.

NOTE 3 - INVENTORIES

At December 31, 2007 and 2006, inventories consisted of:

                                                      2007            2006
                                                   ----------     ----------
    Raw materials ............................     $        -     $   25,336
    Finished goods ...........................      1,100,023         12,100
                                                   ----------     ----------
                                                    1,100,023         37,436
    Less: Reserve for slow moving inventory ..              -        (30,000)
                                                   ----------     ----------
                                                   $1,100,023     $    7,436
                                                   ==========     ==========

In 2006, the Company wrote down inventory by $30,000, which is reflected in cost
of goods sold.

NOTE 4 - RELATED PARTY TRANSACTIONS

Due from related parties

At December 31, 2007, the Company held a due from related party in the amount of
$465,982, which reflects advances due from Shantou Dashu Toy Enterprises Co.,
Ltd., a Chinese entity, to our wholly-owned subsidiary Jieyang Big Tree. These
advances were made prior to our formation of Jieyang Big Tree. Guihong Zheng,
the Company's minority shareholder in Big Tree is an owner of Shantou Dashu Toy
Enterprise Co., Ltd. These advances bear no interest, are due on demand, and are
unsecured.

                                      F-17
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Prior to fiscal 2004, certain officers and a former officer received funds from
the Company in the form of demand notes. During 2006, the Company forgave debt
amounting to $20,000 which has been recorded as compensation expense and at
December 31, 2006, the balance on the amount owed to the Company was $41,121.
During 2007, the Company forgave debt amounting to $26,803 which has been
recorded as compensation expense and the remaining balance of $14,318 was
applied against expenses due to these individuals.

Due to related parties

At December 31, 2007, due to related parties, which is attributable to Aohong,
consists of the following:

               Due to Aihua Hu ........................   $272,488
               Due to Ying Ye .........................     22,186
               Due to Liang WenJuan ...................     13,672
                                                          --------
                                                          $308,346
                                                          ========

Mr. Aihua Hu and Mrs. Ying Ye, who are the minority members of AoHong, are
husband and wife, and Mr. Hu is chief executive officer of the Company. Liang
Wenjuan is the aunt of Mr. and Mrs. Hu, and an officer of Wuling, which is the
wholly-owned subsidiary of Aohong.

NOTE 5 - PROPERTY AND EQUIPMENT

At December 31, 2007 and 2006, property and equipment consisted of the
following:

                                        Estimated
                                           Life          2007           2006
                                        ----------   -----------    -----------
Buildings ...........................     20 years   $   608,551    $         -
Auto and Truck ......................      5 years       184,719              -
Manufacturing Equipment .............     10 years       289,499              -
Office Equipment ....................    5-7 years        30,605         35,690
Construction in Progress ............            -       919,275              -
                                                     -----------    -----------
                                                       2,032,649         35,690
Less: Accumulated Depreciation ......                   (104,512)       (29,427)
                                                     -----------    -----------
                                                     $ 1,928,137    $     6,263
                                                     ===========    ===========

For the year ended December 31, 2007 and 2006, depreciation expense amounted to
$72,222 and $7,297, respectively.

                                      F-18
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 6 - LAND USE RIGHTS AND OTHER INTANGIBLE ASSETS

Land Use Rights

Aohong has land use rights pursuant to an agreement with the Chinese government.
The land use rights are valued at a fixed amount RMB of approximately 567,926,
fluctuated by the exchange rate. At December 31, 2007, the land use rights are
valued at $77,648. Under the terms of the agreement, Aohong has rights to use
certain land until November 3, 2053. Aohong amortizes these land use rights over
the remaining contract period beginning on June 27, 2007 (date of acquisition).

                                                 Estimated
                                                 Remaining
                                                   Life       Amount
                                                 ---------    -------
        Land Use Rights .....................     46 year     $77,648
        Less: Accumulated Amortization ......                    (844)
                                                              -------
                                                              $76,804
                                                              =======

For the year ended December 31, 2007 and 2006, amortization of land use rights
amounted to $810 and $0, respectively.

Other

On August 1, 2005, Sense entered into an Exclusive Patent License Agreement with
UT-Battelle, LLC. The License Agreement superseded and replaced an agreement
dated March 26, 2001. Under the August 1, 2005 Patent and License Agreement, the
Company licensed certain patent rights relating to the detection of unexploded
ordnance, and in connection therewith, UT-Battelle had granted the Company the
exclusive right to manufacture, use, sell, offer for sale and sublicense yet to
be developed products incorporating the licensed patents, relating to all (a)
chemical vapor detection and (b) the detection of unexploded ordnance, including
bombs, grenades, rockets and other unexploded devices. The Company had also been
granted a 24-month right of first refusal to negotiate a patent license
agreement with UT-Battelle for its certain of its proprietary technology; This
right expired on August 1, 2007. Amortization expense of the license rights
amounted to $0 and $45,000 for the year ended December 31, 2007 and 2006,
respectively. In connection with the purchase by the Company of the license
rights discussed above, it was deemed by management during the period ended
December 31, 2006, that the unamortized portion of the license rights was deemed
impaired due to a lack of projected future cash flows. Accordingly, the Company
recognized a loss on impairment of intangible assets of $230,000 for the year
ended December 31, 2006.

                                      F-19
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 7 - FINANCING ARRANGEMENTS

Notes Payable

Notes payable consisted of the following at December 31, 2007 and 2006:
<TABLE>
<CAPTION>
                                                                           2007          2006
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
Notes payable to Country Commercial Bank HuaTing Branch, due on
January 16, 2008.  Interest only payable monthly at an annual rate of
7.38%. Guaranteed by Shanghai Ronghua Press Container Co. Ltd,
Shanghai Wuling Environmental Material Co. Ltd and Shanghai Binghong
Trading Co. Ltd. The note was repaid on the due date ................  $   341,806   $         -

Notes payable to Country Commercial Bank HuaTing Branch, due on
February 28, 2008. Interest only payable monthly at an annual rate of
7.38%. Guaranteed by Shanghai Ronghua Press Container Co. Ltd,
Shanghai Hanqu Trading Co. Ltd, Shanghai Wuling Environmental
Material Co. Ltd and Shanghai Binghong Trading Co. Ltd.The note was
repaid on the due date. .............................................      205,083             -

Bank acceptances payable. non-interest bearing. Secured by restricted
cash of $437,511 and payable on demand. .............................    1,093,778             -

Note payable to individual, due on demand with interest due at 10%
per annum. ..........................................................       25,000        25,000
                                                                       -----------   -----------
Total ...............................................................    1,665,667        25,000
Less: Current Portion ...............................................   (1,665,667)      (25,000)
                                                                       -----------   -----------
Long Term Portion of Notes Payable                                     $         -   $         -
                                                                       ===========   ===========
</TABLE>
Convertible Notes Payable

From June 2005 to September 2005, the Company offered for sale a maximum of 15
units (the "Units") for $50,000 per Unit, to accredited investors only. Each
Unit consisted of a promissory note in the principal amount of $50,000 (the
"Notes") and a common stock purchase warrant (the "Warrants") to purchase 50,000
shares of the common stock of the Company, exercisable at $0.16 per share for a
period of 5 years. The Notes had a term of 14 months, and provided for interest
accrual on unpaid principal at the rate of 10% per year. Interest under the
Notes was payable quarterly commencing on September 1, 2005.

