**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-K**





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





**For
      the fiscal year ended October 31, 2007**





OR





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





For
      the
      transition period from_____________ to _____________.





**Commission
      file number** **O-24512**





**RENHUANG
      PHARMACEUTICALS, INC.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **88-1273503**
              (I.R.S.
                Employer
              Identification
                No.)**No.
                218, Taiping, Taiping District**
              **Harbin,
                Heilongjiang Province,**
              **P.R.
                China**
              (Address
                of principal executive offices)
            **150050**
              (Zip
                Code)





**Registrant’s
      telephone number, including area code +86-451-5762-0378**





Securities
      registered pursuant to Section 12(b) of the Act:





Title
                of each class
            
            Name
                of each exchange on which registeredNone
            
            None





Securities
      registered pursuant to Section 12(g) of the Act:





Common
      Stock, par value $0.001


(Title
      of
      class)





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





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes x No o





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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer  o    Accelerated
      filer o





Non-accelerated
      filer  o Smaller
      reporting company x


(Do
      not
      check if a smaller reporting company)





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





Aggregate
      market value of the voting stock held by non-affiliates: $20,006,148 as
      based
      on last reported sales price of such stock. The voting stock held by
      non-affiliates on that date consisted of 17,246,680 shares of common
      stock.





**Applicable
      Only to Registrants Involved in Bankruptcy Proceedings During the Preceding
      Five
      Years:**





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934
      subsequent to the distribution of securities under a plan confirmed by a court.
      Yes o No o





**Applicable
      Only to Corporate Registrants**





Indicate
      the number of shares outstanding of each of the registrant’s classes of common
      stock, as of the latest practicable date. As of May 20, 2008, there were 35,096,680 shares
      of
      common stock, par value $0.001, issued and outstanding.





**Documents
      Incorporated by Reference**





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







**Renhuang
      Pharmaceuticals, Inc** **.**





**TABLE
      OF CONTENTS**


**PART
                  I**ITEM
                  1 – BUSINESS
              **2**ITEM
                  1A – RISK FACTORS
              **23**ITEM
                  1B – UNRESOLVED STAFF COMMENTS
              **31**ITEM
                  2 - PROPERTIES
              **31**ITEM
                  3 - LEGAL PROCEEDINGS
              **31**ITEM
                  4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              **31****PART
                  II**ITEM
                  5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
                  ISSUER PURCHASES OF EQUITY SECURITIES
              **32**ITEM
                  6 – SELECTED FINANCIAL DATA
              **33**ITEM
                  7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATION
              **34**ITEM
                  7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK
              **42**ITEM
                  8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
              **42**ITEM
                  9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE
              **42**ITEM
                  9A – CONTROLS AND PROCEDURES
              **44**ITEM
                  9A(T) – CONTROLS AND PROCEDURES
              **45**ITEM
                  9B – OTHER INFORMATION
              **45****PART
                  III**ITEM
                  10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE
              **45**ITEM
                  11 – EXECUTIVE COMPENSATION
              **47**ITEM
                  12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND
                  RELATED STOCKHOLDER MATTERS
              **51**ITEM
                  13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE
              **51**ITEM
                  14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
              **53****PART
                  IV**ITEM
                  15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
              **55**





**PART
      I**





**Explanatory
      Note**





This
      Annual Report includes forward-looking statements within the meaning of the
      Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based
      on management’s beliefs and assumptions, and on information currently available
      to management. Forward-looking statements include the information concerning
      possible or assumed future results of operations of the Company set forth under
      the heading “Management's Discussion and Analysis of Financial Condition or Plan
      of Operation.” Forward-looking statements also include statements in which words
      such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,”
“consider” or similar expressions are used.





Forward-looking
      statements are not guarantees of future performance. They involve risks,
      uncertainties and assumptions. The Company's future results and shareholder
      values may differ materially from those expressed in these forward-looking
      statements. Readers are cautioned not to put undue reliance on any
      forward-looking statements.





**ITEM
      1 – BUSINESS**





**Business
      Overview**





*Company
      History of Renhuang Pharmaceuticals, Inc.*





We
      were
      incorporated in the State of Nevada on August 18, 1988 as Solutions,
      Incorporated. Since that time, we have undergone a series of name changes as
      follows: Suarro Communications, Inc., e-Net Corporation, e-Net Financial Corp.,
      e-Net.Com Corporation, e-Net Financial.Com Corporation, Anza Capital, Inc.
      and
      finally on July 28, 2006, we changed our name to Renhuang Pharmaceuticals,
      Inc.





On
      March
      3, 2006, we completed the disposition of substantially all of our assets and
      discontinued our operations, including but not limited to, all of our ownership
      interest in our subsidiary, American Residential Funding, Inc., a Nevada
      corporation (“AMRES”) to AMRES Holding, LLC, a Nevada limited liability company
      (“AMRES Holding”) under control of Vince Rinehart, a shareholder and, at that
      time, our sole officer and director (“Rinehart”). Effective on September 30,
      2005, the disposition was approved by written consent of a majority of our
      stockholders.





In
      exchange for substantially all of our assets, including but not limited to,
      all
      of our ownership interest in AMRES, (i) Rinehart delivered a majority of his
      ownership interest in Anza, consisting of 831,375 shares of common stock and
      1,880,000 shares of our common stock acquired upon the conversion of 18,800
      shares of Series F Convertible Preferred Stock, to Viking Investments USA,
      Inc.,
      a Delaware corporation (“Viking”). Rinehart kept 156,900 shares of our common
      stock; (ii) Rinehart terminated that certain Employment Agreement dated June
      1,
      2001, by and between Rinehart and Anza; (iii) AMRES assumed all obligations
      under that certain real property lease by and between Anza and Fifth Street
      Properties-DS, LLC; (iv) AMRES delivered to Viking its ownership interest in
      Anza, consisting of 4,137,500 shares of our common stock; and (v) AMRES Holding
      delivered warrants to acquire 250,000 shares of our common stock to Viking.





On
      August
      11, 2006, our outstanding common stock underwent a thirty-for-one stock split
      reversal resulting in a decrease in our outstanding common stock at that time
      from 13,355,181 shares to approximately 445,240 shares as further described
      in
      our Current Report 14C filed with the Commission on April 25, 2006.





