**UNITED STATES**


**SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





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




For
      the
      quarterly period ended June
      30, 2008





or





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




For
      the
      transition period from _______ to _________





*Commission
      File No.* 000-51911





**AAMAXAN
      TRANSPORT GROUP, INC.**


(Exact
      name of registrant as specified in its charter)




Delaware
            
            20-5772205(State
                or other jurisdiction of incorporation)
            
            I.R.S.
                Employer Identification Number




Suite
      6B,
      1440 Hongqiao Road


Changning
      District


Shanghai


People's
      Republic of China 200336


(Address
      of principal executive offices)





(011)
      86-215-080-5789


(Registrant's
      telephone number, including area code)





_____________________________


(Former
      name, former address and former fiscal year, if changed since last
      report)





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. x Yes o No





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





Large accelerated filer
            o
            
            Accelerated filer
            oNon-accelerated filer
            o
            (Do not check if a smaller reporting company)
            Smaller reporting company
            x





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





The
      number of shares of the issuer’s common stock, $.0001 per share, outstanding at
      August 19, 2008 was 15,991,812.










**AAMAXAN
      TRANSPORT GROUP, INC.**





TABLE
      OF
      CONTENTS





PagePART IFINANCIAL INFORMATIONItem 1.
            
            Financial Statements
            3Item 2.
            
            Management’s Discussion and Analysis of Financial Condition and Results of Operations
            35Item 4T.
            
            Controls and Procedures
            45PART II  OTHER INFORMATIONItem 6.
            
            Exhibits
            45Signatures
            
            
            46Exhibits/Certifications




2




**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**





**AAMAXAN
      TRANSPORT GROUP, INC.**





**FINANCIAL
      STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US dollars)(Unaudited)**


3





**AAMAXAN
      TRANSPORT GROUP, INC.**




CONTENTS
            
            PAGESCONSOLIDATED
                BALANCE SHEETS
            
            
            5
                - 6CONSOLIDATED
                STATEMENTS OF INCOME
            
            
            7 -
                8CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY
            
            
            9CONSOLIDATED
                STATEMENTS OF CASH FLOWS
            
            
            10 -
                12NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS
            
            
            13
                - 34




4




**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                BALANCE SHEETS****AS
                AT JUNE 30, 2008 AND DECEMBER 31, 2007****(Stated
                in US Dollars)(Unaudited)**





Note
            
            June
                30,
              2008
            
            December
                31,
              2007**ASSETS**Current
                assetsCash
                and cash equivalents
            
            
            
            
            $
            10,769,286
            
            $
            2,299,772Trade
                receivables, net
            
            
            4
            
            
            4,022,912
            
            
            2,408,223Subscription
                receivables
            
            
            5
            
            
            394,916
            
            
            371,035Other
                receivables
            
            
            6
            
            
            1,222,957
            
            
            197,845Inventories
            
            
            7
            
            
            1,826,478
            
            
            1,206,676Advances
                to suppliers
            
            
            
            
            
            4,257,726
            
            
            1,125,088Prepayments
            
            
            
            
            
            2,692
            
            
            1,368Current
                portion of long termprepayments
            
            
            10
            
            
            1,455,223
            
            
            1,367,222Total
                current assets
            
            
            
            
            $
            23,952,190
            
            $
            8,977,229Restricted
                cash
            
            
            
            
            
            300,000
            
            
            -Due
                from a director
            
            
            8
            
            
            54,292
            
            
            6,796Goodwill
                arising from acquisition
            
            
            
            
            
            43,259
            
            
            40,643Deposit
                for an unlisted investment
            
            
            9
            
            
            873,134
            
            
            820,333Long
                term prepayments
            
            
            10
            
            
            3,371,266
            
            
            3,851,009Plant
                and equipment, net
            
            
            11
            
            
            190,407
            
            
            184,330Intangible
                assets, net
            
            
            12
            
            
            5,043,802
            
            
            5,023,174**TOTAL
                ASSETS**
            
            
            
            
            $
            33,828,350
            
            $
            18,903,514**LIABILITIES
                AND****STOCKHOLDERS’
                EQUITY**Current
                liabilitiesAccounts
                payable
            
            
            
            
            $
            2,852,643
            
            $
            2,538,964Due
                to a related company
            
            
            13
            
            
            135,086
            
            
            54,689Customers’
                deposits
            
            
            
            
            
            24,271
            
            
            49,325Accruals
            
            
            
            
            
            401,275
            
            
            316,545Other
                payables
            
            
            14
            
            
            1,213,594
            
            
            719,172Warrant
                liabilities
            
            
            21
            
            
            4,028,229
            
            
            -Income
                tax payable
            
            
            
            
            
            664,241
            
            
            909,579Total
                current liabilities
            
            
            
            
            $
            9,319,339
            
            $
            4,588,274**TOTAL
                LIABILITIES**
            
            
            
            
            $
            9,319,339
            
            $
            4,588,274





See
      accompanying notes to consolidated financial statements


5





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                BALANCE SHEETS (Continued)****AS
                AT JUNE 30, 2008 AND DECEMBER 31, 2007****(Stated
                in US Dollars)(Unaudited)**





Note
            
            June
                30,
              2008
            
            December
                31,
              2007Commitments
                and contingencies
            
            
            18
            
            $
            -
            
            $
            -Minority
                interests
            
            
            
            
            $
            218,628
            
            $
            217,715Preferred
                Stock - $0.001 par value10,000,000
                share authorized ;4,008,188
                and nil sharesoutstanding
                respectively
            
            
            21
            
            $
            8,503,771
            
            $
            -**STOCKHOLDERS’
                EQUITY**Common
                stock - $0.0001 par value200,000,000
                shares authorized;15,991,812
                and 14,991,812 sharesoutstanding
                respectively
            
            
            
            
            $
            1,599
            
            $
            1,499Additional
                paid-in capital
            
            
            
            
            
            1,723,129
            
            
            588,265Statutory
                reserves
            
            
            
            
            
            2,529,527
            
            
            2,529,527Retained
                profits
            
            
            
            
            
            9,598,089
            
            
            10,085,066Accumulated
                other comprehensiveincome
            
            
            
            
            
            1,934,268
            
            
            893,168$
            15,786,612
            
            $
            14,097,525**TOTAL
                LIABILITIES AND****STOCKHOLDERS’
                EQUITY**
            
            
            
            
            $
            33,828,350
            
            $
            18,903,514




See
      accompanying notes to consolidated financial statements


6





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENT OF INCOME****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**Six
                months ended June 30,2008
            
            2007NotesNet
                revenues
            
            
            16
            
            $
            19,978,024
            
            $
            15,816,114Cost
                of net revenues
            
            
            
            
            
            (12,672,104
            )
            
            (9,732,701
            )Gross
                profit
            
            
            
            
            $
            7,305,920
            
            $
            6,083,413Selling
                expenses
            
            
            
            
            
            (925,018
            )
            
            (301,428
            )General
                and administrative expenses
            
            
            
            
            
            (1,396,780
            )
            
            (660,955
            )Income
                from operation
            
            
            
            
            $
            4,984,122
            
            $
            5,121,030Interest
                income
            
            
            
            
            
            12,888
            
            
            1,075Income
                before income taxes
            
            
            
            
            $
            4,997,010
            
            $
            5,122,105Income
                taxes
            
            
            17
            
            
            (1,443,043
            )
            
            (1,729,465
            )Net
                income before minority interests
            
            
            
            
            $
            3,553,967
            
            $
            3,392,640Minority
                interests
            
            
            
            
            
            913
            
            
            558Net
                income
            
            
            
            
            
            3,554,880
            
            
            3,393,198Net
                income per share:-Basic
            
            
            
            
            $
            0.22
            
            $
            0.23-Diluted
            
            
            
            
            $
            0.18
            
            $
            0.23Weighted
                average number of common stock-Basic
            
            
            15
            
            $
            15,991,812
            
            $
            14,991,812-Diluted
            
            
            15
            
            $
            20,000,000
            
            $
            14,991,812




See
      accompanying notes to consolidated financial statements


7





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENT OF INCOME****FOR
                THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**Three
                months ended June 30,2008
            
            2007NotesNet
                revenues
            
            
            
            
            $
            9,781,453
            
            $
            7,872,705Cost
                of net revenues
            
            
            
            
            
            (6,207,537
            )
            
            (4,857,027
            )Gross
                profit
            
            
            
            
            $
            3,573,916
            
            $
            3,015,678Selling
                expenses
            
            
            
            
            
            (287,148
            )
            
            (132,750
            )General
                and administrative expenses
            
            
            
            
            
            (1,060,792
            )
            
            (349,801
            )Income
                from operation
            
            
            
            
            $
            2,225,976
            
            $
            2,533,127Interest
                income
            
            
            
            
            
            9,877
            
            
            558Income
                before income taxes
            
            
            
            
            $
            2,235,853
            
            $
            2,533,685Income
                taxes
            
            
            17
            
            
            (654,923
            )
            
            (875,724
            )Net
                income before minority interests
            
            
            
            
            $
            1,580,930
            
            $
            1,657,961Minority
                interests
            
            
            
            
            
            424
            
            
            2,185Net
                income
            
            
            
            
            
            1,581,354
            
            
            1,660,146Net
                income per share:-Basic
            
            
            
            
            $
            0.11
            
            $
            0.11-Diluted
            
            
            
            
            $
            0.11
            
            $
            0.11Weighted
                average number of common stock-Basic
            
            
            
            
            $
            14,991,812
            
            $
            14,991,812-Diluted
            
            
            
            
            $
            14,991,812
            
            $
            14,991,812





See
      accompanying notes to consolidated financial statements





8




**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY****FOR
                THE YEAR ENDED DECEMBER 31, 2007 AND SIX MONTHS ENDED JUNE 30,
                2008****(Stated
                in US Dollars)(Unaudited)**