In aggregate, from June 2005 to September 2005, the Company sold to new
investors an aggregate of $669,500 of the Units for net proceeds of $602,550
(net of placement fees of $66,950). In connection with these convertible notes,
warrants to purchase 669,500 common shares were issued to the holders at an
exercise price per share of $0.16. The warrants are exercisable immediately and
expire five years from date of grant through September 23, 2010. In 2005, these
warrants were treated as a discount on the convertible notes and were valued at
$138,669 to be amortized over the note terms of 14 months.

                                      F-20
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

In March 2006, holders of the $669,500 convertible notes payable described in
the preceding paragraph converted $142,500 of debt into 647,727 shares of common
stock at a conversion price per share of $.22. This conversion price was less
than the market price of $.26 per share resulting in additional 99,650 shares
being issued (included in 647,727 shares issued). In connection with the
reduction of the conversion price and the issuance of additional shares, the
Company recorded interest expense of $21,923. Additionally, the Company repaid
notes holders the remaining principal balance of $527,000.

For the year ended December 31, 2006, the amount of amortization of imputed
interest charged to interest expense was $92,994. For the year ended December
31, 2006, amortization of the debt issuance costs amounted to $89,692.

NOTE 8 - SHAREHOLDERS' EQUITY

Common stock

Common stock issued for services

On February 17, 2006, the Company entered into a consulting agreement with a
third party for business development services for a three-month period. In
connection with the consulting agreement, the Company issued 100,000 shares of
its common stock for services rendered and to be rendered in the future. The
shares were issued at the fair values at the date of the issuance of $.28 per
share. For the year ended December 31, 2006, in connection with these shares,
the Company recorded stock-based consulting expense of $28,000.

On February 17, 2006, the Company issued 40,000 shares of its common stock for
investor relations services rendered. The shares were issued at the fair values
at the date of the issuance of $11,200 or $.28 per share. For the year ended
December 31, 2006, in connection with these shares, the Company recorded
stock-based consulting expense of $11,200.

On February 17, 2006, the Company issued 10,000 shares of its common stock for
website services rendered. The shares were issued at the fair values at the date
of the issuance of $2,800 or $.28 per share. For the year ended December 31,
2006, in connection with these shares, the Company recorded stock-based
consulting expense of $2,800.

On March 6, 2006, the Company issued 20,000 shares of its common stock for
accounting services rendered. The shares were issued at the fair values at the
date of the issuance of $4,800 or $.24 per share. For year ended December 31,
2006, in connection with these shares, the Company recorded professional fees of
$4,800.

On May 1, 2006, the Company issued 35,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $11,025 or $.315 per share. For the year
ended December 31, 2006, in connection with these shares, the Company recorded
stock-based consulting expense of $11,025.

                                      F-21
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

On May 8, 2006, the Company issued 50,000 shares of its common stock for
consulting services rendered. The shares were issued at the fair values at the
date of the issuance of $15,000 or $.30 per share. For the year ended December
31, 2006, in connection with the issuance of these shares, the Company recorded
stock-based consulting expense of $15,000.

On June 27, 2006, the Company issued 150,000 shares of its common stock for
investor relations services rendered. Additionally, in connection with this
consulting agreement, the Company agreed to issue an additional 350,000 shares
of common stock under this agreement with 150,000 shares due on August 27, 2006.
On October 16, 2006, the Company issued 150,000 shares of common stock in
connection with this consulting agreement. The remaining 200,000 shares were due
to the consultant on November 27, 2006 unless the contract is terminated by the
parties. The Company terminated this contract during the three months ended
December 31, 2006. The common shares issued were valued at the fair values at
the date of the contract of $63,000 or $.21 per share. For the year ended
December 31, 2006, in connection with these shares, the Company recorded stock
based consulting expense of $63,000.

On June 26, 2006, the Company issued 30,000 shares of its common stock for
accounting services rendered. The shares were issued at the fair values at the
date of the issuance of $6,300 or $.21 per share. For year ended December 31,
2006, in connection with these shares, the Company recorded professional fees of
$6,300.

On June 27, 2006, the Company issued 88,500 shares of its common stock for
consulting services rendered. The shares were issued at the fair values at the
date of the issuance of $18,585 or $.21 per share. For the year ended December
31, 2006, in connection with these shares, the Company recorded stock-based
consulting expense of $18,585.

On August 25, 2006, the Company issued 125,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $25,000 or $.20 per share. For the year
ended December 31, 2006, in connection with the issuance of these shares, the
Company recorded stock-based consulting expense of $25,000.

On September 1, 2006, the Company issued 100,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $20,000 or $.20 per share. For the year
ended December 31, 2006, in connection with the issuance of these shares, the
Company recorded stock-based consulting expense of $20,000.

On October 1, 2006, the Company issued 85,000 shares of its common stock for
business development services rendered. The shares were issued at the fair
values at the date of the issuance of $12,500 or $.147 per share. For the year
ended December 31, 2006, in connection with the issuance of these shares, the
Company recorded stock-based consulting expense of $12,500.

On October 16, 2006, the Company issued 5,000,000 shares of its common stock for
business development and advisory services rendered. The shares were issued at
the fair values at the date of the issuance of $450,000 or $.09 per share. For
the year ended December 31, 2006, in connection with the issuance of these
shares, the Company recorded stock-based consulting expense of $450,000.

                                      F-22
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

On November 21, 2006, the Company issued 168,000 shares of its common stock as
payment for rent. The shares were issued at the fair values at the date of the
issuance of $15,960 or $.095 per share. For the year ended December 31, 2006, in
connection with the issuance of these shares, the Company recorded stock-based
rent expense of $15,960.

On January 30, 2007, the Company issued 100,000 shares of its common stock for
accounting services rendered. The shares were issued at the fair value at the
date of the issuance of $8,000 or $.08 per share.