2




*Company
      History of Harbin Renhuang Pharmaceutical Co. Ltd. and Harbin Renhuang
      Pharmaceutical Stock Co. Ltd.*





Harbin
      Renhuang Pharmaceutical Stock Co. Ltd. was incorporated in 1996 in the Peoples
      Republic of China (“Old Renhuang”). Harbin Renhuang Pharmaceutical Co. Ltd. was
      incorporated in February 2006 in the Peoples Republic of China (“Renhuang
      China”). On March 3, 2006 Renhuang Medicine for Animals, a company
      controlled by Mr. Li Shaoming, invested 25 million RMB ($3.3 million) in cash
      in
      Renhuang China. On May 1, 2006 Old Renhuang transferred the majority of its
      operating assets, except buildings, to Renhuang China at the carrying amounts
      of
      Old Renhuang.





As
      a
      result, as of May 1, 2006, nearly 100% of revenue producing activities in Old
      Renhuang have been migrated to Renhuang China.





*Merger
      of Renhuang Pharmaceuticals and Harbin Renhuang*





On
      August
      28, 2006, Renhuang Pharmaceuticals, Inc., a Nevada corporation (the “Company”)
      and Harbin Renhuang Pharmaceutical Company Limited, a Corporation incorporated
      under the laws of the British Virgin Island, (the “BVI”) entered into a Share
      Exchange Agreement (the “Agreement”) pursuant to which the Company acquired all
      of the outstanding capital stock of BVI in exchange for issuing 29,750,000
      shares of the Company’s common stock, par value $0.001 per share (the ‘‘Common
      Stock’’) to BVI’s stockholders, representing 85% of the Company’s capital stock
      on a fully diluted basis after taking into account the contemplated transaction.
      BVI is a holding company and owns 100% of Harbin Renhuang Pharmaceutical Co.
      Ltd., incorporated under the laws of the Peoples Republic of China (“Renhuang
      China”). This transaction is referred to throughout this report as the
“Merger.”





*Post-Merger
      Business*





As
      a
      result of the Merger, all of our operations are conducted through Harbin
      Renhuang Pharmaceutical Co. Ltd., a company incorporated under the laws of
      the
      Peoples Republic of China and a wholly-owned subsidiary of Harbin Renhuang
      Pharmaceutical Company Ltd., a corporation incorporated under the laws of the
      British Virgin Islands and our wholly-owned subsidiary. Unless otherwise noted
      in this Registration Statement all references to “we,” “us,” “our company,”
“our,” or the “Company” refer to the combined entity of Renhuang
      Pharmaceuticals, Inc., and its subsidiaries.





Harbin
      Renhuang Pharmaceutical Co. Ltd. was incorporated in 1996 in the Peoples
      Republic of China, and is located in the capital of the province of Heilongjiang
      Province, in the northeastern corner of China. We
      are
      primarily engaged in the fields of research, manufacturing and distribution
      of
      Chinese medical products and bio-pharmaceutical products in Mainland
      China .
      Our
      niche market is production and sale of the traditional Chinese medical products
      and bio-pharmaceutical products mentioned herein, and our goal is to become
      the
      dominant manufacturer and supplier of a few carefully selected groups of
      products, primarily natural health care products, such as Acanthopanax and
      Ban
      lan gen derived from the roots of the Isatis plant; enzyme engineering series
      products, including Lysozyme enzyme; Shark Power health care products, Monoclonal
      Antibody Reagent Box Series Products, and traditional medical products, such
      as
      but not limited to cold, flu and headache medicines .





We
      are a
      high-tech company with its niche market in Greater China area. With our advanced
      monoclonal antibody technologies and by specializing in a few carefully selected
      products we believe we will be able to differentiate ourselves from our
      competitors.





3


Renhuang
      has the ability to produce more than 100 types of products. The product sales
      have reached more than 50 provinces and cities in China.





In
      the
      beginning of 2003, Harbin Renhuang Pharmaceutical Stock Co., Ltd. (“Old
      Renhuang”), purchased the land use rights to 100,000 square meters (about 1
      million square feet) of land and built “City Biotech Medicine Park” located in
      the City of “A” in the Province of Heilongjiang. The project was called
“Renhuang City Bio-tech Medicine Construction Project,” which has been supported
      by the Chinese government. This support was in the form of a zero percent
      interest rate three-year loan in the amount of 30 million RMB (about US $3.7
      million). The whole project was finished in 2004, and “City Bio-tech Medicine
      Park” received “Good Manufacturing Practice” (GMP) certification from the
      Heilongjiang Food and Drug Administration on December 30, 2004. In the facility
      we produce enzyme engineering series products, including SOD (Super Oxide
      Dismutase), Lysozyme enzyme; Shark Power health care products and some other
      traditional medicine. As of May 1, 2006, Old Renhuang is leasing the buildings
      to Renhuang China on market terms as disclosed herein.





In
      2003,
      Old Renhuang acquired Dongfanghong (“DFH”) Pharmaceutical Co., which
      controls 70% of all Acanthopanax wild resource (commonly known as “Siberian
      Ginseng”) in the Heilongjiang Province. About 90% of all wild Acanthopanax
      resource in China grows in Heilongjiang.  Additionally, the
      acquisition came with 73 GMP approved medicines from DFH. As of May 1, 2006,
      Old
      Renhuang transferred all acquired operations of DFH to Renhuang
      China.





**Products**





Historically,
      our medical product portfolio is divided into three different categories:





1.  Acanthopanax
      medical products - 53%*





2.  Shark
      Power Healthcare products, and - 13%*





3.  Traditional
      medical products. - 34%*





*
      Approximate percentage of the total revenue of from November 1, 2006 to October
      31, 2007.





Acanthopanax
      (Siberian Ginseng)





***Overview:***





Acanthopanax,
      which is known in the United States as Siberian Ginseng, has been used for
      centuries in China and Russia. Although a distant relative of American and
      Asian
      ginsengs ( *Panax* sp *.* ),
      with
      some overlap in its uses, Acanthopanax is a distinct plant with different active
      chemical components. Known for its ability to restore vigor, increase longevity,
      enhance overall health, and stimulate both a healthy appetite and a good memory,
      it is widely used in Russia to help the body adapt to stressful conditions
      and
      to enhance productivity.