AccumulatedCommon
                stock
            
            Additional
            
            
            
            
            
            otherNo.
                of
            
            
            
            paid-in
            
            Statutory
            
            Retained
            
            comprehensiveshare
            
            Amount
            
            capital
            
            reserves
            
            earnings
            
            income
            
            TotalBalance,
                January 1,
            
            
            14,991,812
            
            $
            1,499
            
            $
            233,804
            
            $
            1,394,556
            
            $
            5,961,705
            
            $
            269,473
            
            $
            7,861,0372007Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,227,560
            
            
            -
            
            
            7,227,560Contribution
                fromshareholders
            
            
            -
            
            
            -
            
            
            354,461
            
            
            -
            
            
            -
            
            
            -
            
            
            354,461Appropriations
                tostatutory
                reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            1,134,971
            
            
            (1,134,971
            )
            
            -
            
            
            -Dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,969,228
            )
            
            -
            
            
            (1,969,228
            )Foreign
                currencytranslation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            623,695
            
            
            623,695Balance,
                December31,
                2007
            
            
            14,991,812
            
            $
            1,499
            
            $
            588,265
            
            $
            2,529,527
            
            $
            10,085,066
            
            $
            893,168
            
            $
            14,097,525Balance,
                January1,
                2008
            
            
            14,991,812
            
            $
            1,499
            
            $
            588,265
            
            $
            2,529,527
            
            $
            10,085,066
            
            $
            893,168
            
            $
            14,097,525Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,554,880
            
            
            -
            
            
            3,554,880Reverseacquisition
            
            
            178,571
            
            
            18
            
            
            (74,411
            )
            
            -
            
            
            -
            
            
            -
            
            
            (74,393
            )Issuance
                forservices
            
            
            821,429
            
            
            82
            
            
            (82
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Issuance
                of preferredstock
                and warrants
            
            
            -
            
            
            -
            
            
            1,209,357
            
            
            -
            
            
            (4,041,857
            )
            
            -
            
            
            (2,832,500
            )Foreign
                currencytranslationadjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,041,100
            
            
            1,041,100Balance,
                June 30,2008
            
            
            15,991,812
            
            $
            1,599
            
            $
            1,723,129
            
            $
            2,529,527
            
            $
            9,598,089
            
            $
            1,934,268
            
            $
            15,786,612




See
      accompanying notes to consolidated financial statements


9





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Six
                months ended June 30,2008
            
            2007Cash
                flows from operating activitiesNet
                income
            
            $
            3,554,880
            
            $
            3,393,198Depreciation
            
            
            16,426
            
            
            13,870Amortization
            
            
            294,091
            
            
            266,063Amortization
                of long term prepayment
            
            
            706,951
            
            
            -Minority
                interests
            
            
            (913
            )
            
            (558
            )Adjustments
                to reconcile net income to netcash
                provided by (used in) operating activities:Trade
                receivables
            
            
            (1,418,237
            )
            
            (477,034
            )Subscription
                receivables
            
            
            -
            
            
            (351,072
            )Other
                receivables
            
            
            (1,011,589
            )
            
            17,356Inventories
            
            
            (526,741
            )
            
            (324,093
            )Advances
                to suppliers
            
            
            (2,973,327
            )
            
            2,692Prepayments
            
            
            (1,016
            )
            
            (25,905
            )Accounts
                payable
            
            
            145,989
            
            
            406,632Customers’
                deposits
            
            
            (27,428
            )
            
            (328,706
            )Accruals
            
            
            62,529
            
            
            (3,535
            )Other
                payables
            
            
            435,408
            
            
            (699,145
            )Income
                tax payable
            
            
            (295,254
            )
            
            (76,348
            )Net
                cash (used in) provided by operatingactivities
            
            $
            (1,038,231
            )
            $
            1,813,415Cash
                flows from investing activitiesRestricted
                cash
            
            $
            (300,000
            )
            $
            -Acquisition
                of a subsidiary
            
            
            -
            
            
            (377,489
            )Purchase
                of plant and equipment
            
            
            (10,900
            )
            
            (58,532
            )Proceeds
                from sale of plant and equipment
            
            
            -
            
            
            15,977Purchase
                of intangible assets
            
            
            -
            
            
            52,825Due
                from a director
            
            
            (45,298
            )
            
            241,324Net
                cash used in investing activities
            
            $
            (356,198
            )
            $
            (125,895
            )





See
      accompanying notes to consolidated financial statements


10





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (Continued)****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Six
                months ended June 30,2008
            
            2007Cash
                flows from financing activitiesIssuance
                of stock
            
            $
            -
            
            $
            355,757Proceeds
                from issuance of preferred stockand
                warrants, net of direct issue expenses,$2,832,502
            
            
            9,713,128
            
            
            -Dividend
                paid
            
            
            -
            
            
            (1,946,008
            )Advances
                from a related company
            
            
            2,300
            
            
            181,113Net
                cash provided by (used in) financingactivities
            
            $
            9,715,428
            
            $
            (1,409,138
            )Net
                cash and cash equivalents sourced
            
            $
            8,320,999
            
            $
            278,382Effect
                of foreign currency translation on cashand
                cash equivalents
            
            
            148,515
            
            
            298,299Cash
                and cash equivalents-beginning of year
            
            
            2,299,772
            
            
            1,896,853Cash
                and cash equivalents-end of year
            
            $
            10,769,286
            
            $
            2,473,534




Supplementary
                cash flow information:Interest
                received $
            
            
            12,888
            
            $
            1,075Tax
                paid
            
            
            1,738,296
            
            
            1,828,390




See
      accompanying notes to consolidated financial statements


11





**AAMAXAN
                TRANSPORT GROUP, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (Continued)****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





**SUPPLEMENTAL
      NON-CASH DISCLOSURES:**





On
      February 5, 2007, the Company acquired 81.6% interest of Shanghai Pharmaceutical
      & Hemo Tech International Co., Ltd. (Hemo) for $460,138 in cash and Hemo
      became a 81.6% owned subsidiary of the Company. The following represents the
      assets purchased and liabilities assumed at the acquisition date:





Cash
                and cash equivalents
            
            $
            255,974Inventory
            
            
            1,181,687Accounts
                receivable
            
            
            516,581Plant
                and equipment, net
            
            
            96,764Other
                receivables and prepayments
            
            
            241,392Other
                assets
            
            
            2,845Total
                assets purchased
            
            $
            2,295,243Accounts
                payable
            
            $
            (1,468,048
            )Other
                payables
            
            
            (195,694
            )Accrued
                liabilities
            
            
            (4,151
            )Customer
                deposits
            
            
            (13,672
            )Total
                liabilities assumed
            
            $
            (1,681,565
            )Total
                net assets
            
            $
            613,678Share
                percentage
            
            
            81.6
            %Net
                assets acquired
            
            $
            500,761Total
                actual paid
            
            $
            (460,138
            )Consideration
                Goodwill
            
            $
            40,623




12


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**




**1.**
            **ORGANIZATION
                AND****PRINCIPAL
                ACTIVITIES**





Aamaxan
      Transport Group,Inc. (the “Company”)
      was incorporated
      on June 3, 1998 under the laws of the State of Delaware under the name
      Worthington Venture Fund, Inc. (“WD”). On August 14, 1998, WD changed its name
      to Admax Technology, Inc.(“Admax”). On August 28, 1998, Admax merged with
      Worthington Venture Fund, Inc., a non-operating Utah shell corporation, and
      changed its name to Aamaxan Transport Group, Inc. Its primary activities through
      January 31, 2008 have been the attempted acquisition of interests in the
      trucking industry. The Company was completely dormant from mid-2000 to mid-2005,
      although there were two changes in control of the Company's outstanding common
      stock shares.





On
      April
      4, 2008, the Company entered into a stock purchase agreement with Kamick Assets
      Limited (“KAL”), a British Virgin Island company, and our then-current director
      Marc Juliar, pursuant to which, for a purchase price of $585,000 in cash, KAL
      acquired from Mr. Juliar 65,428 shares of the Company’s Common Stock and the
      right to nominate all members of the Company’s board. Pursuant to this
      agreement, the Company’s former sole director and officer resigned from his
      executive positions effective April 15, 2008, and resigned as a director
      effective ten days after a Form 14F-1 is filed with the SEC and distributed
      to
      the Company’s shareholders. Since April 15, 2008 Mr. Chen Zhong has been serving
      as our Chairman and Chief Executive Officer and Ms. Michelle Zhao served as
      the
      Company’s Chief Financial Officer until July 31, 2008. Mr. Chen Zhong holds an
      option to buy a 100% ownership interest in KAL. Mr. Chen Zhong and Ms. Zhao
      each
      hold similar management positions at KAL, Anhante (Beijing) Medical Technology
      Co., Ltd (“ABMT”) and Shanghai Medical Technology Co., Ltd.
      (“SMTL”)





On
      April
      15, 2008, the Company consummated a share exchange transaction with KAL, in
      which the Company exchanged 14,991,812 shares of the Company’s common stock, par
      value $0.0001 per share, for all of the issued and outstanding stock of Asia
      Business Management Group Limited (“ABM”) held by KAL. As a result of the share
      exchange transaction, ABM became the Company’s wholly-owned subsidiary, and ABMT
      became the Company’s indirectly wholly-owned subsidiary.





SMTL
      was
      established in Shanghai of the People’s Republic of China (the “PRC”) as a
      limited company on June 28, 2005. SMTL operates through itself and two
      subsidiaries located in mainland China: Shanghai Vantage Pharmaceutical
      Technology Co., Ltd (“Vantage”) and Shanghai Pharmaceutical & Hemo-tech
      International Co., Ltd (“Hemo”).