On March 31, 2007, the Company issued 225,000 shares of its common stock to
consultants for business development services rendered. The shares were issued
at the fair value at the date of the issuance of $18,000 or $.08 per share.

On May 14, 2007 and May 16, 2007, the Company issued an aggregate of 225,000
shares of its common stock to consultants for business development services
rendered. The shares were issued at the fair values at the date of the issuance
of $12,875 or $.05 to $.063 per share. Accordingly, the Company recorded
stock-based consulting expense of $12,875.

On June 27, 2007, the Company executed a consulting agreement with CDI Shanghai
Management Co., Ltd., a Chinese limited liability company ("Consultant"), for
consulting services provided by Consultant since April 1, 2007 and the agreement
expired on September 30, 2007. Consultant has been providing services to
identify suitable acquisition partners in Asia, structuring merger and/or
acquisition transactions and providing translation services. Under the terms of
the consulting agreement, the Company issued Consultant 5,000,000 shares of its
common stock to the consultant. The Company valued these common shares at the
fair market value on the date of grant of $0.095 per share or $475,000 based on
the trading price of common shares. Accordingly, the Company recorded
stock-based consulting expense of $475,000.

On July 9, 2007, the Company issued 1,000,000 shares of common stock to an
officer and a former officer of the Company (500,000 shares each) for services
rendered. The shares were issued at the fair value at the date of the issuance
of $80,000 or $.08 per share based on the trading price of common shares.
Accordingly, the Company recorded stock-based consulting expense of $80,000.

On August 7, 2007, the Company issued 180,000 shares of its common stock to
consultants for business development service services rendered. The shares were
issued at the fair values at the date of the issuance of $12,240 or $.068 per
share based on the trading price of common shares.

On August 23, 2007, the Company issued 500,000 shares of common stock to its
chief executive officer as a bonus under his employment agreement in conjunction
with the acquisition of AoHong. The shares were issued at the fair value at the
date of the issuance of $37,500 or $.075 per share based on the trading price of
common shares. Accordingly, the Company recorded stock-based compensation of
$37,500.

On August 28, 2007, the Company issued 150,000 shares of its common stock to a
consultant for business development services rendered. The shares were issued at
the fair value at the date of the issuance of $12,750 or $.085 per share based
on the trading price of common shares.

                                      F-23
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

On November 26, 2007, the Company issued 200,000 shares of its common stock to a
consultant for business development service services rendered. The shares were
issued at the fair values at the date of the issuance of $18,000 or $.09 per
share based on the trading price of common shares.

Common Stock Issued Pursuant to Private Placements

On March 7, 2006, the Company completed a private placement to accredited
investors and received gross proceeds of $2,451,000 from the sale of units
consisting in the aggregate of 11,140,911 shares of its common stock and
warrants to purchase 5,570,455 shares of common stock. The warrants are
exercisable at $0.35 per share for a term of five years. The net proceeds from
the transaction are being used to eliminate debt of the Company owing to certain
prior note holders and for working capital purposes. The warrants are redeemable
by the Company at any time following the first anniversary of the completion of
the transaction at a redemption price equal to $0.05 per warrant share, provided
the closing price of the Company's common stock is in excess of $0.60 for 20
consecutive trading days on the date of the notice of redemption, and further
provided that the average daily trading volume during the 20-day period is
greater than 100,000 shares per day. The securities are subject to "full
ratchet" anti-dilution protection during the initial one year period following
the closing, including common stock of the Company comprising the units and
retained by the investor, as well as shares received upon exercise of the
warrants. Following the initial one year period, the warrants are subject to
"weighted-average" anti-dilution protection. There are limited exceptions to the
anti-dilution protection afforded to the investors.

The Company agreed to file a registration statement covering the shares of the
common stock underlying the securities issued. In the event the registration
statement was not filed by May 7, 2006 or did not become effective by July 21,
2006, then the number of shares of common stock included within the units and
the number of common shares underlying the warrants would have increased by 2%
for each 30-day period following such period. The Company has adopted View C of
EITF 05-4 "Effect of a Liquidated Damages Clause on a Freestanding Financial
Instrument Subject to EITF 00-19" ("EITF 05-4"). Accordingly, the Company
classifies as liability instruments, the fair value of registration rights
agreements when such agreements (i) require it to file, and cause to be declared
effective under the Securities Act, a registration statement with the SEC within
contractually fixed time periods, and (ii) provide for the payment of
liquidating damages in the event of its failure to comply with such agreements.
Under View C of EITF 05-4, (i) registration rights with these characteristics
are accounted for as derivative financial instruments at fair value and (ii)
contracts that are (a) indexed to and potentially settled in an issuer's own
stock and (b) permit gross physical or net share settlement with no net cash
settlement alternative are classified as equity instruments. On May 31, 2006, in
connection with registration rights associated with a 2004 private placement,
the Company issued 392,000 shares of its common stock and granted 98,000
warrants for payment of liquidating damages. Additionally, on November 29, 2006,
the Company issued 273,036 shares of its common stock for payment of liquidating
damages. The Company filed the registration statement on June 16, 2006 and
became effective on July 10, 2006. As of December 31, 2006, the Company has
accrued estimated registration rights penalties of $0 related to the late filing
of its registration statement.

Joseph Stevens & Company, Inc. served as placement agent for the transaction and
received a placement agent cash fee of $245,100. In addition, the placement
agent also received a non-accountable expense fee of $73,530. The placement
agent also received 2,451,000 shares of common stock as additional compensation
for serving as placement agent, and, subject to applicable regulatory
requirements, is entitled to receive a cash fee equal to 5% of the gross
proceeds received by the Company upon exercise of the warrants.

                                      F-24
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

On March 31, 2007, the Company completed a private placement to six accredited
investors and received net proceeds of $105,000 from the sale of units
consisting in the aggregate of 2,100,000 shares of its common stock and warrants
to purchase 2,100,000 shares of common stock. The warrants are exercisable at
$0.10 per share for a term of five years.

Prior to September 30, 2007, the Company completed its private placement to
accredited investors of $2,862,404 (net proceeds of $2,528,664) in units of its
securities consisting of 47,706,735 shares of common stock at a purchase price
of $.06 per share and common stock purchase warrants to purchase 47,706,735
shares of common stock. The warrants are exercisable at $.12 per share and are
for a term of five years, with one half of each purchaser's purchase warrants
being callable if the Closing Price of the Common Stock is equal to or above
U.S. $.18, as adjusted for any ten (10) Trading Days out of any thirty (30)
consecutive Trading Day period.