In
      Chinese medicine, it is valued for its beneficial effects on “qi” *(the
      Chinese term for vital energy or life force. It is pronounced
“chee.”)* and its
      ability to treat “yang” *(one
      of the two fundamental forces, yang represents the male or active
      force.)* deficiency in the spleen *(distinct
      from the Western medical concept of spleen, this concept from Traditional
      Chinese Medicine is more a way of describing a set of interrelated parts than
      an
      anatomical organ.)* and the
      kidney. Like the panax ginsengs, Acanthopanax is considered to be an adaptogen,
      which means it helps in stressful circumstances and returns the body to a normal
      balance. For example, an adaptogen might lower blood pressure in someone who
      has
      high blood pressure, but raise it in another person who has low blood pressure.
      The active ingredients in Acanthopanax, eleutherosides (similar to ginsenosides
      in the panax species), are thought to increase stamina and to stimulate the
      immune system.





4


Until
      recently, most scientific research on Acanthopanax took place in Russia. This
      research has largely supported its use to maintain health and strengthen the
      system rather than to treat particular disorders. Acanthopanax may help the
      body
      deal with physically and mentally stressful exposures such as heat, cold,
      physical exhaustion, viruses, bacteria, chemicals, extreme working conditions,
      noise, and pollution. By strengthening the system, it may also help prevent
      illness. Acanthopanax is especially popular among athletes or physical workers
      who require substantial sources of adaptive energy and endurance, such as long
      distance runners, rock climbers, bicyclists, scuba divers, dancers, tennis
      players and by others seeking to enhance physical and mental performance,
      endurance and adaptability.




***Research:***




Siberian
      ginseng's active ingredients are a complex group of chemicals called *eleutherosides* .
      Eleutherosides are different than the ginsenocides found in the *Panax* varieties of ginseng, which is consistent with Chinese herbalists' claims that
      Siberian ginseng acts differently in the body than Korean or American ginseng.
      There has been some debate among herbalists whether Siberian ginseng should
      be
      considered a true ginseng at all, due to this difference in active
      ingredients.




Much
      of
      the research done on Siberian ginseng was performed by Soviet scientists in
      the
      former Soviet Union. Many of the study results are still unavailable in English.
      Those that have been translated and more recent studies have corroborated the
      benefits of Siberian ginseng.




·
            Siberian
                ginseng has been documented in many studies to improve physical endurance,
                oxygen uptake, recovery, and overall performance in athletes, ranging
                from
                runners to weightlifters. A 1986 study in Japan showed that eleuthero
                ginseng improves oxygen uptake in exercising
                muscle.


·
            Siberian
                ginseng normalized blood pressure in patients with high and low blood
                pressure. Siberian ginseng has been shown to reduce stress symptoms
                in
                general. A 1996 study in Japan concluded that Siberian ginseng can
                protect
                against gastric ulcers.


·
            Animal
                studies showed Siberian ginseng helped fight against toxic chemicals
                and
                exposure to harmful levels of radiation. A 1992 Russian study showed
                that
                Siberian ginseng reduced the occurrence of tumors in rats when exposed
                to
                radiation. Another Russian study showed that women undergoing radiation
                for breast
                cancerhad
                a significant reduction of side effects when given Siberian
                ginseng.


·
            A
                1987 German study, using human subjects in a double-blind test,
                demonstrated that eleuthero ginseng boosts immune system response
                and
                enhances the body's overall resistance to infection. Other studies
                have
                shown that Siberian ginseng increases activity of lymphocytes and
                killer
                cells in the immune system.




Another
      popular but unproven use of Acanthopanax is to maintain or restore mental
      alertness.





*Physical
      Performance*





Although
      Acanthopanax is frequently used to enhance physical stamina and increase muscle
      strength, studies have shown mixed results for these purposes.





5


*Male
      Fertility*





Acanthopanax
      has a long history of folkloric use for male infertility. Animal studies suggest
      that Acanthopanax may be helpful in increasing reproductive capacity.





*Viral
      Infection*





In
      a
      laboratory study, an extract of Acanthopanax slowed the replication of certain
      viruses, including influenza A (which causes the flu) as well as human
      rhinovirus and respiratory syncytial virus (both of which cause symptoms of
      the
      common cold). It had no effect, however, in test tubes on adenovirus (another
      cause of the common cold and other respiratory infections) or herpes simplex
      virus type 1 (which generally causes oral herpes lesions). But, a 6-month study
      of 93 people with herpes simplex virus type 2 (which generally causes genital
      herpes lesions) found that Acanthopanax reduced frequency, severity, and
      duration of outbreaks.





***Market
      Analysis on Acanthopanax in China:***





Wild
      Acanthopanax grows in some provinces in North and North-Eastern China,
      especially in Heilongjiang Province, where 90% of all wild Acanthopanax
      resources in China are located. Pursuant to our research, the annual production
      level in the 1980’s was around 10,000 tons, which due to excessive harvesting
      and damage, significantly decreased during the 1990s to 2,000 tons. Our latest
      estimate shows that the production in 2004 decreased to 1,000 tons.





The
      resources for Acanthopanax medicine are mostly derived from wild Acanthopanax.
      Due to favorable conditions and temperature in the Heilongjiang Province, where
      Renhuang is located, 90% of the wild Acanthopanax suitable for medicine comes
      from Heilongjiang Province. (Note: human cultivated Acanthopanax in other areas
      does not reach the same drug efficacy as wild Acanthopanax). Therefore, most
      of
      the pharmaceutical companies producing Acanthopanax are located in the
      Heilongjiang Province. Due to the limited supply of wild Acanthopanax, and
      increased recognition of its medical benefits, the demand for Acanthopanax
      is
      higher than the supply. Our management believes the demand for Acanthopanax
      worldwide will increase tenfold in the next five years. As a result, the price
      of raw Acanthopanax should gradually increase.





In
      2000,
      the price of a kilogram of raw Acanthopanax was around 0.5 RMB (around US
      $0.062), which increased to 2.8 RMB (around US $0.375) in 2007. It is estimated
      that the price for Acanthopanax will continue to increase.





Due
      to
      its increasing popularity in United States, Japan and European countries,
      exporting Acanthopanax medicine is expected to generate additional revenue
      for
      us in the near future.