Vantage
      was established in Shanghai, PRC as a limited company on May 28,
      2004.




13


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES (C****ontinued****)**





In
      May,
      2004, Chen Zhong entered into the trust agreements with Sun Guang and Che
      Yingqian, which provided that Chen Zhong should consign Sun Guang and Che
      Yingqian as the registered shareholders to respectively holding 33% and 28%
      equity interests of Vantage on behalf of him, and Sun Guang and Che Yingqian
      would not enjoy the corresponding shareholders’ rights unless with the written
      authorization from Chen Zhong.





The
      SMTL
      and Chen Zhong signed the Consignment Agreement which stipulated that Chen
      Zhong
      should consign all its 95% equity interests in Vantage to the SMTL, and the
      SMTL
      should have the right to receive dividends and dispose of such consigned equity
      interests.





Chen
      Zhong executed an Equity Transfer Agreement with Sun Guang and Chen Yingqian
      on
      November 26, 2007, in which Sun Guang and Chen Yingqian should respectively
      transfer 33% and 28% of the equity interest in Vantage to Chen Zhong.





On
      the
      same day, at a Shareholders’ General Meeting, the shareholders of Vantage made a
      resolution for approval of the aforesaid equity transfer, and the Articles
      of
      Association of Vantage were revised accordingly.





Vantage
      had registered and filed the equity transfer and its revised Articles of
      Association with the relevant industry and commerce authority. On December
      3,
      2007, Shanghai Administration Bureau of Industry and Commerce, Changning Branch
      issued a new Business License to SMTL.





Hemo
      was
      established in Shanghai of the People’s Republic of China (the “PRC”) as a
      limited
      company on August 7, 2001.





On
      January 23, 2007, at a Shareholders’ Meeting of Hemo, the shareholders passed
      the resolution that China National Medical Equipment Corporation (the “China
      Equipment”) could duly transfer its 81.6% of the equity interests in Hemo to the
      Company.





On
      February 5, 2007, China National Medical Equipment Corporation and SMTL signed
      the Equity Transfer Agreement for the aforesaid equity interest transfer.





On
      February 13, 2007, China Beijing Equity Exchange issued the equity exchange
      voucher to execute the aforementioned transfer.





On
      the
      Articles of Association of Hemo were revised with respect to the aforesaid
      equity transfer, and Hemo registered and filed the revised Articles of
      Association with the relevant industry and commerce authority. Accordingly,
      SMTL
      became the holding company of Hemo.





SMTL
      is
      the holding company of, Vantage and Hemo through the aforesaid group
      restructuring.


14


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES (C****ontinued****)**




On
      June
      11, 2007, there was a reduction of registered capital by Shanghai Xinhui Science
      & Technology Investment Co., Ltd. of RMB 500,000, and the SMTL effective
      holding percentage of equity interests of Hemo increased from 81.6% to
      84.84%.





The
      Company and its subsidiary (hereinafter, collectively referred to as “the
      Group”) are engaged in the technical development, transfer, consulting and
      servicing of pharmaceutical and medical appliance, and the selling of diagnosis
      products.





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





*a)*
              *Method
                  of accounting*





The
      Company maintains its general ledger and journals with the accrual method
      accounting for financial reporting purposes. The financial statements and notes
      are representations of management. Accounting policies adopted by the Company
      conform to generally accepted accounting principles in the United States of
      America and have been consistently applied in the presentation of financial
      statements.





The
      interim results of operations are not necessarily indicative of the results
      to
      be expected for the fiscal year ending June 30, 2008. The Company’s consolidated
      balance sheet as of December 31, 2007 has been taken from the Company’s audited
      consolidated balance sheet as of the date. All other financial statements
      contained herein are unaudited and, in the opinion of management, contain all
      adjustments (consisting only of normal recurring accruals) necessary for a
      fair
      presentation of financial position, results of operations and cash flows for
      the
      period presented.





The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures 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. This basis of accounting differs in certain material respects from
      that used for the preparation of the books of account of the Company’s principal
      subsidiaries, which are prepared in accordance with the accounting principles
      and the relevant financial regulations applicable to enterprises with limited
      liabilities established in the PRC, the accounting standards used in the places
      of their domicile. The accompanying condensed interim consolidated financial
      statements reflect necessary adjustments not recorded in the books of account
      of
      the Company's subsidiaries to present them in conformity with US
      GAAP.




15


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*b)*
            *Use
                of estimates*





The
      preparation of the financial statements in conformity with generally accepted
      accounting principles in the United States of America 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 periods. Management makes these estimates using the best
      information available at the time the estimates are made; however actual results
      could differ materially from those estimates.





*c)*
            *Principles
                of consolidation*





The
      consolidated financial statements are presented in US Dollars. All significant
      inter-company balances and transactions are eliminated in the
      consolidation.





The
      following table depicts the identity of the subsidiaries





***Name
                of Company***
            
            ***Place
                & date of Incorporation***
            
            ***Attributable
                Equity Interest %***
            
            ***Registered***
              ***Capital***
            
            ***Common
                stock***Asia
                Business Management Group Limited
            
            BVI/
              Aug
                12, 1999
            
            100%
            
            -
            
            $3Anhante
                (Beijing) Medical Technology Co., Ltd
            
            PRC/
              Jan
                23, 2008
            
            100%
            
            $8,000,000*Shanghai
                Medical
              Technology
                Co., Ltd
            
            PRC/
              June
                28, 2005
            
            100%
            
            RMB6,300,000
            
            -*Shanghai
                Vantage Pharmaceutical
              Technology
                Co., Ltd
            
            PRC/
              May
                28, 2004
            
            95%
            
            RMB1,000,000
            
            -*Shanghai
                Pharmaceutical & Hemo-tech International
              Co.,
                Ltd
            
            PRC/
              Aug
                7, 2001
            
            84.84%
            
            RMB12,600,000
            
            -





*They
      are
      variable interests entities.





16
 
  **AAMAXAN
        TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*d)*
            *Economic
                and political risks*





The
      Group’s operations are conducted in the PRC. Accordingly, the Company’s
      business, financial condition and results of operations may be influenced by
      the
      political, economic and legal environment in the PRC, and by the general state
      of the PRC economy.




The
      Group’s operations in the PRC are subject to special considerations and
      significant risks not typically associated with companies in North America
      and
      Western Europe. These include risks associated with, among others, the
      political, economic and legal environment and foreign currency exchange. The
      Group’s results may be adversely affected by changes in the political and social
      conditions in the PRC, and by changes in governmental policies with respect
      to
      laws and regulations, anti-inflationary measures, currency conversion,
      remittances abroad, and rates and methods of taxation, among other
      things.




*e)*
            *Plant
                and equipment*





Plant
      and
      equipment are carried at cost less accumulated depreciation. Depreciation is
      provided over their estimated useful lives, using the straight-line method.
      Estimated useful lives of the plant and equipment are as follows:





Machinery
                and equipment
            5-10
                yearsOffice
                equipment
            5
                yearsMotor
                vehicles
            8
                years





The
      cost
      and related accumulated depreciation of assets sold or otherwise retired are
      eliminated from the accounts and any gain or loss is included in the statement
      of income. The cost of maintenance and repairs is charged to income as incurred,
      whereas significant renewals and betterments are capitalized.





*f)*
            *Intangible
                assets*





Intangible
      assets represent patent rights in the PRC. Patent rights are carried at cost
      and
      amortized on a straight-line basis over the period of rights of 10 years
      commencing from the date of acquisition of equitable interest.





17




**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**




*g)*
            *Accounting
                for the impairment of long-lived
                assets*





The
      Group
      periodically evaluates the carrying value of long-lived assets to be held and
      used, including intangible assets subject to amortization, when events and
      circumstances warrant such a review, pursuant to the guidelines established
      in
      SFAS No. 144. The carrying value of a long-lived asset is considered impaired
      when the anticipated undiscounted cash flow from such asset is separately
      identifiable and is less than its carrying value. In that event, a loss is
      recognised based on the amount by which the carrying value exceeds the fair
      market value of the long-lived asset. Fair market value is determined primarily
      using the anticipated cash flows discounted at a rate commensurate with the
      risk
      involved. Losses on long-lived assets to be disposed of are determined in a
      similar manner, except that fair market values are reduced for the cost to
      dispose.





During
      the reporting periods, there was no impairment loss.





*h)*
            *Inventories*





Inventories
      comprise merchandise purchased for resale and are stated at lower of cost and
      net realizable value. Cost of merchandise, representing the purchase cost,
      is
      calculated on the weighted average basis. Net realizable value is the estimated
      selling price in the ordinary course of business less any applicable selling
      expenses.





*i)*
            *Trade
                receivables*





Trade
      receivables are recognized and carried at the original invoice amount less
      allowance for any uncollectible amounts. An allowance for doubtful accounts
      is
      maintained for all customers in considering with a variety of factors, including
      the length of past due, significant one-time events and the company’s historical
      experience. Bad debts are written off as incurred.





*j)*
            *Cash
                and cash equivalents*





The
      Company considers all highly liquid investments purchased with original
      maturities of three months or less to be cash equivalents. The Company maintains
      bank accounts only in the PRC. The Company does not maintain any bank accounts
      in the United States of America.





18




**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*k)*
            *Foreign
                currency translation*





The
      accompanying financial statements are presented in United States dollars. The
      functional currency of the Company is the Renminbi (RMB). The financial
      statements are translated into United States dollars from RMB at year-end
      exchange rates as to assets and liabilities and average exchange rates as to
      revenues and expenses. Capital accounts are translated at their historical
      exchange rates when the capital transactions occurred.