The purchasers of the units are certain accredited institutional and individual
investors. The exercise of the warrants is subject to a 4.99% cap on the
beneficial ownership that each purchaser may have at any point in time while the
securities are outstanding. The net proceeds from the transaction will be used
for working capital purposes.

The Company agreed to file a registration statement covering the shares of
common stock underlying the securities issued. In the event the registration
statement was not filed within 60 days of the closing and declared effective not
later than 180 days following the closing date, the Company is required to pay
liquidated damages in an amount equal to 2% for each 30 days (or such lesser pro
rata amount for any period of less than 30 days) of the purchase price of the
outstanding shares, but not to exceed in the aggregate 12% of the aggregate
purchase price. The transaction documents also provide for the payment of
liquidated damages to the investors in certain events, including the Company's
failure to maintain an effective registration statement covering the resale of
the common shares issued or issuable upon exercise of the warrants. The Company
filed its registration statement on October 19, 2007 and it was declared
effective on November 5, 2007.

The securities are subject to anti-dilution protections afforded to the
purchasers. In the event the Company were to issue any shares of common stock or
securities convertible into or exercisable for shares of common stock to any
third party purchaser at a price per share of common stock or exercise price per
share which is less than the per share purchase price of the shares of common
stock in this offering, or less than the exercise price per warrant share,
respectively, without the consent of the subscribers then holding securities
issued in this offering, the purchaser is given the right to apply the lowest
such price to the purchase price of shares purchased and still held by the
purchaser and to shares issued upon exercise of the warrants and still held by
the purchaser (which will result in the issuance of additional shares to the
purchaser) and to the exercise price of any unexercised warrants. In addition,
until eight (8) months after the Effective Date of the Registration Statement,
purchasers will have certain rights of first refusal with respect to subsequent
offers, if any, by the Company for the sale of its securities or debt
obligations. The anti-dilution provisions and the right of first refusal do not
apply with respect to certain limited exceptions, including strategic license
agreements, mergers and similar acquisitions and certain option programs.

                                      F-25
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The Company paid Skyebanc, Inc., a broker-dealer and FINRA member firm, a
finder's fee of $10,800 and issued it common stock purchase warrants to purchase
an aggregate of 180,000 shares of our common stock which are identical to the
warrants issued in the offering. The Company also paid Joseph Stevens & Company,
Inc., a broker-dealer and FINRA member firm, a finder's fee of $28,200 and
issued it common stock purchase warrants to purchase an aggregate of 470,000
shares of our common stock which are identical to the warrants issued in the
offering. The Company paid legal fees of the purchasers' counsel of and other
legal fees of $47,500 and the Company also paid a due diligence fee of $247,240
in cash to certain of the investors or their advisors and these entities common
stock purchase warrants to purchase an aggregate of 4,120,673 shares of common
stock as an additional due diligence fee.

Common Stock Issued for Debt

In March 2006, holders of the $669,500 convertible notes payable converted
$142,500 of debt into 647,727 shares of common stock at a conversion price per
share of $.22. This conversion price was less than the original agreed upon
conversion price of $.26 per share resulting in additional 99,650 shares being
issued (included in 647,727 shares issued above). In connection with the
reduction of the conversion price and the issuance of additional shares, the
Company recorded interest expense of $21,923.

Common Stock Issued for Warrants

In April 2006, the Company issued 399,025 shares of common stock in a cashless
exercise of 529,250 warrants that were previously granted to investors.

Common Stock Issued for Liquidating Damages

On May 31, 2006, the Company issued 392,000 shares of its common stock for
payment of liquidating damages in connection with the registration statement
covering the shares of common stock sold in a 2004 private placement. The shares
were issued at the fair values at the date of the issuance of $94,080 or $.24
per share and included in registration rights penalties on the accompanying
consolidated statement of operations..

On November 29, 2006, the Company issued 273,036 shares of its common stock for
payment of accrued liquidating damages in connection with the registration
statement covering the shares of common stock sold in a 2006 private placement.
The shares were issued at the fair values at the date of the issuance of $27,303
or $.10 per share. This was recorded as registration rights penalties.

Common Stock Issued for Acquisitions

On June 27, 2007, in connection with an acquisition (see Note 2), the Company
issued 12,500,000 shares of its common stock. The Company valued these common
shares at the fair market value on the acquisition date of $0.095 per share or
$1,187,500 based on the trading price of common shares.

On September 30, 2007, in connection with the acquisition of 60% of Big Tree,
the Company issued 8,250,000 shares of its common stock. On December 31, 2007,
the Company issued an additional 1.750,000 shares of its common stock for the
Big Tree acquisition for an aggregate of 10,000,000 shares (See Note 2).

                                      F-26
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Other

On January 1, 2006, the Company entered into a stock exchange agreement with
UT-Battelle, LLC. In connection with this agreement, UT-Battelle, LLC returned
683,333 shares of common stock previously issued to the Company for $150,000 in
cash. The Company cancelled the returned shares.

For the year ended December 31, 2006, the Company amortized stock-based
compensation of $778,070 from the issuance of shares, options, and warrants in
2005 and 2006.

On December 29, 2006, the Company obtained through a vote of majority of its
shareholders the approval to increase the authorized common shares from
100,000,000 to 350,000,000 shares of common stock at $0.10 par value.

On July 12, 2007, the Company amended its article of incorporation to change the
par value of the Company's common stock to $.001 per share.

On November 8, 2007, the Company filed Articles of Amendment to its Articles of
Incorporation with the Secretary of State of Florida to:

   o change the name of our company to China America Holdings, Inc., and

   o increase the number of our authorized shares of common stock from
     350,000,000 shares to 500,000,000 shares.

         This action was approved on November 5, 2007 by the Company's Board of
Directors by a written consent in lieu of a special meeting in accordance with
the relevant sections of the Florida Business Corporation Act. In addition, the
Company's management together with certain shareholders who collectively hold a
majority in interest of the Company's issued and outstanding voting stock
approved this action by written consent in lieu of a special meeting of the
Company's shareholders effective November 8, 2007 in accordance with the
relevant sections of the Florida Business Corporation Act. This action will be
effective as of the close of business on November 26, 2007.