The
      Dongfanghong Acquisition:





In
      2003,
      Old Renhuang acquired Dongfanghong Pharmaceutical Co. (DFH), a previously
      state-owned pharmaceutical company, located in Harbin, Heilongjiang Province,
      which owns 70% of all wild Acanthopanax resources in China. DFH owns a plant
      used to manufacture products utilizing Acanthopanax. In 2004, one year after
      the
      acquisition, we increased efficiency and production capabilities to generate
      US
      $3.75 million in revenue from the sale of Acanthopanax-based products, which
      is
      a 10% market share in China. As of May 1, 2006, Old Renhuang transferred all
      acquired operations of DFH to Renhuang China.





6


In
      the
      year ended October 31, 2007, the plant generated US $15.6 million in revenue.
      In
      the year from November 1, 2006 to October 31, 2007, the plant generated US
      $10.2
      million in revenue from Acanthopanax. We hope to obtain a market share of 50%
      of
      Acanthopanax products in China within the next 3-5 years.





***Competitive
      Advantages:***





In
      addition to the resource advantage, we have the following competitive edges
      related to Acanthopanax:





*Farm
      Production*





Wild
      Acanthopanax resources might not be able to fulfill the rapid growing demand.
      Therefore, we have started to cultivate Acanthopanax manually in a 60 million
      square feet cultivation area. Cultivated Acanthopanax achieves, in all material
      respects, the same effects as wild Acanthopanax, mainly due to our use of wild
      Acanthopanax seeds and other production methods as well as its extraordinarily
      favorable climate conditions in Heilongjiang Province.





*Lower
      Production Costs*





We
      have
      successfully developed new withdrawing technology during the process of
      cultivating and producing Acanthopanax. Based on our estimates, we believe
      that
      our new technology will lead to production costs that will be approximately
      30%
      lower than our competitors.





*Future
      Development Plan for Acanthopanax Products*





With
      our
      position in the marketplace, we plan to capitalize on increased brand
      recognition. Through a controlled expansion plan, we plan to expand our market
      shares in local provinces and eventually in all of China. We hope to eventually
      be identified as the leading manufacturer of Acanthopanax products.





Through
      increased market awareness, it is further anticipated that our unique edge
      in
      Acanthopanax will be recognized outside of China. In doing so, we anticipates
      entering into strategic foreign partnership, which we expect will result in
      increased international sale of Acanthopanax medicine in the near
      future.





***Acanthopanax
      Revenue:***





During
      the year ended October 31, 2007, Acanthopanax medical products have generated
      approximately 53% of our total revenue. Due to the amount of Acanthopanax wild
      resource we control, and our cutting-edge technology, we believe that we will,
      within the next 3-5 years, control more than 50% share of the market of
      Acanthopanax-based medical products in China. It is further anticipated that
      the
      market for Acanthopanax-based products will continue to grow at a potential
      average annual rate of 30% and thereby becoming our primary revenue generating
      product.





7


Shark
      Power Healthcare Products





Shark
      Power Healthcare products, are made from Squalene, the scientific name for
      'Nose
      Oil', a low density compound stored in the liver of sharks. These medicines
      contain extracts of shark liver oil and are used to improve oxygen level of
      human blood. Squalene, when taken into the body, removes animal fat and various
      waste materials whilst circulating in the blood so that it cleans blood vessels
      and blood. It is good for the treatment and prevention of arteriosclerosis,
      improving the function of the kidneys and livers.





Our
      research and development center has developed natural medicines utilizing
      Squalene - the Shark Power Healthcare Series. It was awarded the “special golden
      prize at Ninth Chinese Patent Technology New Product Exhibition,” and “Golden
      metal at London International Patent Technology Exhibition.”





Clinical
      research has proven that this medicine can improve the carrying and transporting
      oxygen ability of blood, enhance the oxygen absorption and utilization factor
      of
      the organism organs, dredge the blood vessels, increase the speed of blood's
      oxygen transportation, and specially supply oxygen to heart, brain, lung and
      liver. It is able to effectively cure all kinds of symptoms caused by secondary
      health problems like dizziness, insomnia, forgetfulness, low energy, back pain,
      tiredness, and the caught cold. The effect is stable and safe.





***Competitive
      Advantages:***





Our
      Shark
      Power Healthcare Products have the following major advantages compared with
      the
      competition.





*State
      Drug Administration (SDA) Approval*





Renhuang’s
      Shark Power Healthcare Products has received Good Manufacturing Practice (“GMP”)
      certificates from the State Drug Administration (“SDA”). As most healthcare
      products produced in China have not obtained GMP certificates, our Shark Power
      Healthcare Products have a strong competitive advantage. Our Shark Power
      Products are also distributed through hospital channels, which is not the case
      for most other health care products.





*Lower
      Production Costs*





The
      retail price of Shark Power Healthcare products has historically been lower
      than
      the price of competitors’ products, because our raw material costs are lower.
      This means we can pass the savings on to the customers. We purchase raw
      materials indirectly from Australia at prices which we believe are 20% lower
      than those from coastal areas in China, where most competitors purchase their
      materials.





***Sales
      of our Shark Power Healthcare Products***





In
      the
      six months ended October 31, 2007, the revenue from Shark Power Healthcare
      products has accounted for approximately 13% of our total revenue, compared
      to
      10% for the six months ended October 31, 2006. With increased promotion and
      improved marketing strategy, our intent is to increase its market share during
      the next several years.





8


Traditional
      Medical Products





In
      addition to Acanthopanax medical and Shark Power Healthcare products, we produce
      traditional medicine products, such as medicine for cold, flu, headache, etc.
      Revenue from these traditional medical products accounted for 34% of our total
      revenue in the twelve months ended October 31, 2007, 36% between November
      1, 2005 and April 30, 2006, and 35% between May 1, 2006 and October 31, 2006.
      We
      own 40 medical products with GMP certificates, of which some “Star” products
      reach top sales among the same products and most of the others generate a stable
      stream of revenue.  We designate those products that we believe are among
      our most promising products as “Star” products.





*Three
      “Star” products*





“Tianma
      pills” and “Tornado pills” are the “Star” Chinese traditional medicines for
      treating headache in China. Although western headache medicines have larger
      market share in China, they have also been showing to have larger side effects.
      Research reveals that most other Chinese traditional medicines have fewer side
      effects, but cannot reach the same curative effects as western medicines.
      Renhuang's “Tianma” and “Tornado” are not only superior with strong visible
      curative effects, but with little or no side effects.