The
      PRC
      government imposes significant exchange restrictions on fund transfers out
      of
      the PRC that are not related to business operations. These restrictions have
      not
      had a material impact on the Group because it has not engaged in any significant
      transactions that are subject to the restrictions.





The
      exchange rates used to translate amounts in RMB into USD for the purposes of
      preparing the consolidated financial statements were as follows:





**June
                30, 2008**
            
            **December
                31, 2007**
            
            **June
                30, 2007**Twelve
                months ended
            
            -
            
            7.3141
            
            -RMB
                : USD exchange rateSix
                months ended
            
            6.8718
            
            -
            
            7.6248RMB
                : USD exchange rateAverage
                six months ended
            
            7.0726
            
            -
            
            7.7300RMB
                : USD exchange rateAverage
                three months ended
            
            6.9696
            
            -
            
            7.6896RMB
                : USD exchange rate





The
      RMB
      is not freely convertible into foreign currency and all foreign exchange
      transactions must take place through authorized institutions. No representation
      is made that the RMB amounts could have been, or could be, converted into
      US D at the
      rates used in translation.




*l)*
            *Revenue
                recognition*




Net
      revenue is recognized when customer takes delivery and acceptance of products,
      the price is fixed or determinable as stated on sales contract, and the
      collectibility is reasonably assured.




Customers
      do not have a general right of return on products delivered.




19




**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*m)*
              *Leases*





The
      Group
      did not have lease which met the criteria of capital lease. Leases which do
      not
      qualify as capital lease are classified as operating lease. Operating lease
      rental payment included in the general and administrative expenses for the
      six
      months ended June 30, 2008 and 2007
      were
      $76,581 and $61,692 respectively.





*n)*
            *Advertising*





The
      Group
      expensed all advertising costs as incurred. Advertising expenses included in
      the
      selling expenses for the six months ended June 30, 2008 and
      2007
      were $16,438 and $2,135 respectively.





*o)*
            *Retirement
                benefit plans*





The
      employees of the Group are members of a state-managed retirement benefit plan
      operated by the government of the PRC. The Group is required to contribute
      a
      specified percentage of payroll costs to the retirement benefit scheme to fund
      the benefits. The only obligation of the Group with respect to the retirement
      benefit plan is to make the specified contributions.




20





Retirement
      benefits in the form of contributions under defined contribution retirement
      plans to the relevant authorities are charged to the statements of income as
      incurred. The retirement benefit funding included in the general and
      administrative expenses for the six months ended June 30, 2008 and
      2007
      were $91,810 and $69,642 respectively.




The
      Group
      is operating in the PRC, and in accordance with the relevant tax laws and
      regulations of PRC, the enterprise income tax rate is 25% and 33% for 2008
      and
      2007 respectively.





*p)*
            *Income
                taxes*





The
      Group
      accounts for income taxes using an asset and liability approach and allows
      for
      recognition of deferred tax benefits in future years. Under the asset and
      liability approach, deferred taxes are provided for the net tax effects of
      temporary differences between the carrying amounts of assets and liabilities
      for
      financial reporting purposes and the amounts used for income tax purposes.
      A
      valuation allowance is provided for deferred tax assets if it is more likely
      than not these items will either expire before the Group is able to realize
      their benefits, or that future realization is uncertain.


21





**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (** **Continued)**





*q)*  *Cash
      and concentration of risk*





Cash
      includes cash on hand and demand deposits in accounts maintained within PRC.
      Total cash in these banks at June 30, 2008 and December 31, 2007 amounted to $10,769,286
      and $2,299,772 respectively, of which no deposits are covered by Federal Depository Insured
      Commission. The Company has not experienced any losses in such accounts and
      believes the risk on its cash in bank accounts is very low.





*r)*  *Statutory
      reserves*





Statutory
      reserves are referred to the amount appropriated from the net income in
      accordance with laws or regulations, which can be used to recover losses and
      increase capital, as approved, and are to be used to expand production or
      operations.








*s)*  *Comprehensive
      income*





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by owners and distributions to owners. Among other disclosures,
      all
      items that are required to be recognized under current accounting standards
      as
      components of comprehensive income are required to be reported in a financial
      statement that is presented with the same prominence as other financial
      statements. The Group’s current component of other comprehensive income is the
      foreign currency translation adjustment.





*t)*  *Recent
      accounting pronouncements*




In
      February 2007, FASB issued Statement of Financial Accounting Standards No.
      (“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”).
      SFAS 159 permits entities to choose to measure many financial instruments and
      certain other items at fair value. Entities that elect the fair value option
      will report unrealized gains and losses in earnings at each subsequent reporting
      date. The fair value option may be elected on an instrument-by-instrument basis,
      with a few exceptions. SFAS 159 also establishes presentation and disclosure
      requirements to facilitate comparisons between entities that choose different
      measurement attributes for similar assets and liabilities. The requirements
      of
      SFAS 159 are effective for our fiscal year beginning on January 1, 2008. The
      Group does not anticipate that the adoption of this standard will have a
      material impact on these consolidated financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110(“SAB 110”). SAB
      110 permits companies to continue to use the simplified method, under certain
      circumstances, in estimating the expected term of “plain vanilla” options beyond
      December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously
      stated that the Staff would not expect a company to use the simplified method
      for share grants after December 31, 2007. Adoption of SAB 110 is not expected
      to
      have a material impact on the Group’s consolidated financial
      statements.




22


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (** **Continued)**





*(t)*  *Recent
      accounting pronouncements (continued)*




In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
      establishes accounting and reporting standards for the noncontrolling interest
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. As such, the Group is required to
      adopt
      these provisions at the beginning of the fiscal year ended December 31, 2009.
      The Group is currently evaluating the impact of SFAS 160 on its consolidated
      financial statements but does not expect it to have a material
      effect.





In
      December 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS
      141(R) establishes principles and requirements for how the acquirer recognizes
      and measures in its financial statements the identifiable assets acquired,
      the
      liabilities assumed, an any noncontrolling interest in the acquiree, recognizes
      and measures the goodwill acquired in the business combination or a gain from
      a
      bargain purchase, and determines what information to disclose to enable users
      of
      the financial statements to evaluate the nature and financial effects of the
      business combination. SFAS 141(R) is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      As
      such, the Group is required to adopt these provisions at the beginning of the
      fiscal year ended December 31, 2009. The Group is currently evaluating the
      impact of SFAS 141(R) on its consolidated financial statements but does not
      expect it to have a material effect.




In
      March
      2008, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative
      Instruments and Hedging Activities”. SFAS 161 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. The
      Company is currently evaluating the impact of SFAS 161 on its consolidated
      financial statements but does not expect it to have a material
      effect.




23


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**3.
      CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS**





Financial
      instruments which potentially expose the Group to concentrations of credit
      risk,
      consists of cash and accounts receivable as of March 31, 2008 and December
      31,
      2007. The Group performs ongoing evaluations of its cash position and credit
      evaluations to ensure sound collections and minimize credit losses
      exposure.





As
      of
      June 30, 2008 and December 31, 2007, the Group’s bank deposits were all
      conducted with banks in the PRC where there is currently no rule or regulation
      mandated on obligatory insurance of bank accounts.





For
      the
      six months ended June 30, 2008 and 2007, all of the Group’s sales were generated
      from the PRC. In addition, all accounts receivable as of June 30, 2008 and
      December 31, 2007 also arose in the PRC.





The
      maximum amount of loss exposure due to credit risk that the Group would bear
      if
      the counter parties of the financial instruments failed to perform represents
      the carrying amount of each financial asset in the balance sheet.





Normally
      the Group does not require collateral from customers or debtors.





Details
      of the customer account for 10% or more of the Group’s revenue are as
      follows:





Six
                months ended June 30,2008
            
            2007Customer
                A
            
            $
            2,163,148
            
            $
            3,370,157





Details
      of customer account for 10% or more of the Group’s accounts receivable are as
      follows:





June
                30, 2008
            
            December
                31, 2007Customer
                B
            
            $
            -
            
            $
            254,934Customer
                C
            
            
            -
            
            
            275,566





24


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**4.
      TRADE RECEIVABLES, NET**





June
                30,
              2008
            
            December
                31,
              2007Trade
                receivables, gross
            
            $
            4,096,873
            
            $
            2,474,947Provision
                for doubtful debts
            
            
            (73,961
            )
            
            (66,724
            )$
            4,022,912
            
            
            2,408,223





All
      of
      the above trade receivables are due within 12 months of aging.





An
      analysis of the allowance for doubtful accounts for the six months ended June
      30, 2008 and 2007 is as follows:





June
                30,
              2008
            
            December
                31,
              2007Balance
                at beginning of period
            
            $
            66,724
            
            $
            -Addition
                of bad debt expense
            
            
            -
            
            
            66,724Foreign
                exchange adjustment
            
            
            7,237
            
            
            -Balance
                at end of period
            
            $
            73,961
            
            $
            66,724





Allowance
      was made when collection of the full amount is no longer probable. Management
      reviews and adjusts this allowance periodically based on historical experience,
      current economic climate as well as its evaluation of the collectibility of
      outstanding accounts. The Group evaluates the credit risks of its customers
      utilizing historical data and estimates of future performance.





**5.
      SUBSCRIPTION RECEIVABLES**





Subscription
      receivables are commitments from the shareholders for the payment in the
      registered capital. They are due on June 2008. Details are as follows:





June
                30,
              2008
            
            December
                31,
              2007Chen
                Zhong
            
            $
            208,284
            
            $
            195,688Yang
                Fong
            
            
            166,987
            
            
            156,889Shanghai
                City Hygiene IndustryDevelopment
                Centre
            
            
            19,645
            
            
            18,458$
            394,916
            
            $
            371,035





25


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**6.
      OTHER RECEIVABLES**





Details
      of other receivables are as follows:





June
                30,
              2008
            
            December
                31,
              2007Rental
                deposits
            
            $
            29,441
            
            $
            12,715Deposit
                to suppliers
            
            
            174,627
            
            
            -Loans
                to an unrelated company
            
            
            -
            
            
            171,338Advances
                to employee
            
            
            20,477
            
            
            1,383Prepayment
            
            
            969,667
            
            
            -Others
            
            
            28,745
            
            
            12,409$
            1,222,957
            
            $
            197,845





Loan
      to
      an unrelated company is unsecured, interest free, and has no fixed repayment
      date.