Stock options

1999 Equity Compensation Plan

On July 19, 1999, the board of directors adopted the Company's 1999 Stock Option
Plan (the "1999 Plan"). The Company has reserved 1,500,000 shares of common
stock for issuance upon exercise of options granted from time to time under the
1999 stock option plan. The 1999 stock option plan is intended to assist the
Company in securing and retaining key employees, directors and consultants by
allowing them to participate in the Company's ownership and growth through the
grant of incentive and non-qualified options. Under the stock option plan, the
Company may grant incentive stock options only to key employees and employee
directors, or the Company may grant non-qualified options to employees,
officers, directors and consultants. The 1999 stock option plan is currently
administered by the Company's board of directors. Subject to the provisions of
the 1999 stock option plan, the board will determine who shall receive options,
the number of shares of common stock that may be purchased under the options,

                                      F-27
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

the time and manner of exercise of options and exercise prices. The term of the
options granted under the 1999 stock option plan may not exceed ten years (five
years for an incentive stock option granted to an optionee owning more than 10%
of our voting stock).

The exercise price for incentive stock options will be equal to or greater than
100% of the fair market value of the shares of the common stock at the time
granted. However, the incentive stock options granted to a 10% holder of the
Company's voting stock are exercisable at a price equal to or greater than 110%
of the fair market value of the common stock at the date of the grant. The
exercise price for non-qualified options will be set by the board, in its
discretion, but in no event shall the exercise price be less than 75% of the
fair market value of the shares of common stock on the date of grant. The
exercise price may be payable in cash or, with the approval of the board, by
delivery of shares or a combination of cash and shares. Shares of common stock
received upon exercise of options will be subject to restrictions on sale or
transfer.

2001 Equity Compensation Plan

On November 26, 2001, the board of directors adopted the Company's 2001 Equity
Compensation Plan (the "2001 Plan"). The Company has reserved 2,000,000 shares
of the Company's common stock. The purpose of the 2001 Plan is to provide
designated employees, certain key advisors who perform services for the Company,
and non-employee board members with the opportunity to receive grants of
incentive stock options, nonqualified stock options and restricted stock. The
Company believes that the Plan will encourage the participants to contribute
materially to the growth of the Company, thereby benefiting the Company's
shareholders. The Plan will be administered by the Company's board of directors
or a committee appointed by the board. Subject to the provisions of the stock
option plan, the board of directors or its appointed committee shall have the
sole authority to determine the individuals to whom grants shall be made, the
type, size and terms of the grants to be made to each individual. In addition,
the board or its appointed committee will determine the time when the grants
will be made and the duration of grants including exercise or restrictions and
criteria for exercisability.

The term of the options granted under the 2001 Plan may not exceed ten years
(five years for an incentive stock option granted to an optionee owning more
than 10% of our voting stock). The exercise price for incentive stock options
may be equal to or greater than the fair market value of the shares of the
common stock at the time granted. However, the incentive stock options granted
to a 10% holder of the Company's voting stock are exercisable at a price equal
to or greater than 110% of the fair market value of the common stock at the date
of the grant. In the case of an option granted that qualifies as performance
based compensation, the exercise price may not be less than 100% of the fair
market value of the Company's stock on the date of grant. The exercise price for
non-qualified options granted to non-employee directors shall equal 100% of the
fair market value of the Company's common stock at the date of grant. The
exercise price may be payable in cash or, with the approval of the board, by
delivery of shares or a combination of cash and shares. Shares of common stock
received upon exercise of options will be subject to restrictions on sale or
transfer.

                                      F-28
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

2005 Equity Compensation Plan

On June 16, 2005, the board of directors adopted the Company's 2005 equity
compensation plan (the "2005 Plan") and on June 16, 2005, the 2005 Plan was
ratified by holders of a majority of our outstanding common stock. The Company
had reserved 2,000,000 shares of common stock for issuance as stock grants and
upon exercise of options granted from time to time under the 2005 equity
compensation plan. The 2005 plan is intended to assist the Company in securing
and retaining key employees, directors and consultants by allowing them to
participate in our ownership and growth through the grant of incentive and
non-qualified options, as well as direct stock grants. Under the 2005 Plan, the
Company may grant incentive stock options only to key employees and employee
directors. The Company may grant non-qualified options and issue direct stock
awards to its employees, officers, directors and consultants. The Company's
Board of Directors currently administers the 2005 equity compensation plan.

Subject to the provisions of the 2005 Plan, the board will determine who shall
receive options or grants, the number of shares of common stock that may be
purchased under the options, the time and manner of exercise of options and
exercise prices. The term of options granted under the stock option plan may not
exceed ten years or five years for an incentive stock option granted to an
optionee owning more than 10% of our voting stock. The exercise price for
incentive stock options will be equal to or greater than 100% of the fair market
value of the shares of the common stock at the time granted. However, the
incentive stock options granted to a 10% holder of our voting stock are
exercisable at a price equal to or greater than 110% of the fair market value of
the common stock on the date of the grant. The exercise price for non-qualified
options will be set by the board, in its discretion, but in no event shall the
exercise price be less than the par value for our common stock The exercise
price may be payable in cash or, with the approval of the board, by delivery of
shares or by a combination of cash and shares. The board may also direct the
issuance of shares of our common stock as awards under the 2005 plan.

Absent registration under the Securities Act of 1933, as amended, or the
availability of an applicable exemption there from, shares of common stock
received as stock grants and upon exercise of options will be subject to
restrictions on sale or transfer.

On June 26, 2007 the Company's Board of Directors adopted a resolution approving
an increase in the number of shares subject to the 2005 Equity Compensation
Plan, as amended, to 5,000,000 shares from 2,000,000 shares.

Stock Option Grants

On September 1, 2006, the Company granted five-year options to purchase 750,000
shares of common stock to an employee and to two officers/directors of the
Company at an exercise price of $.20 per share. The Company valued these
warrants utilizing the Black-Scholes options pricing model at approximately
$0.20 or $150,000. For the year ended December 31, 2006, in connection with
these options, the Company recorded non-cash compensation expense of $150,000.

On January 30, 2007, the Company granted five-year options to purchase 350,000
shares of common stock to two officers/directors of the Company at an exercise
price of $.08 per share. The Company valued these options utilizing the
Black-Scholes options pricing model at approximately $0.08 or $28,000. In
connection with these options, the Company recorded stock-based compensation
expense of $28,000.

                                      F-29
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

On June 28, 2007, the Company granted five-year options to purchase 1,000,000
and 600,000 shares of common stock to an officer/director of the Company and to
a consultant, respectively, at an exercise price of $.08 per share. The Company
valued these stock options utilizing the Black-Scholes options pricing model at
approximately $0.059 or $93,686. In connection with these options, the Company
recorded stock-based compensation expense of $58,600 and stock-based consulting
expense of $35,086.

On June 30, 2007, the Company cancelled an aggregate of 1,000,000 stock options
with an exercise price of $0.22 previously granted to two officers and a former
officer.