In
      the
      year ended October 31, 2007, revenue from the sales of “Tianma pills” and
“Tornado pills” was $1.97 million and $5.42 million, respectively. In the six
      months from May 1, 2006 to October 31, 2006 revenue from the sales of “Tianma
      pills” reached more than US $1,000,000, and that sales of “Tornado pills”
reached US $2,230,000.





Another
      “Star” medicine is “Shengmai” granulate. In the year ended October 31, 2007,
      revenue from the sales of “Shengmai” granulate was $1.9 million. In the six
      months from May 1, 2006 to October 31, 2006, revenue from this product reached
      US $1,000,000.





We
      also
      produce several additional traditional medical products that each accounts
      for
      lesser amounts. These products, through brand recognition, generate stable
      revenue for us. When Renhuang expands its product offerings, it is anticipated
      that these additional products will be replaced by higher margin
      products.





**Products
      in the Developing Stage**




We
      hope to develop the following products in the
      coming years. We started the early stages of internal research on these products
      in 2006 and before through Old Renhuang. To date, we have not spent material
      amounts on the development of these products.




*Lysozyme
      Enzyme Products*




Lysozyme
      is an enzyme occurring naturally in egg white, human tears, saliva, and other
      body fluids, capable of destroying the cell walls of certain bacteria and
      thereby acting as a mild antiseptic. Lysozyme protects us from the ever-present
      danger of bacterial infection. It is a small enzyme that attacks the protective
      cell walls of bacteria. Bacteria build a tough skin of carbohydrate chains,
      interlocked by short peptide strands, that braces their delicate membrane
      against the cell's high osmotic pressure. Lysozyme breaks these carbohydrate
      chains, destroying the structural integrity of the cell wall. The bacteria
      then
      burst under their own internal pressure.





Hen
      egg
      white has a high content of lysozyme which protects the integrity of the
      delicate yolk, thus making egg white (albumen), the preferred raw material
      for
      industrial production of the Lysozyme enzyme.





9


Currently,
      we do not believe there is any company in China with the ability to produce
      Lysozyme on a large scale, despite the fact that it has a big potential market.
      Lysozyme can be used in food antiseptic, which will alter sterilization effects
      by 40% compared with chemistry antiseptic at a cost of 80% lower than similar
      products produced outside of China. The large-scale production of Lysozyme
      products will speed the development of cultivation industry.





The
      major
      uses of Lysozyme products are as follows:





1)
      Lysozyme compound biology antiseptic (food packing coating, food bag,
      etc)





2)
      Lysozyme drug preparation (troche, oral liquid etc)





3)
      Lysozyme Biotech Pesticide





4)
      Lysozyme home-using disinfect series products (paper tower, detergent,
      etc)





5)
      Lysozyme biotech Veterinary medicine





6)
      Lysozyme biotech preparation





During
      the year ended October 31, 2007, this Lysozyme Enzyme Product is still in the
      very early research and development stage. In the future, we hope to launch
      Lysozyme Enzyme Products in the food antiseptic area, which we believe is the
      largest potential market for Lysozyme. Currently, we estimate that we will
      able
      to achieve up to 80% of cost savings compared with competitive products produced
      outside of China. To date, we believe our products from this group are up to
      60%
      more reliable with 50% lower production costs than competitors’ products. With a
      huge potential market, our management conservatively estimates we will achieve
      significant revenue growth rate in the next 5 years.





*Monoclonal
      Antibody Reagent Box Series Products*





Based
      on
      our research of the industry, we believe, the total sales volume of China’s
      biotechnology products was about 30.3 billion RMB (US $3.75 billion) in 2005,
      among which the sales volume of medicine and health-care products including
      medicine of gene products, vaccines, diagnosis reagents, some antibiotics,
      amino
      acids for medical use, vitamins, blood products, bio-chemical medicines and
      some
      functional food was 15.7 billion RMB (US $1.94 billion), accounting for
      approximately 50 percent of the total sales volume.





We
      believe that the Monoclonal Antibody Reagent Box segment has a huge upside
      potential. Chinese companies in the Monoclonal Antibody Reagent Box industry
      are
      primarily small to mid-sized privately-owned enterprises without any government
      support. The production scale in China is still very small. The estimated
      production ability for 2004 was around 185 million dollars, which is a niche
      market when compared with other developed countries. Due to the huge population
      and potential market in China, this area is already being pursued by some
      pharmaceutical companies.





In
      order
      to explore possibilities in this field, a team of research scientists, who
      are
      graduates of top universities in the United States and therefore trained on
      the
      most advanced technology in this field, was
      hired
      in 2006 by us and our predecessor company. The Troponin T Diagnostic Kit
      and some other products from this group have proved to be 60% more effective
      at
      50% less production cost when compared with other products.





10


If
      the
      research supports its development we plan to launch a Monoclonal Antibody
      Reagent Box series of products. More than five of our Monoclonal Antibody
      Reagent Box products are estimated to receive GMP certificates and to be
      launched in the upcoming years. We believe these products are 60% more reliable
      than those from their competitors. Moreover, we are in the process of building
      our own monoclonal antibody center, the necessary raw material for the products.
      Therefore, the company is able to achieve 50% of cost savings compared with
      most
      of its competitors, who have to purchase their raw materials from third parties.





With
      high
      and sustained demand in China, and insufficient supply, we believe that the
      Monoclonal Antibody Reagent Box segment has a substantial upside potential.





**Sales**




We
        currently have approximately 25 independent sales distributors. Through those
        distributors we enjoy a large sales network. Together these distributors
        have
        more than 70 sales centers organized under 24 districts with more than 2,000
        sales people. We believe these sales offices allow Renhuang products cover
        over
        60% of China, including over 80% in the most populated areas.


**Research
      & Developmnt Centers**




Our
          predecessor, Old Renhuang, owned R&D centers, including an Information
          Center, Cooperation Center, Research Center, and the Harbin Renhuang Marine
          Healthcare Medicine Center. Old Renhuang also owned and operated a Post-doctor
          Research Working Station, which was set up by the company and approved
          by the
          government, where post PhD students conducted research.