**7.**  **INVENTORIES**





Details
      of inventories are as follows:





June
                30,
              2008
            
            December
                31,
              2007Raw
                materials
            
            $
            23,813
            
            $
            22,510Materials
                in consignment
            
            
            13,828
            
            
            12,992Finished
                goods
            
            
            1,882,223
            
            
            1,258,914$
            1,919,864
            
            $
            1,294,416Provision
                for inventory write-down
            
            
            (93,386
            )
            
            (87,740
            )$
            1,826,478
            
            $
            1,206,676





26


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**8.**  **DUE
      FROM A DIRECTOR**





The
      amounts due from a director, Chen Zhong ,
      were
      $54,292 and $6,796
      as at June 30, 2008 and December 31, 2007 respectively. The amounts due from
      a
      director are unsecured, interest free and repayable on demand.





**9.**  **DEPOSITS
      FOR AN UNLISTED INVESTMENT**





Deposit
      for an unlisted investment was made for the investments in Ningbo China Tianyi
      Medical Appliance Co., Ltd. (“Tianyi”). The Company is in the progress of
      investing in the Tianyi. Details of the proposed investment are as
      follow:





*Portion
                of**nominal**Place*
            
            *Form
                of*
            
            *value
                of**of*
            
            *business*
            
            *registered*
            
            *Principal**registration*
            
            *structure*
            
            *capital*
            
            *activities*PRC
            
            Limited
                company
            
            20%
            
            Production
                of disposable medical polymer material and
                products




**10.**  **LONG
      TERM PREPAYMENTS**





Details
      of long term prepayments are as follows:





June
                30,
              2008
            
            December
                31,
              2007Dealership
                of products in China
            
            $
            4,826,489
            
            $
            5,218,231Current
                portion
            
            
            (1,455,223
            )
            
            (1,367,222
            )$
            3,371,266
            
            $
            3,851,009




The
      long
      term prepayments included two dealerships of products in China. The number of
      years
      of the dealership is from 3 to 5 years.




Amortization
      expenses included in the general and administrative expenses for the six months
      ended June 30, 2008 and 2007 were $ 760,951 and nil respectively.





27


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**11.**  **PLANT
      AND EQUIPMENT, NET**





Details
      of plant and equipment, net are as follows:





June
                30,
              2008
            
            December
                31,
              2007At
                costMachinery
                and equipment
            
            $
            38,418
            
            $
            36,094Office
                equipment
            
            
            67,725
            
            
            54,020Motor
                vehicles
            
            
            226,226
            
            
            212,546$
            332,369
            
            $
            302,660Less:
                accumulated depreciation
            
            
            (121,862
            )
            
            (99,445
            )Less:
                provision for impairment
            
            
            (20,100
            )
            
            (18,885
            )$
            190,407
            
            $
            184,330





Depreciation
      expenses included in the selling expenses
      were $6,370 and $5,383 respectively, and included in the general and
      administrative expenses for the six months ended June 30, 2008 and 2007 were
      $10,056 and $8,487 respectively .





As of December
      31, 2007, the Group carried out a review of the carrying value of its machinery
      and equipment. The review led to the recognition of an impairment loss of
      $18,133 (RMB$138,125), that has been recognized in profit and loss based on
      the
      amount by which the carrying value exceeds the fair market value of the
      assets.





The
      impairment losses $18,133 have been included in the general and administrative
      expenses for the year ended December 31, 2007.





No
      additional impairment losses recognized in this period.





28


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**12.**  **INTANGIBLE
      ASSETS, NET**





Details
      of intangible assets, net are as follows:





June
                30,
              2008
            
            December
                31,
              2007Patent
                rights, at cost
            
            $
            6,053,727
            
            $
            5,687,644Less:
                accumulated amortization
            
            
            (1,009,925
            )
            
            (664,470
            )$
            5,043,802
            
            $
            5,023,174





Amortization
      expenses included in the general and administrative expenses for the six months
      ended June 30, 2008 and 2007 were $294,091 and $266,063
      respectively.




Patent *s*




The
      Company holds the following patents:





**Application
                No.**
            
            **Bulletin
                No.**
            
            **Applicant**
            
            **Name
                of the Patent**
            
            **Author**
            
            **Publication
                Date**
            
            **Issuance
                Date**
            
            **Consideration**200510028341.0
            
            1903206A
            
            Shanghai
                Medical
            
            Alprostadil
                Lyophilize Emulsion and Its Producing Means
            
            Xiang
                Wei
            
            July
                29, 2005
            
            January
                31, 2007
            
            $876,986




*Utility
      Model of Platelet Collection and Storage System:*




**Certificate
                No.**
            
            **Patent
                No.**
            
            **Patentee**
            
            **Author**
            
            **Application
                Date**
            
            **Issuance
                Date**
            
            **Consideration**625562
            
            ZL
                03229879.X
            
            SPHIC
            
            Bao
                Ping
            
            March
                28, 2003
            
            July
                7, 2004
            
            $2,543,257





On
      October 10, 2005, the Company entered into the Patent Transfer Agreement with
      Shanghai Pharmaceutical & Hemo -Tech International Co., Ltd. (“SPHIC”),
      which provided that SPHIC should transfer the above patent for utility model
      to
      the Company. The Company is processing such transfer procedures.




29





**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**12.
      INTANGIBLE ASSETS, NET (Continued)**




*Utility
      Model of Platelet Collection and Storage System (Continued)*





**Certificate
                No.**
            
            **Patent
                No.**
            
            **Patentee**
            
            **Author**
            
            **Application
                Date**
            
            **Issuance
                Date**
            
            **Consideration**624113
            
            ZL
                03229880.3
            
            SPHIC
            
            Bao
                Ping
            
            March
                28, 2003
            
            July
                7, 2004
            
            $1,879,254





On
      October 15, 2005, the Company entered into the Patent Transfer Agreement with
      SPHIC, which provided that SPHIC should assign its above patent for utility
      model to the Company. Pursuant to the confirmation of SPHIC, the Company has
      paid up the fees for such patent transfer. According to the explanation of
      the
      Company, it is processing such transfer procedures.




Other
      Intellectual Property Rights Protections in the PRC





In
      addition to patent and trade secret protection law in the PRC, the company
      also
      relies on contractual confidentiality provisions to protect the intellectual
      property rights. The research and development personnel and executive officers
      are subject to confidentiality agreements to keep the proprietary information
      confidential. In addition, they are subject to a one-year covenant not to
      compete following the termination of employment with the company. Further,
      they
      agree that any work product belongs to the company.





**13.**  **DUE
      TO A RELATED COMPANY**





Details
      of due to a related company are as follows:





June
                30,
              2008
            
            December
                31,
              2007Shanghai
                Pharmacy Co., Ltd
            
            $
            135,086
            
            $
            54,689





Due
      to a
      related company is unsecured, interest free loan which is payable on demand.
      Shanghai Pharmacy Co., Ltd is one of the minority shareholders, which holds
      4.76% equity interest in Shanghai Pharmaceutical & Hemo-tech International
      Co., Ltd., a subsidiary of the Company.




30


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**14.**  **OTHER
      PAYABLES**





Details
      of other payables are as follows:




June
                30,
              2008
            
            December
                31,
              2007Sales
                rebates
            
            $
            831,439
            
            $
            247,499Payables
                to unrelated companies
            
            
            176,775
            
            
            -Sundry
                PRC taxes payables
            
            
            137,636
            
            
            455,070Unrealized
                subsidies from government
            
            
            52,679
            
            
            -Sundry
            
            
            15,065
            
            
            16,603$
            1,213,594
            
            $
            719,172





Payables
      to unrelated companies are unsecured, interest free loans which are payable
      on
      demand.




**15.**  **EARNINGS
      PER SHARE**





The
      calculation of the basic and diluted earnings per share attributable to the
      common stock holders is based on the following data:




For
                the six months ended June 30,Earnings:
            
            2008
            
            2007Earnings
                for the purpose of basicearnings
                per share
            
            $
            3,554,880
            
            $
            3,393,198Effect
                of dilutive potential commonstock
            
            
            -
            
            
            -Earnings
                for the purpose of basicearnings
                per share
            
            $
            3,554,880
            
            $
            3,393,198Number
                of shares:Weighted
                average number ofcommon
                stock for the purpose of basicearnings
                per share
            
            
            15,991,812
            
            
            14,991,812Effect
                of dilutive potential common stock-
                conversion of Series Aconvertible
                preferred stock
            
            
            4,008,188
            
            
            -Weighted
                average number of commonstock
                for the purpose of dilutiveearnings
                per share
            
            
            20,000,000
            
            
            14,991,812




31





**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**16.**  **NET
      REVENUES**





Details
      of net revenues are as follows:





Six
                months ended June 30,2008
            
            2007Dialysis
                products revenues
            
            $
            19,952,497
            
            $
            15,816,114Others
            
            
            25,527
            
            
            -$
            19,978,024
            
            $
            15,816,114




**17.**  **INCOME
      TAXES**





The
      Group
      is operating in the PRC, and in accordance with the relevant tax laws and
      regulations of PRC, the corporation income tax rate is 25% and 33% for 2008
      and
      2007 respectively.





No
      deferred tax has been provided as there are no material temporary differences
      arising for the six months ended June 30, 2008 and 2007.