On August 23, 2007, the Company granted five-year options to purchase 5,000,000
shares of common stock to an officer/director of the Company, at an exercise
price of $.07 per share. The Company valued these stock options utilizing the
Black-Scholes options pricing model at approximately $0.07 or $242,459. In
connection with these options, the Company recorded stock-based compensation
expense of $242,459.

On December 13, 2007, the Company granted five-year options to purchase 400,000
shares of common stock to an officer/director of the Company, at an exercise
price of $.07 per share. The Company valued these stock options utilizing the
Black-Scholes options pricing model at approximately $0.083 or $33,245. In
connection with these options, the Company recorded stock-based compensation
expense of $33,245.

During 2007, the fair value of the stock option granted were estimated using the
Black-Scholes option pricing model with the following assumptions:

                                                         2007            2006
                                                     -----------     -----------
Dividend rate ...............................                 0%             0%
Term (in years) .............................            5 years        5 years
Volatility ..................................         74% - 120%           280%
Risk-free interest rate .....................        3.54%-4.97%          4.70%

Stock option activity for the years ended December 31, 2007 and 2006 is
summarized as follows:
<TABLE>
<CAPTION>
                                      Year Ended December 31, 2007   Year Ended December 31, 2006
                                      ----------------------------   ----------------------------
                                                      Weighted                      Weighted
                                      Number of        Average        Number of      Average
                                       Options     Exercise Price      Options    Exercise Price
                                      ----------   --------------    ----------   --------------
<S>                                   <C>          <C>               <C>          <C>
Balance at beginning of year ......    4,120,000   $         0.24     4,445,000   $         0.32
Granted ...........................    7,750,000             0.07       750,000             0.20
Exercised .........................            -                -             -             0.00
Forfeited .........................   (2,750,000)            0.20    (1,075,000)            0.55
                                      ----------   --------------    -----------  --------------
Balance at end of year ............    9,300,000   $         0.10     4,120,000   $         0.24
                                      ==========   ==============    ===========  ==============

Options exercisable at end of year.    9,300,000   $         0.10     4,120,000   $         0.24
                                      ==========   ==============    ===========  ==============
Weighted average fair value of
options granted during the year....                $         0.05                 $         0.20
                                                   ==============                 ==============
</TABLE>
                                      F-30
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The following table summarizes the Company's stock options outstanding at
December 31, 2007:

                  Options Outstanding                     Options Exercisable
-----------------------------------------------------   ------------------------
                                Weighted
                  Number         Average     Weighted       Number      Weighted
 Range of     Outstanding at    Remaining     Average   Exercisable at   Average
 Exercise      December 31,    Contractual   Exercise    December 31,   Exercise
  Price            2007           Life        Price          2007        Price
-----------   --------------   -----------   --------   --------------  --------
$ 0.07-0.08      7,750,000      4.65 Years   $  0.073      7,750,000    $  0.073
       0.35        250,000      0.75 Years      0.35         250,000       0.35
  0.19-.020      1,300,000      2.30 Years      0.20       1,300,000       0.20
              --------------                 --------   --------------  --------

                 9,300,000                   $  0.10       9,300,000    $  0.10
              ==============                 ========   ==============  ========

Common Stock Warrants
---------------------

On March 7, 2006, in connection with a private placement, the Company granted
5,570,455 purchase warrants to investors. The warrants are exercisable at $.35
per common share and expire in five years.

In April 2006, the Company issued 399,025 shares of common stock in a cashless
exercise of 529,250 warrants that were previously granted to investors.

On April 25, 2006, the Company granted 100,000 warrants to a consultant at an
exercise price of $.20 per share. The Company valued these warrants utilizing
the Black-Scholes options pricing model at approximately $0.335 or $33,500. For
the year ended December 31, 2006, in connection with these warrants, the Company
recorded stock-based consulting expense of $33,500.

On May 31, 2006, the Company granted 98,000 warrants for payment of liquidating
damages in connection with the registration statement covering the shares of
common stock sold in a 2004 private placement. The Company valued these warrants
utilizing the Black-Scholes options pricing model at approximately $0.194 or
$19,049.

On March 31, 2007, in connection with a private placement, the Company granted
2,100,000 purchase warrants to investors. The warrants are exercisable at $.10
per common share and expire in five years.

In August and September 2007, in connection with a private placement, the
Company granted an aggregate of 52,477,408 purchase warrants to investors. The
warrants are exercisable at $.12 per common share and expire in five years.

                                      F-31
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

Stock warrant activity for the years ended December 31, 2007 and 2006 is
summarized as follows:
<TABLE>
<CAPTION>
                                      Year Ended December 31, 2007   Year Ended December 31, 2006
                                      ----------------------------   ----------------------------
                                                      Weighted                      Weighted
                                      Number of       Average        Number of      Average
                                       Warrants    Exercise Price     Warrants    Exercise Price
                                      ----------   --------------    ----------   --------------
<S>                                   <C>          <C>               <C>          <C>
Balance at beginning of year ......   18,010,295   $         0.55    13,460,340   $        0.67
Granted ...........................   54,577,408             0.12     5,768,455            0.35
Exercised .........................            -                -      (529,250)           0.185
Forfeited .........................   (4,776,090)            1,19      (689,250)              -
                                      ----------   --------------    -----------  --------------
Balance at end of year ............   67,811,613   $         0.16    18,010,295   $        0.55
                                      ==========   ==============    ===========  ==============

Warrants exercisable at end of year   67,811,613   $         0.16    18,010,295   $        0.55
                                      ==========   ==============    ===========  ==============
</TABLE>
The following table summarizes the Company's stock warrants outstanding at
December 31, 2007:

               Warrants Outstanding                       Warrants Exercisable
-----------------------------------------------------   ------------------------
                                Weighted
                  Number         Average     Weighted       Number      Weighted
Range of      Outstanding at    Remaining    Average    Exercisable at   Average
Exercise      September 30,    Contractual   Exercise    September 30,  Exercise
  Price            2007            Life        Price          2007         Price
-----------   --------------   -----------   --------   --------------  --------
$ 0.35-0.55      8,218,455      2.50 Years   $  0.40       8,218,455    $  0.40
       0.30        200,000      0.40 Years      0.30         200,000       0.30
  0.16-0.20      4,815,750      2.55 Years      0.18       4,815,750       0.18
       0.12     52,477,408      4.75 Years      0.12      52,477,408       0.12
       0.10      2,100,000      4.25 Years      0.10       2,100,000       0.10
              --------------                 --------   --------------  --------
                67,811,613                   $  0.16      67,811,613    $  0.16
              ==============                 ========   ==============  ========

NOTE 9 - INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires
the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statements and the tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax losses and tax credit carryforwards. SFAS 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood of realization
of deferred tax assets. Realization of deferred tax assets, including those
related to the U.S. net operating loss carryforwards, are dependent upon future
earnings, if any, of which the timing and amount are uncertain. Accordingly, the
net deferred tax asset related to the U.S. net operating loss carryforward has
been fully offset by a valuation allowance. The Company is governed by the
Income Tax Law of the People's Republic of China and the United States.