The
      R&D centers simulate real assembly lines, have advanced equipment, and
      substantial and advanced examination analysis instruments. A number of well
      recognized and respected pharmaceutical professors and research scientists
      in
      China are employed in the R&D centers. Over 50% of the employees in the
      centers have an advanced degree.





**Market
      Analysis Summary**





Traditionally,
      the pharmaceutical market is defined based on the different medical usage
      prescription drug market and non-prescription medicine market
      (OTC).





Based
      on
      our research the annual revenue of the medicine market in China is estimated
      to
      be 500 billion RMB (US$ 62.5 billion), of which 440 billion RMB (88 %) is
      derived from the prescription medicine market and the balance, 60 billion
      RMB (around US$ 7.5 billion) relates to the non-prescription medicine
      market which constitutes 12% of the whole medical sales market.





We
      believe there are approximately 6,600 pharmaceutical companies in China, of
      which only 2,700 have received GMP Certificates. We are one of the GMP certified
      pharmaceutical companies. Our annual production capacity is currently 1.5
      billion RMB (almost US $200 million), which equals to a market share of 3%.
      As
      we approach full capacity, we anticipate increased production volume by
      acquisitions and/or additional production facilities.





Our
      first
      and primary target market is China, where a growing middle class with demand
      for
      improved healthcare has created a sustainable need for quality healthcare
      products. Our secondary market in the long-term future is the United States
      and
      the rest of the world.





11


Renhuang
      focuses its sales in three primary areas:





1.  Over
      The
      Counter - OTC market.





2.  Other
      drug stores located across the nation.





3.  Hospitals,
      clinics and other medical institutions.





**Industry
      Analysis**





*World
      Trade Organization*





Due
      in
      part to the relaxation of trade barriers and China’s access to the World Trade
      Organization (“WTO”) in January 2002, our management believes that China will
      become one of the world's largest pharmaceutical markets by the middle of the
      twenty-first century. As a result, the Chinese market presents a significant
      opportunity for both domestic and foreign drug manufacturers.





*The
      State Drug Administration (“SDA”)*





The
      State
      Drug Administration (“SDA”) of China has set up a classification administrative
      system in 1999 for prescription and OTC drugs. Since then, the SDA has issued
      a
      series of guidelines on the interpretation of the new classification system
      for
      labeling, usage instructions and packaging of OTC products. The SDA currently
      requires that pharmaceutical manufacturers clearly label drugs for OTC sales
      and
      distinguish them from those to be sold in hospitals as ethical drugs. We have
      instituted this policy as required by the SDA.





**The
      Current Chinese Pharmaceutical Market**





*The
      introduction of the Chinese pharmaceutical industry*





Most
      of
      the recognized brands in China are manufactured by multi-national drug companies
      with higher market share than domestic brands. Based on our research, there
      are
      a total of approximately 6,600 drug companies approved by GMP producing a
      variety of traditional and modern Chinese medical products. The total
      productivity is about 370 thousand tons of 8,000 different types of finished
      products. Furthermore, Chinese drug companies produce 300 different types
      biotech products including vaccine, toxoid, antiserum, blood products,
      diagnosing reagent for internal and external use. Chinese drug companies are
      producing more than 11,000 types of medical instruments, including X-ray fault
      scanning imagery equipments and magnetic resonance equipments.




12




Renhuang PHARMACEUTICALS




*—Market
      Shares of various pharmaceutical products*





*The
      current problems in the Chinese pharmaceutical industry*





·
            Most
                drug companies in China produce low quantities of a large number
                of
                products. Therefore, many big companies are producing similar drugs.
                Many
                of those products are based on low technology and obsolete production
                methods. It is common that companies have minimal R&D departments, and
                therefore, do not bring new drugs into the market. As a result, many
                of
                these companies with inefficient management have lower
                productivity.


·
            Many
                drug companies do not qualify to reach approval by GMP, which prevent
                those companies from reaching the national and international drug
                markets.


·
            Patents
                and other intellectual property are not well protected well in
                China.


·
            Limited
                access to financial markets makes it difficult to obtain financing
                for
                drug companies.


·
            The
                competition in drug industry has growth
                space.





*The
      development trend in the Chinese drug market*





·
            The
                pharmaceutical market will continue to grow at a stable
                pace.


·
            The
                net growth of the aging population supports the demand for drug
                consumption.


·
            The
                rising living standard improves the demand for drugs. Average drug
                consumption per capita in China is 50% lower than other mid-developed
                countries. Therefore, following the development of rural areas, it
                is
                anticipated that the Chinese drug market offers great
                opportunities.


·
            Habitual
                changes inside the drug consuming
                population.


·
            More
                reasonable drug consuming habits.


·
            Non-prescription
                drugs will enter the fast development
                phase.


·
            Drug
                prices on the market will be more
                rational.


·
            There
                will be fewer drug companies, but with large
                capacity.


·
            More
                advanced circulation of medical
                products.


·
            More
                competition in China’s drug market




13




**The
      Current State of the Biotech Industry in China**





*Introduction
      of biotech industry in China*





The
      biotech industry in China has undergone fundamental improvements. According
      to
      government statistics, China's biological product market (which generally
      includes gene engineering drugs, vaccines, antibodies, and blood products)
      surpassed $30.3 billion RMB in 2005, $39.1 billion RMB in 2006, and $44.6
      billion RMB in 2007, and is growing in excess of 15 percent per
      year.





Biotech
      R&D has achieved big successes. In order to accelerate the development of
      the biotech industry, which is one of the most supported industries, the
      government has invested in biotech R&D. Biotech engineering and bio-drugs
      are making great progress and a series of key technologies has been built.
      The
      gene transfer technology between zoology and botany is mature. The hybrid rice
      has been promoted in large scale, and anti-gene cotton and tomato have become
      a
      reality. Tens of gene drugs are fast approaching the area of practical use.
      Therefore, the Chinese biotech R&D industry is rapidly becoming more mature
      and competitive.





*Some
      common problems in the Chinese biotech industry*





Compared
      with the development of the international biotech industry, the domestic Chinese
      industry is still immature.





·
            Insufficient
                self-owned Intellectual property rights and limited competing
                ability.


·
            In
                the United States, it is common that founders of bio-tech companies
                control more than 50% of equity and technology during the first and
                second
                stage of financing and the Venture Capital firms control less. With
                the
                expansion, including additional financing, the initial founders start
                to
                lose the control position. In China, intangible assets usually represent
                less than 35% of the total value.