**18.**  **COMMITMENTS
      AND CONTINGENCIES**





The
      Group
      has entered into a tenancy agreement for office premise expiring through 2007.
      Total rental expenses for the six months ended June 30, 2008 and 2007 amounted to
      $76,581 and $61,692 respectively .





The
      Group’s commitments for minimum lease payments under the lease for next five
      years are as follows:





Year
                ending June 30,2009
            
            $
            5,5302010
            
            
            161,7672011
            
            
            -2012
            
            
            -2013
                and thereafter
            
            
            -$
            167,297





32


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**19.**  **FAIR
      VALUE OF FINANCIAL INSTRUMENTS**





The
      fair
      value of financial instrument is the amount at which the instrument could be
      exchanged in a current transaction between willing parties. The carrying amounts
      of financial assets and liabilities, such as cash and cash equivalents, accounts
      receivable, other receivables, accounts payable, and other payables, approximate
      their fair values because of the short maturity of these instruments and market
      rates of interest available to the Group.





**20.
      SEGMENT INFORMATION**





The
      Group
      currently is engaged in the technical development, transfer, consulting and
      servicing of pharmaceutical and medical appliance, and the selling of diagnosis
      products. Accordingly, no analysis of the Company's sales and assets by product
      is presented.





The
      Group's operations are located in the PRC. All revenue is from customers in
      the
      PRC. Also, all of the Group’s assets are located in the PRC. Accordingly, no
      analysis of the Company's sales and assets by geographical market is
      presented.





**21.
      SERIES A PREFERRED STOCK AND WARRANTS**





On
      April
      15, 2008 the Company sold an aggregate of 4,008,188 shares of Series A Preferred
      Stock and warrants to purchase an aggregate of 2,004,094 shares of its common
      stock (the “Warrant”) for gross proceeds of approximately $12.5 million. Each
      share of Series A Preferred Stock is convertible into one share of common stock
      and is subject to certain anti-dilution provisions. In addition, the Series
      A
      Preferred Stock may be redeemed, at the holder’s option, upon the occurrence of
      certain triggering events, as defined in the Amended Certificate of Designations
      of the Series A Preferred Stock (filed with the Delaware Secretary of State
      on
      April 11, 2008 and which forms part of the Company’s Certificate of
      Incorporation), one of which is the Company achieving net income (as defined
      in
      the Amended Certificate of Designations) for the fiscal year ended December
      31,
      2007 or either the fiscal year ending December 31, 2008 or December 31, 2009
      of
      less than $6,000,000. In the event the Series A Preferred Stock is redeemed,
      the
      redemption price would be at the conversion price plus an amount that would
      result in a 10% yield per annum on the conversion price to the date of the
      triggering event.




33


**AAMAXAN
      TRANSPORT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**21.
      SERIES A PREFERRED STOCK AND WARRANTS (Continued)**




The
      Warrants are exercisable for an aggregate of up to 2,004,094 shares of common
      stock and have an exercise price of $3.91 per share. The Warrants expire on
      October 13, 2013. The initial fair value of the Warrants was calculated using
      the Black -Scholes model using the following assumptions: life of warrants
      of
      approximately 5.5 years, estimated volatility of 80%, risk free interest rate
      of
      approximately 3%, and no dividends. This calculation resulted in an initial
      value of $2.01 per share or an aggregate value of $4,028,229 for the Warrants.
      The Warrants will be classified as a liability and adjusted to fair value at
      each balance sheet date with any change in fair value being recognized in
      earnings. The remaining gross proceeds of $8,503,771 were allocated to the
      Series A Preferred Stock. This allocation resulted in the holders of the Series
      A Preferred Series receiving a beneficial conversion feature totaling
      $4,041,857. This beneficial conversion feature has been accounted for as a
      dividend to the holders and has been charged to retained earnings.




As
      part
      of the Series A Preferred Stock and Warrants issuance discussed above, the
      Company agreed to file and maintain an effective a registration statement with
      the SEC by certain dates. If the Company fails to meet the required deadlines
      or
      certain events of default occur under the registration rights agreement, it
      will
      be obligated to pay liquidated damages to each investor in an amount equal
      to
      one percent of the investor’s initial investment in the Series A Preferred for
      each month until the default is cured, subject to a cap of ten percent of the
      amount of the initial investment. At the present time the Company anticipates
      meeting all the deadlines required.




34


**Item
        2.** **MANAGEMENT
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
        OPERATION**




**Disclaimer
      Regarding Forward-looking Statements**





Certain
      statements in this report, including statements in the following discussion,
      which are not statements of historical fact, may be deemed to be
      "forward-looking statements" which are basically statements about the future.
      For that reason, these statements involve risk and uncertainty since no one
      can
      accurately predict the future. Words such as "plans," "intends," "will,"
      "hopes," "seeks," "believes," "anticipates," "expects," and the like, often
      identify such forward-looking statements, but are not the only indication that
      a
      statement is a forward-looking statement. Such forward-looking statements
      include statements concerning our plans and objectives with respect to the
      present and future operations of Aamaxan Transport Group, Inc. (the "Company"
      or
“we”) and statements which express or imply that such present and future
      operations will or may produce revenues, income or profits. Numerous factors
      and
      future events could cause the Company to change such plans and objectives,
      or
      fail to successfully implement such plans or achieve such objectives, or cause
      such present and future operations to fail to produce revenues, income or
      profits. Therefore, the reader is advised that the following discussion should
      be considered in light of the discussion of risks and other factors contained
      in
      this report on Form 10-Q and in the Company's other filings with the Securities
      and Exchange Commission. No statements contained in the following discussion
      should be construed as a guarantee or assurance of future performance or future
      results. These forward-looking statements are made as of August 14, 2008; the
      date of the filing of this Form 10-Q, and the Company undertakes no
      responsibility to update these forward-looking statements.





The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the financial statements and
      accompanying notes for the six months
      ended June 3 0 ,
      2008
      and 2007 contained in this Current Report.





**Overview**





Aamaxan
      Transport Group, Inc. is a holding company for entities that, through
      contractual relationships in the PRC, control the business of Shanghai Medical
      Technology Co., Ltd. (“SMT”), which is engaged in the sale and distribution of
      hemodialysis equipment and the disposable tubing, filters and other products
      necessary for hemodialysis. SMT is one of the leading distributors of supplies
      and equipment in the hemodialysis industry in eastern China. The Company is
      expanding its geographic reach within the PRC by expanding its distribution
      channels through a traditional western-style marketing plan into the main
      commercial markets in China, including, but not limited to, the Pearl River
      Delta, Beijing and other first tier markets in eastern China. The Company is
      seeking to make acquisitions of distributors of hemodialysis equipment in other
      cities. The Company is also negotiating with hospitals and companies to launch
      a
      chain of diagnostic and treatment centers in the PRC similar to those found
      in
      the U.S. and other western nations. Because our operations are the only
      significant operations of the Company and its affiliates, this discussion and
      analysis focuses on the business results of SMT .




35





**Results
      of Operations**





***Three
      Months Ended June 30, 2008 Compared to Three Months Ended June 30,
      2007***





Three
                Months Ended June 30, 2008
            
            Three
                Months Ended June 30, 2007
            
            Increase/
                Decrease
            
            Percentage
              Increase/
                DecreaseNet
                Revenues
            
            $
            9,781,453
            
            $
            7,872,705
            
            $
            1,908,748
            
            
            24.24
            %Cost
                of Sales
            
            $
            6,207,537
            
            $
            4,857,027
            
            $
            1,350,510
            
            
            27.80
            %Gross
                Profit
            
            $
            3,573,916
            
            $
            3,015,678
            
            $
            558,238
            
            
            18.51
            %Selling
                Expenses
            
            $
            287,148
            
            $
            132,750
            
            $
            154,398
            
            
            116.31
            %General
                and Administrative Expenses
            
            $
            1,060,792
            
            $
            349,801
            
            $
            710,991
            
            
            203.25
            %Operating
                Income
            
            $
            2,225,976
            
            $
            2,533,127
            
            
            -$307,151
            
            
            -12.12
            %Interest
                Income, Net
            
            $
            9,877
            
            $
            558
            
            $
            9,319
            
            
            1670.07
            %Income
                Before Income Taxes
            
            $
            2,235,853
            
            $
            2,533,685
            
            
            -$297,832
            
            
            -11.75
            %Net
                Income
            
            $
            1,581,354
            
            $
            1,660,146
            
            
            -$78,792
            
            
            -4.74
            %





**Net
      Revenues**





Net
      revenues were $9,781,453 for the three months ended June 30, 2008, an increase
      of $1,908,748 or 24.24% from $7,872,705 for the three months ended June 30,
      2007. Our revenues increased primarily as a result of an increase in sales
      volume in Shanghai and the surrounding district. The increase in sales was
      primarily due to more sales representatives and marketing efforts in the second
      quarter of 2008 which resulted in the addition of hospitals and clinics as
      customers. Although the unit prices for our products have been reduced in
      accordance with the local government’s pricing guidelines, the increase in unit
      sales has more than offset such lower prices.





Hemodialysis
      equipment and related disposables are our principal products, generating almost
      all of our sales. During the three months ended June 30, 2008, hemodialysis
      and
      disposable sales accounted for 99.87% of our net sales.





**Cost
      of Sales**





Cost
      of
      sales rose to $6,207,537 for the three months ended June 30, 2008, an increase
      of $1,350,510 or 27.80% from $4,857,027 for the corresponding period in 2007.
      Cost of sales measured as a percentage of net revenues was 63.46%, a minor
      increase from 61.69% in that of 2007. The increase in cost of sales was
      principally driven by the increase in marketing and sales volume.