                                      F-32
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

The Company has a US net operating loss carry forward for tax purposes totaling
approximately $10,523,000 at December 31, 2007. The net operating loss carries
forwards for United States income taxes, which may be available to reduce future
years' taxable income. These carry forwards will expire, if not utilize, through
2027 and are subject to the Internal Revenue Code Section 382, which places a
limitation on the amount of taxable income that can be offset by net operating
losses after a change in ownership. . Management believes that the realization
of the benefits from these losses appears uncertain due to the Company's
continuing losses for United States income tax purposes. Accordingly, the
Company has provided a 100% valuation allowance on the deferred tax asset
benefit to reduce the asset to zero. Management will review this valuation
allowance periodically and make adjustments as warranted.

The Company's subsidiaries in China are governed by the Income Tax Law of the
Peoples Republic of China concerning Foreign Investment Enterprises and Foreign
Enterprises and local income tax laws (the "PRC Income Tax Law"). Pursuant to
the PRC Income Tax Law, wholly foreign owned enterprises are subject to tax at a
statutory rate of approximately 33% (30% state income tax plus 3% local income
tax). The Company intends to utilize profits earned by its Chinese based
subsidiaries in China to expand its PRC based operations. The Company's
subsidiary, Shanghai Wuling Environmental Material Co., Ltd. has received a 100%
tax exemption for the 2007 and 2006 period and will be subject to the these
statutory rates in 2008.

The table below summarizes the differences between the Company's effective tax
rate and the statutory federal rate as follows for the periods ended December
31, 2007 and 2006:
                                                       Year Ended    Year Ended
                                                      December 31,  December 31,
                                                          2007          2006
                                                      -----------   -----------
Tax benefit computed at "expected" statutory rate ..  $  (380,000)  $(1,290,000)
State income taxes, net of federal effect ..........      (12,000)      (38,000)
US effective rate in excess of China tax rate ......       (4,000)            -
Non-deductible stock-based compensation ............      375,000       253,000
Other permanent differences ........................            -        89,000
China tax exemptions ...............................     (184,000)            -
Increase in valuation allowance ....................      205,000       986,000
                                                      -----------   -----------
Net income tax benefit .............................  $         -   $         -
                                                      ===========   ===========

Deferred tax assets and liabilities are provided for significant income and
expense items recognized in different years for tax and financial reporting
purposes. Temporary differences, which give rise to a net deferred tax asset is
as follows:

                                      F-33
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

                                                      December 31,  December 31,
                                                          2007          2006
                                                      ------------  ------------
Tax benefit of net operating loss carryforward .....     3,683,000  $ 3,661,000
Stock-based compensation. ..........................       193,000            -
Allowance for inventory obsolescence ...............             -       10,500
Valuation allowance ................................    (3,876,000)  (3,671,500)
                                                      ------------  -----------
Net deferred tax asset recorded ....................  $          -  $         -
                                                      ============  ===========

After consideration of all the evidence, both positive and negative, management
has recorded a valuation allowance at December 31, 2007 and 2006, due to the
uncertainty of realizing the deferred income tax assets. During 2007, the
valuation allowance was increased by $205,000 from the prior year.

NOTE 9 - OPERATING RISK

(a) Concentration of credit risk

Financial instruments that potentially expose the Company to concentration of
credit risk consist primarily of cash, accounts and notes receivable. The
Company places its cash with financial institutions with high credit ratings.
Substantially all of the Company's cash accounts are located in Shanghai, of the
Peoples Republic of China ("PRC").

(b) Country risk

Revenues of Aohong are mainly derived from the sale of refrigerant products in
the PRC. The Company hopes to expand its operations to countries outside the
PRC, however, such expansion has not been commenced and there are no assurances
that the Company will be able to achieve such an expansion successfully.
Therefore, a downturn or stagnation in the economic environment of the PRC could
have a material adverse effect on the Company's financial condition.

(c) Product risk

In addition to competing with other companies, Aohong could have to compete with
larger U.S. companies who have greater funds available for expansion, marketing,
research and development and the ability to attract more qualified personnel if
access is allowed into the PRC market. If U.S. companies do gain access to the
PRC markets, they may be able to offer products at a lower price. There can be
no assurance that Aohong will remain competitive should this occur.

(d) 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 Chinese
Renminbi (RMB) converted to U.S. dollars on that date. The exchange rate could
fluctuate depending on changes in the political and economic environments
without notice.

(e) Key personnel risk

The Company's future success depends on the continued services of Mr. Aiuhu Hu
in China and Dore Perler in the United States. The loss of their services would
be detrimental to the Company and could have an adverse effect on business
development. The Company does not currently maintain key man insurance on their
lives. Future success is also dependent on the ability to identify, hire, train
and retain other qualified managerial and other employees.

                                      F-34
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 10 - COMMITMENTS

Employment agreements

On May 1, 2007, the Company entered into a three-year employment contract with
its Chief Executive Officer which expires on May 1, 2010. Specific terms are
detailed below:

   Pursuant to an employment agreement with the Company's chief executive
   officer (CEO), in consideration for services as CEO, effective May 1, 2007,
   the Company will pay CEO a salary of $156,000 per annum. On each successive
   anniversary date of this agreement, the Board shall review the base
   compensation and at its sole discretion may elect to increase the base
   salary. In addition, the CEO is provided a car allowance of up to $500 per
   month.

   Incentive Compensation

      In addition to the base salary, the Company's CEO is entitled to receive,
      as incentive compensation in respect of each calendar year (or portion
      thereof), an amount determined in accordance with any bonus or short term
      incentive compensation program, which may be based upon achieving certain
      specified performance criteria, which may be established by the board. The
      Company's Board of Directors shall review the determination as to the
      amounts of any awards available to its CEO under these programs at least
      annually. The review shall ensure that such amounts are competitive, and
      comparable, with awards granted to similarly situated executives of
      publicly held companies comparable to the Company.

   Termination

      In the event of involuntary termination without "cause" or disability,
      each executive will be entitled to the following compensation for the
      succeeding 24 months following the date of termination:

      o  A total of two hundred (200%) percent of the executive's base
         compensation in effect on the date of the employment termination; plus

      o  A total of two hundred (200%) percent of the executive's annual
         incentive bonus earned on a quarterly basis as of the date of the
         termination, assuming the executive was employed on the last day of the
         quarter in which termination of employment occurred.