·
            Essential
                key technologies and equipments such as important laboratories equipments,
                instruments and dosage etc are still lagging in biotech industry
                and most
                users rely on import. Companies who have the ability to produce those
                special equipments and instruments have earned international market
                recognition. Renhuang owns substantial intangible
                assets.





Insufficient
      Capital investment and very limited R&D capability




·
            Biotech
                industry is a high-tech investment in a high-risk and a high-reward
                industry. Therefore, insufficient capital is the most important problem
                which needs to be solved. At present, there are only six ways to
                provide
                capital to bio-tech companies: (i) founders' own money; (ii) public
                company investment (iii) third party investment; (iv) government
                venture
                capital; (v) mid to small-size company security fund from state science
                administration; and (vi) mid to small-size technology venture capital.
                The
                United States, which has the most advanced bio-tech development and
                bio-tech companies provides more financing opportunities to this
                industry.
                Despite this problem in the industry Renhuang successfully obtain
                capital
                and build a new state of the art R&D
                facility.





Insufficient
      educated human resources cause a gap between research and practical
      areas.





·
              Due
                  to the long training period of R&D personnel staffs, high quality
                  research scientists stay outside of China. Therefore, there are
                  not
                  sufficient highly qualified research scientists available, especially
                  those in combination of research and management skills. Renhuang
                  has
                  United States educated research scientists.





14




**Competitors**





*Acanthopanax
      Product Series*





·
            Hongdoushan
                Pharmaceuticals*





Main
      Acanthopanax products are tablets, with approximately 8% of the market share
      of
      Acanthopanax tablets.





·
            Wangdashang
                Pharmaceuticals*





Main
      Acanthopanax products are tablets and syrup, with approximately 5% and 2% of
      the
      market share, respectively.





·
            Lianhuahu
                Pharmaceuticals*





Main
      Acanthopanax products are ointment and raw product, with approximately 15%
      and
      10% of the market share, respectively.





·
            Harbin
                Shengyuan Pharmaceuticals*





Main
      Acanthopanax products are Acanthopanax ointment, with approximately 10% of
      the
      market share.





**
      Information is based on our information and belief and is not guaranteed by
      us.*





*Shark
      Power Healthcare Series*





·
            Beijing
                Saishali Company (approximately 15% market
                share)


·
            Shantou
                Xianle Pharmaceuticals (approximately 8% market
                share)


·
            Shangai
                Zhongyang Donghai Pharmaceuticals (approximately 5% market
                share)





Our
      raw
      materials for Shark Power Healthcare products are imported indirectly from
      Australia at a price which we believe is 20% lower than that what the
      competitors pay, whose raw materials are from coastal areas in
      China.





*Traditional
      Medical Products*





Tornado
      Pills





·
            Harbin
                Sanjing North Pharmaceuticals (approximately 18% market
                share)


·
            Harbin
                Huarui Pharmaceuticals (approximately 15% market
                share)


·
            Harbin
                Mingmu Pharmaceuticals (approximately 12% market
                share)




15




Tianma
      Pills





·
            Sigpore
                Xinri Pharmaceuticals (approximately 20% market
                share)


·
            Guizhou
                Yibai Pharmaceuticals (approximately 18% market
                share)


·
            Sanjiu
                Pharmaceuticals (approximately 22% market
                share)





Shengmai
      granulate





·
            Gansu
                Foci Pharmaceuticals (approximately 13% market
                share)


·
            Hubei
                Meibao Pharmaceuticals (approximately 10% market
                share)


·
            Nanning
                Weiwei Pharmaceuticals (approximately 6% market
                share)





*Lysozyme
      Products*





We
      believe there are few companies with the ability to produce Lysozyme products
      on
      a large scale. It has big potential market. Based on our preliminary research
      we
      believe Lysozyme can be used in food antiseptic, which will have 40% higher
      sterilization effects than chemistry antiseptic with 80% lower costs than same
      kind products produced outside of China. The large-scale production of Lysozyme
      products will speed the development of cultivation industry.





*Monoclonal
      Antibody Reagent Box Series Products*





·
            Beijing
                BGI-GBI Bio-tech Co., Ltd


·
            Shanghai
                Shisheng Cell Bio-tech Co., Ltd


·
            Beijing
                Wantai Biological Pharmacy Enterprise Co., Ltd.******





At
      present, we do not believe any of our competitors have large-scale production
      ability. Speed Monoclonal Antibody Reagent Box for Muscle Calcium Protein
      Myocardial Infarction of Renhuang is very competitive in the market because
      of
      its advance technology. Our core technology is from Chinese research scientists
      educated in United States, and we plan to build antigen antibody store base
      with
      self-owned intellectual property rights, and we believe the product will become
      more reliable, and the price will be approximately 50% lower than that from
      its
      competitors with approximately 60% improvement in effects. Additionally, this
      product will be easy to use.





**Competitive
      Edge**





*General*





We
      have
      stable management team with over 35 years in the pharmaceutical industry
      combined, which, when compared to Old Renhuang’s historical numbers, generated
      historical annual growth in both sales and profits.





Acanthopanax





Through
      the acquisition of Dongfanghong during 2003, we control approximately 70% of
      the
      wild resources of Acanthopanax, which product group accounts for approximately
      50% of our revenue in 2007. The demand for products derived from Acanthopanax
      is
      at all time high. Our current market share is approximately 50%. Of the total
      wild resource of Acanthopanax in China, 94% is located in the Heilongjiang
      Province, most of which are controlled by Dongfanghong in the Wanda Mountain.
      We
      develop Acanthopanax products in our own plant and benefit from a fairly
      dominant position through resource control. We have reduced the cost of
      absorbing and producing Acanthopanax by 50% over the past two years. Through
      our
      research, we estimate that our cost of production is 30% lower than the
      competition.





16


*Other
      Advantages Over the Competition*





In
      addition to advantages related specifically to Acanthopanax, our business
      possesses the following advantages:





·
            The
                ability to upgrade our products by using our follow-up research projects
                enables us to continue its product
                developments.


·
            We
                have developed a unique independent innovation system, which will
                provide
                a powerful support to the R&D of new products.