36





**Gross
      Profit**





There
      was
      an 18.51% increase in the gross profit from $3,015,678 in the three months
      ended
      June 30, 2007, to approximately $3,573,916, in the three months ended June
      30,
      2008. However, the gross profit margins for the three months ended June 30,
      2008
      declined to 36.54% from the 38.31% gross margin for the three months ended
      June
      30, 2007. The decrease in gross profit margins was due to increasing
      competition, especially at the larger hospitals, which put pressure on the
      prices we could charge and our entering into new markets with lower sales
      prices. In addition, each provincial or local government has the power to issue
      pricing guidelines and to set the maximum prices for the products and services
      in the hemodialysis industry, which resulted in reduced selling prices.





**Selling,
      General and Administrative Expenses**





Selling
      expenses were $287,148 for the three months ended June 30, 2008, an increase
      of
      $154,398, or 116.31% from $132,750 for the three months ended June 30, 2007.
      The
      increase in cost of sales was substantially driven by the implementation of
      our
      increased marketing, including training doctors and sales representatives.





We
      incurred an increase of $710,991 or 203.25% in general and administrative
      expenses which rose from $349,801 for the three months ended June 30, 2007
      to
      $1,060,792 for the three months ended June 30, 2008. This increase is
      attributable to the amortized expenses of our recently obtained two exclusive
      dealerships, increasing overhead of our marketing department, corporate
      governance enhancements and reporting costs as a public
      company.





**Operating
      Income**





Operating
      income was $2,225,976 for the three months ended June 30, 2008, a decrease
      of
      $307,151 or 12.12% from $2,533,127 for the three months ended June 30, 2007.
      The
      increase in general and administrative expenses and selling expenses contributed
      to the decreased operating income.





**Net
      Income**





Net
      income decreased to $1,581,354 for the three months ended June 30, 2008 from
      $1,660,146 for the three months ended June 30, 2007. Net profit margin was
      16.17% for the three months ended June 30, 2008 compared to 21.09% for the
      same
      period in 2007 mainly as a result of the increase in our general and
      administrative expenses related to the
      amortized expenses of dealerships, and costs incurred expanding our sales
      and in restructuring management to meet the requirements of an expanding
      enterprise.





37




***Six
      Months Ended June 30, 2008 Compared to Six Months ended June 30, 2007***





The
      following table shows our operating results for the six
      months ended June 30, 2008 and 2007.





Six
                months ended June 30, 2008
            
            Six
                months ended June 30, 2007
            
            Increase/
                Decrease
            
            PercentageIncrease/
                DecreaseNet
                Revenues
            
            $
            19,978,024
            
            $
            15,816,114
            
            $
            4,161,910
            
            
            26.31
            %Cost
                of Sales
            
            $
            12,672,104
            
            $
            9,732,701
            
            $
            2,939,403
            
            
            30.20
            %Gross
                Profit
            
            $
            7,305,920
            
            $
            6,083,413
            
            $
            1,222,507
            
            
            20.10
            %Selling
                Expenses
            
            $
            925,018
            
            $
            301,428
            
            $
            623,590
            
            
            206.88
            %General
                and Administrative Expenses
            
            $
            1,396,780
            
            $
            660,955
            
            $
            735,825
            
            
            111.33
            %Operating
                Income
            
            $
            4,984,122
            
            $
            5,121,030
            
            $
            -136,908
            
            
            -2.67
            %Interest
                Income, Net
            
            $
            12,888
            
            $
            1,075
            
            $
            11,813
            
            
            1098.88
            %Income
                Before Income Taxes
            
            $
            4,997,010
            
            $
            5,122,105
            
            $
            -125,095
            
            
            -2.44
            %Net
                Income
            
            $
            3,554,880
            
            $
            3,393,198
            
            $
            161,682
            
            
            4.76
            %




**Net
      Revenues**





Net
      revenues were $19,978,024 for the six months ended June 30, 2008, an increase
      of
      $4,161,910 or 26.31% from $15,816,114 for the six months ended June 30, 2007.
      Our revenues increased primarily as a result of increase in sales volume in
      Shanghai and the surrounding district. The increase in sales was primarily
      due
      to more sales representatives and marketing work in the second quarter of 2008
      and additional hospitals and clinics being added as customers in the second
      quarter of 2008.





Hemodialysis
      equipment and related disposables have been our principal products since the
      acquisition of the subsidiary, generating almost all of our sales. During the
      six months ended June 30, 2008, hemodialysis and disposable sales accounted
      for
      99.87% of our net sales.




38





**Cost
      of Sales**





Cost
      of
      sales rose to $12,672,104 for the six months ended June 30, 2008, an increase
      of
      $2,939,403 or 30.20% from $9,732,701 for the six months ended June 30, 2007.
      Cost of sales measured as a percentage of net revenues was 63.43%, a minor
      increase from 61.54% in that of 2007. The increase in cost of sales was
      principally driven by the increase in marketing and sales volume. The increase
      in cost of sales as a percentage of net sales was caused mainly by downward
      price adjustments owing to greater competition. We distribute products produced
      by Fresenius, considered by many to be the leading manufacturer of hempdialysis
      equipment and related disposables. We believe that Fresenius intends to maintain
      premium prices and to increase unit sales on an ongoing basis. Competing
      distributors of lesser names, even well-known U.S. brands, sometimes offer
      deep
      discounts to persuade hospitals to buy their products instead of Fresenius
      products. Also there has been a continuing trend for hospitals to insist on
      competitive bidding in purchasing, rather than a traditional negotiated
      one-to-one purchase. This has tended to place downward pressure on
      prices.





**Gross
      Profit**





Gross
      profit for the six months ended June 30, 2008 was $7,305,920, an increase of
      $1,222,507 or 20.10% from $6,083,413 for the six months ended June 30, 2007.
      Gross profit margin was 36.57% for the six months ended June 30, 2008 compared
      to 38.46% for 2007. This decrease in the gross profit margin was due to
      increasing competition, especially at the larger Level 3 hospitals, which put
      pressure on the prices we could charge and the entering into new markets with
      lower sales price. The government’s power to influence the pricing of our
      products also contributed to such decrease, hence resulting in lower unit sales
      prices.





**Selling,
      General and Administrative Expenses**





Selling
      expenses were $925,018 for the six months ended June 30, 2008, an increase
      of
      $623,590 or 206.88% from $301,428 for the six months ended June 30, 2007. The
      significant increase in cost of sales was substantially driven by the
      implementation of our geographical expansion strategy. From the end of 2007,
      we
      have incurred costs in order to expand our market share in hemodialysis
      equipment and related disposables, by establishing our sales network in new
      markets (such as the southeast Shanghai district) and expanding our sales
      network. Most of the new markets are located in high economic developed region
      with a more competitive environment. Therefore, we determined it was necessary
      to increase our marketing promotion expenses (including the continuing training
      and education programs for doctors and sales representatives). These new markets
      have significant strategic functions to our business strategy which we hope
      will
      stabilize our leading market position and increase our market share.





General
      and administrative expenses were $1,396,780 for the six months ended June 30,
      2008, an increase of $735,825 or 111.33% from $660,955 for the six months ended
      June 30, 2007. The increase was mainly due to the amortized expenses of
      approximately $500,000 incurred by the two exclusive dealerships that we
      obtained in November 2007. The two dealerships grant us the exclusive right
      to
      distribute two new hemodialysis treatment equipment products for periods of
      three and five years. Since these products have not completed the process
      of registration with PRC FDA, we do not expect to generate revenues from
      these distributorships until 2009. Another reason of the increase is due to
      our
      efforts in restructuring management to meet the requirements of an expanding
      enterprise. We have a total of more than 70 people in SMT. We have incurred
      increased expenses in retaining outside consultants to advise us on increasing
      the quality of our company, including internal financial and disclosure
      controls. We have a sales and marketing team of 44 people and have a logistic
      support team of 12 people. In addition, we have 14 employees in Shanghai and
      Beijing, working in consulting and administration.




39





**Operating
      Income**





Operating
      income was $4,984,122 for the six months ended June 30, 2008, a decrease of
      $136,908 or 2.67% from $5,121,030 for the six months ended June 30, 2007. Our
      operating income margins decreased from 32.38 % for the six months ended June
      30, 2007 to 24.95% for the six months ended June 30, 2008. This operating margin
      decrease was principally due to the substantial increase in general and
      administrative expenses and selling expenses in the three months ended June
      30,
      2008, which in the case of our two new distributorships will not generate
      revenue in 2008.





**Income
      taxes**





Although
      we are subject to United States taxation, we do not anticipate incurring
      significant United States income tax liability for the foreseeable future
      because:




·
            we
                do not conduct any material business or maintain any branch office
                in the
                United States





·
            the
                earnings generated from our non-U.S. operating companies are generally
                eligible for a deferral from United States taxation until such earnings
                are repatriated to the United States,
                and





·
            we
                believe that we will not generate any significant amount of income
                inclusions under the income imputation rules applicable to a United
                States
                company that owns "controlled foreign corporations" for United States
                federal income tax purposes.





Provision
      for income tax was $1,443,043 for the six months ended June 30, 2008, a decrease
      of $286,422 from $1,729,465 for the six months ended June 30, 2007. The decrease
      of income tax is primarily due to the decrease of operating income and the
      adjustment of the income tax rate from 33% to 25% for domestic companies by
      the
      PRC tax authorities since January 1, 2008. We conduct all our operations through
      our PRC operating companies and we are governed by the PRC Enterprise Income
      Tax
      Laws. The PRC enterprise income tax is calculated based on taxable income
      determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC
      domestic company is subject to enterprise income tax at the rate of 25%, value
      added tax at the rate of 17% for most of the goods sold, and business tax on
      services at a rate ranging from 3% to 5% annually. A PRC domestic company is
      also subject to local taxes. We were fully taxed at the rate of 25% and 33%
      for
      the first six months ended June 30, 2008 and 2007, respectively




40





**Minority
      interests**





Minority
      interests were $913 for the six months ended June 30, 2008, an increase of
      $355
      from $558 for the six months ended June 30, 2007. The increase is due to the
      adjustment of the percentage of the equities the minority shareholder
      held.