In the event the executive is terminated for "cause" the executive will be
entitled to any unpaid salary through the date of termination and deferred
compensation will be forfeited. In the event there is a "Change in Control", we
will be required to pay the executive a lump sum equal to 299% of the
executive's base compensation in effect on the date of employment plus 299% of
the executive's prior year incentive bonus. The executives may, at their
discretion, elect to terminate the contract the executive must give the board 90
days written notice and the executive would not be entitled to severance
benefits.

                                      F-35
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 11 - SEGMENT INFORMATION

The following information is presented in accordance with SFAS No. 131,
Disclosure about Segments of an Enterprise and Related Information. In the year
ended December 31, 2007, the Company operated in three reportable business
segments - (1) Aohong segment (2) Biometrics segment, and (3) Big Tree segment.
The Company's reportable segments are strategic business units that offer
different products. The Company's reportable segments, although integral to the
success of the others, offer distinctly different products and services and
require different types of management focus. As such, these segments are managed
separately. In the 2006 period, the Company operated in the Biometrics segments
and did not have any other reportable segments. Condensed information with
respect to these reportable business segments for the year ended December 31,
2007 is as follows:

                            Aohong      Biometrics     Big Tree
                          Segment (1)   Segment (2)   Segment (3)   Consolidated
                          -----------   -----------   -----------   ------------

Net Revenues ...........  $16,197,391   $    92,962   $         -   $16,290,353
Cost of sales ..........   13,995,155         3,480             -    13,998,635
Operating expenses
(excluding depreciation)    1,153,356     1,755,973             -     2,909,329
Depreciation and
 amortization ..........       69,905         3,127             -        73,032
Interest expense .......       35,026         1,250             -        36,276
Net income (loss) ......      536,577    (1,655,180)            -    (1,118,603)
Segment Assets .........    9,754,217     1,046,735       473,340    11,274,292

(1) Includes activity from date of acquisition of June 29, 2007.
(2) Includes all general and administrative expenses incurred in the United
    States.
(3) Includes activity from the date of acquisition of August 31, 2007.

NOTE 12 - STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the
statutory surplus reserve, statutory public welfare fund and discretionary
surplus reserve, based on after-tax net income determined in accordance with
generally accepted accounting principles of the People's Republic of China (the
"PRC GAAP"). Appropriation to the statutory surplus reserve should be at least
10% of the after tax net income determined in accordance with the PRC GAAP until
the reserve is equal to 50% of the entities' registered capital or members'
equity. Appropriations to the statutory public welfare fund are at a minimum of
5% of the after tax net income determined in accordance with PRC GAAP.
Commencing on January 1, 2006, the new PRC regulations waived the requirement
for appropriating retained earnings to a welfare fund. For the period from
acquisition to December 31, 2007, statutory reserve activity is as follows:

                                              AoHong     Big Tree      Total
                                             --------    --------    --------
Balance - Date of acquisition ...........    $476,144    $      -    $476,144
Additional to statutory reserves ........     151,873           -     151,873
                                             --------    --------    --------
Balance - December 31, 2007 .............    $628,017    $      -    $628,017
                                             ========    ========    ========

                                      F-36
<PAGE>

                  CHINA AMERICA HOLDINGS, INC. AND SUBSIDIARIES
                         (FORMERLY SENSE HOLDINGS, INC.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2007 and 2006

NOTE 13 - SUBSEQUENT EVENTS

On January 5, 2008, the Company entered into a two month consulting agreement
for investor relations services. In connection with this consulting agreement,
the Company paid cash of $100,000 and agreed to issue 1,100,000 shares of its
common stock to the consultant. The shares issuable pursuant to this contract
were issued by a third party on behalf of the Company. The shares were issued at
the fair values at the date of the issuance of $110,000 or $.10 per share based
on the trading price of common shares. Accordingly, the Company recorded
consulting expense of $110,000 and contributed capital of $110,000.

On January 18, 2008, the Company issued 50,000 shares of its common stock to two
consultants for business development service services rendered. The shares were
issued at the fair values at the date of the issuance of $5,000 or $.10 per
share based on the trading price of common shares.

On February 8, 2008, the Company issued 60,000 shares of its common stock to a
consultant to satisfy accounts payable of $5,400 for previous accounting
services rendered. The shares were issued at the fair values at the date of the
issuance of $5,400 or $.09 per share based on the trading price of common
shares.

On March 28,2008, the Company's subsidiary, Big Tree, entered into a five year
Cooperation Agreement with the Guangdong Test Center of Product Quality
Supervision ("CEST"). Under the terms of the agreement, CEST will operate a toy
testing laboratory which is anticipated to begin operations once it receives
approval from the China National Accreditation Service for Conformity
Assessment. The laboratory will provide sample testing and finished product
inspection. CEST will assist Big Tree in providing the quality assurance
services including supplier evaluations, sample testing and finished product
inspect. Big Tree, which will be responsible for marketing these services, will
not perform any of the services. CEST will charge the center for the sample
testing and finished products inspection at a 30% discount of the market price.
Big Tree agreed to use its best efforts to develop business for CEST of not less
than $428,571 (RMB3 million) annually beginning in 2009, increasing to not less
than $714,286 (RMB 5 million) in 2013.

CEST will invest approximately $42,857 (RMB300,000) and provide technology and
lease various equipment. Big Tree is responsible for leasing the facility at
which the laboratory will operate and supervising the construction in accordance
with CEST's specifications. The agreement provides that the laboratory is to be
complete within three months of the execution of the agreement. In addition, Big
Tree committed to invest $500,000 (RMB3.5 million) to purchase testing equipment
and instruments, of which approximately $285,715 is to be funded within six
months from the date of the agreement and the remaining $214,286 within one
year. Big Tree is entitled to 30% of annual net profit of the laboratory
starting from July 1, 2008 which for the purposes of the agreement is considered
rent expense. Net profit is defined as the total revenue of testing services
subtracted by total cost of the center, including utility expenses, testing
materials expenses, office supply, travel expenses of testing engineers, salary
and benefits (estimated to be approximately 30% of total revenues),
administration cost (estimated to be approximately 8% of total revenue),
marketing and sales cost (on actual basis) and related application fees and
expenses.

During the first three years of the term the agreement may be terminated by
either party without notice upon the payment to the non-terminating party of
$14,286 (RMB100,000). During the remainder of the term, either party may
terminate upon six months notice and the payment of this penalty.

                                      F-37