**Net
      Income**





Net
      income was $3,554,880 for the six months ended June 30, 2008, an increase of
      $161,682 or 4.76% from $3,393,198 for the second quarter of 2007. Net profit
      margin was 17.79% for the six months ended June 30, 2008 compared to 21.45
      % for
      the same period in 2007 because of the significant increase in our general
      and
      administrative expenses, and costs incurred in expanding our sales and in
      restructuring management to meet the requirements of an expanding
      enterprise.





**Foreign
      Currency Translation Adjustments**




During
      the fiscal year ended December 31, 2007 and through June 30, 2008, the Renminbi
      rose steadily against the U.S. dollar. Given the uncertainty of exchange rate
      fluctuations, we cannot estimate the effect of these fluctuations on our future
      business, product pricing, results of operations or financial conditions, but
      the fluctuation of the Renminbi may materially and adversely affect the
      investment of U.S. investors if the current trend of appreciation of the
      Renminbi versus the U.S. dollar is reversed.





All
      of
      our revenue and expenses in the six months ended by June 30, 2008 and 2007
      were
      denominated in Renminbi. The income statement accounts were translated at the
      first six months average exchange rate of $1 to RMB 7.0726 and the balance
      sheet
      items, except the equity accounts were translated at the year ended rate of
      $1
      to RMB 7.3141. The equity accounts were stated at their historical rate when
      corresponding transactions happened. The exchange rate on August 13, 2008 was
      $1
      to RMB 6.81600.





**Inventory**





Inventory
      was $1,826,478 at June 30, 2008, an increase of $619,802 or 51.36% from
      $1,206,676 at December 31, 2007. The increase is mainly due to the increase
      of
      the sales volume of the products.





**Accounts
      Receivable**





Accounts
      receivable increased 67.04% to $4,022,912 at June 30, 2008, compared to
      $2,408,223 at December 31, 2007. Accounts receivable related to our five largest
      customers totaled $932,543.70, accounting for 23.18% of all accounts receivable
      as of June 30, 2008.




41





Management
      reviews its accounts receivable on a regular basis to determine if the allowance
      for doubtful accounts is adequate at each year-end. We only extend 30 to 90
      day
      trade credits to our large customers, who tend to be well-established and large
      sized businesses, and we have not seen any accounts receivable go uncollected
      beyond 90 days or experienced any write-off of accounts receivable in the past.
      Thus, we elected not to make any provision for doubtful accounts and consider
      all accounts receivable collectable.





**The
      following table provides information, as of June 30, 2008, as to our accounts
      receivable from our five largest customers:**


Creditors
              
              Receivable
                  amounts (RMB)
              
              Receivable
                  amounts (US$)
              
              Percentage
                  of Total receivables (%)Heilongjiang
                  Jichang Medical Equipment Co. Ltd.
              
              
              1,400,000.00
              
              
              203,784.57
              
              
              21.85
              %Shanghai
                  Qingpu Sanitary Industry Center
              
              
              1,310,380.00
              
              
              190,739.45
              
              
              20.45
              %Nanjing
                  Dakang Medical Equipment Co., Ltd.
              
              
              1,270,508.40
              
              
              184,935.72
              
              
              19.83
              %Shanghai
                  KangTai Co. Ltd.
              
              
              1,223,540.00
              
              
              178,098.98
              
              
              19.10
              %Liberation
                  Army No.455 Hospital
              
              
              1,202,146.82
              
              
              174,984.98
              
              
              18.76
              %Total
              
              
              6,406,575.22
              
              
              932,543.70
              
              
              100
              %




**Liquidity
      and Capital Resources**





Historically,
      we have financed our business with cash flow from operations and used
      shareholders’ equity investment and retained earnings to cover capital
      expenditures.





Working
      capital mainly consists of inventory, salaries, operation overhead (auxiliary
      materials, utilities, etc.) and finance expenses. Inventory purchases comprise
      the majority of our working capital. Our working capital as of June 30, 2008,
      was $14,632,851.





Our
      working capital requirements may be influenced by quite a few factors, including
      cash flow, competition, our relationships with suppliers, logistic and inventory
      management, the availability of credit facilities and financing alternatives,
      none of which can be predicted with high level of certainty. During the last
      two
      years the availability of credit facilities in the PRC has become tighter,
      as
      the government has been taking steps to moderate inflation. So far these
      measures have not materially affected our operations. We believe that, following
      our recent private placement financing, we have sufficient working capital
      to
      proceed with our business plans.




42





***Operating
      Activities***





Net
      cash
      used by operating activities for the six months ended June 30, 2008 was
      $1,038,231, compared to $1,813,415 provided for the six months ended June 30,
      2007. This difference was principally attributable to the long-term prepayments
      that were used to increase inventory in our warehouses so as to make us more
      competitive and enable us to respond more quickly to our customers’ needs. This
      was also supportive our supplier’s goal of increasing unit sales. .





***Investing
      Activities***





Net
      cash
      used in investing activities for the six months ended June 30, 2008 was
      $356,198, an increase of $230,303 from $125,895 for the six months ended June
      30, 2007. This increase was due primarily to the deposit of $300,000 of
      restricted cash in the escrow account for the purpose of engagement of the
      public relation firm for the current and coming operating periods, and this
      long-term nature of the restriction made such an item an investing activity.





***Financing
      Activities***


Net
      cash
      provided in financing activities for the six months ended June 30, 2008 was
      $9,715,428 comparing with $1,409,138 used in financing activities for the six
      months ended June 30, 2007. This increase was due primarily to the completion
      of
      our issuance of preferred stock and warrants of $ 9,713,128.





**Loans**





There
      were no short-term bank loans outstanding at the end of June 30, 2008 and 2007.





**Future
      Cash Commitments**





We
      have
      made capital investment plans for geographical expansion, possible acquisitions,
      setting up hemodialysis service centers and expansion of production capabilities
      in fiscal 2008, estimated at a total value of approximately $23 million. This
      demand for investment capital will be mainly met with the proceeds from the
      sale
      of our Series A Senior Preferred Stock described above, and partly with cash
      inflow from operations.





**Critical
      Accounting Policies and Estimates**





Management's
      discussion and analysis of its financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with United States generally accepted accounting principles. Our
      financial statements reflect the selection and application of accounting
      policies which require management to make significant estimates and judgments.
      See note 1 to our consolidated financial statements, "Summary of Significant
      Accounting Policies and Organization". We believe that the following reflect
      the
      more critical accounting policies that currently affect our financial condition
      and results of operations:




43





**Method
      of Accounting**





We
      maintain our general ledger and journals with the accrual method accounting
      for
      financial reporting purposes. Accounting policies adopted by us conform to
      generally accepted accounting principles in the United States of America and
      have been consistently applied in the presentation of financial statements,
      which are compiled on the accrual basis of accounting.





**Use
      of estimates**





The
      preparation of the financial statements in conformity with generally accepted
      accounting principles in the United States of America 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 revenue and expenses during
      the reporting periods. Management makes these estimates using the best
      information available at the time the estimates are made; however actual results
      could differ materially from those estimates.





44




**Item
      4T. Controls and Procedures.**




***Disclosure
      Controls and Procedures***




As
      required by Rule 13a-15 under the Exchange Act, our management, including our
      Chief Executive Officer and our Chief Financial Officer, evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of April 30, 2008.




Disclosure
      controls and procedures refer to controls and other procedures designed to
      ensure that information required to be disclosed in the reports we file or
      submit under the Securities Exchange Act is recorded, processed, summarized
      and
      reported within the time periods specified in the rules and forms of the SEC
      and
      that such information is accumulated and communicated to our management,
      including our chief executive officer and chief financial officer, as
      appropriate, to allow timely decisions regarding required disclosure. In
      designing and evaluating our disclosure controls and procedures, management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving the desired control
      objectives, and management is required to apply its judgment in evaluating
      and
      implementing possible controls and procedures.




Management
      conducted its evaluation of disclosure controls and procedures under the
      supervision of our chief executive officer and our chief financial officer.
      Based on that evaluation, management concluded that our disclosure controls
      and
      procedures are designed to provide reasonable assurance of achieving their
      objectives and our principal executive officer and principal financial officer
      concluded that our disclosure controls and procedures are effective at the
      reasonable assurance level.




***Changes
      in Internal Controls over Financial Reporting***




There
      were no changes in our internal controls over financial reporting during the
      second quarter of fiscal year 2008 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




**PART
      II. OTHER INFORMATION**




**Item
      6. Exhibits**





(a)
      Exhibits





31.1 -
      Certification of Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





31.2 -
      Certification of Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





32.1 -
      Certification of Chief Executive Officer and Chief Financial Officer pursuant
      to
      Section 906 of the Sarbanes-Oxley Act of 2002.





[The
      remainder of this page is intentionally blank.]




45


SIGNATURES





Pursuant
      to the requirements of the Securities Act of 1934, the Registrant has duly
      caused this report to be signed on its behalf by the undersigned there unto
      duly
      authorized.


AAMAXAN
                TRANSPORT GROUP, INC.Date:
                August 19, 2008
            BY:
            /s/Chen ZhongChen
                Zhong
                Chief
                  Executive Officer
                  (principal
                    executive officer)




BY:
            /s/
                Xu YifeiXu
                Yifei
                Acting
                  Chief Financial Officer
                  (principal
                    financial officer and accounting
                    officer)




46