·
            We
                have excellent relations with provincial, city and regional our government
                and have been awarded outstanding levels of status.


·
            We
                own a state of the art research and production facility.


·
            Our
                credit rating is AAA by the major banks in China


·
            We
                have United States educated research scientists.


·
            Through
                    efficiency and state of the art production facilities, we believe
                    our
                    production costs, are on an average, 30- 50% lower than those
                    of the
                    competition.


·
            Through
                  our approximately 25 independent sales distributors there are more
                  than 70
                  regional sales offices, covering 50% of Mainland China staffed
                  with a
                  sales force of more than 2,000.


·
            We
                have a top-level management team.





**Research
      & Development**





We
      have
      constructed a strong independent innovation system, which will provide a
      powerful support to the R&D of new products as follows:





Through
      our research control and relative dominant position related to the Acanthopanax
      products, we believe we are on the verge of positioning Acanthopanax as an
      independent segment in the Chinese drug industry. In order to achieve this
      goal,
      we plan on building an Acanthopanax base including six parts: (1) Wild
      Acanthopanax protection; (2) research; (3) seeding; (4) cultivating; (5)
      processing; and (6) exporting. Pursuant to plan, this will become the largest
      Good Manufacturing Practice (“GMP”) approved Acanthopanax base in
      China.





We
      plan
      to continually upgrade our products by using follow-up research projects. This
      continued development will be focusing on the following three areas: (1) the
      development of biotech products, with the focus on practical applications of
      Lysozyme and Hyperoxide mutase, and the research and development of gene
      engineering drugs just to mention a few; (2) the research and development of
      Chinese traditional medicine products, including but not limited to additional
      use of Acanthopanax and Shizandra Berry; and (3) research and development of
      Western drugs for generic production, where we are able to complete the
      generation replacement of traditional drugs shortly.





*Information
      Center*





We
      utilize the marketing network system and direction oriented information system
      to provide fixed period and in-fixed period market feedback information, market
      demand information, evaluation of new products inside and outside of China,
      domestic and foreign authority research topic and product technology feedback
      information.





17


*Teamwork
      Center*




During
        2006 our predecessor company, Old Renhuang, contracted and hired specialists
        comprising a group of reputable professors and research scientists from the
        marine biotech drug segment, the natural biotech drug segment and the gene
        engineering area to evaluate and support research topics and results. Old
        Renhuang hadalso formed long-term strategic partnerships and other
        research and work related relationships with some of the most prominent research
        organizations with the purpose of researching and developing new products
        together.




Currently,
      we are closely related to the National Navy Pharmaceutical Research Center
      located in Shanghai, China bio-tech drug research center (Shanghai Research
      Base), Second Military Medicine University in Shanghai, and Beijing Ellionbio
      Research Center, Beijing to mention a few. Furthermore, we have research
      cooperation with Russia Academic School Far-east division and Australia
      Scientific Research Center.





*Research
      Center and Mid-Testing Base*





Formed
      by
      different labs, these research and mid-testing facilities are simulating the
      assembly lines.





*Renhuang
      Bio-Tech Drugs and Healthcare Products Research Center*





This
      facility is mainly focused R&D on bio-tech drugs and healthcare products,
      and medicine intermediates.





*Post-doc
      Research Workstation*





The
      major
      task is to do R&D on Acanthopanax and other North-China medical products and
      to develop medicine qualified to international standard. This unit also performs
      R&D on gene engineering drugs, like tumor Chalone.





**Official
      Accomplishments**





·
            We
                have a well-established and excellent working relationship with the
                Chinese government on various levels. For example, we have obtained
                support from different level governments including provincial, city
                and
                regional government, which enabled our rapid development. We undertake
                various research projects on a national level, where the government
                has
                praised our accomplishments.


·
            Government
                has appraised us as “The Best Quality and Credit Company”, “The Company
                with The Best Social Image”, and “The Most Trustful Consumer Products
                Company”.


·
            Our
                bank credit rating is AAA.


·
            Our
                Lysozyme and Hyperoxide mutase projects have been included into the
                most
                important nation level project in State Scientific
                Administration.


·
            Biotech
                drug garden has been included into the national transforming projects
                of
                North Eastern China heavy industry base, and in the projects which
                can get
                zero interests loan from
                government.


·
            For
                  the years of 2006 and 2007 we were granted a tax holiday and concession,
                  which entitled us to a full exemption from corporate income taxes
                  through
                  December 2007. Beginning in 2008, we will receive a special income
                  tax
                  rate of 15% since we are a wholly foreign-owned company, which
                  entitles us
                  to a tax exemption for certain
                  enterprises.





18


**Marketing
      Strategy**





We
      primarily market our products through four business channels: OTC Market, Direct
      Sales, Wholesale, and Raw Material. We are a highly technology-oriented niche
      company that has developed name recognition for its quality products. Through
      our approximately 25 independent sales distributors our products are being
      sold
      by more than 2,000 sales people divided into 70 sales offices in 24 regions
      across Mainland China. Furthermore, we have strong alliances with distributors
      who have powerful channel relationships but lack manufacturing or product
      development capabilities.





*Four-Pronged
      Approach to Achieve Market Goals*





**First** ,
      the
      goal is to build brand names for products, which is well under way. In non-urban
      areas, 90% of the Chinese population lives in the countryside with lower income.
      Due to a diverse strategy, adjusted to the lower income consumer, we believe
      our
      traditional drugs will have a relatively high level of penetration in those
      areas. Distribution to end-consumers is obtained through our own sales personnel
      without middlemen cost.





**Second** ,
      we are
      using key cities like Beijing and Shanghai as geographical sales centers with
      the purpose to establish its brands with the established distribution centers
      that distribute to major drug chain stores in the urban and suburban areas
      around the city. Our approach is to use selected cities as sample target,
      supported by initial promotion and investments enabling the products entry
      into
      the well-known drug chain stores. In addition, we are exploring multiple sales
      channels.





**Third** ,
      we
      focus on top-level hospitals in the country, which have the highest quality
      standard and stringent approval procedures for new products and brands.
      Traditionally, hospitals in China are divided into different levels due to
      different functions. Junior level hospital only care for small areas, mid-level
      one will care for several areas, and senior level one will handle different,
      larger regions. By focusing on the top tier of the hospital industry, our
      strategy is to work from top down and gain access to mid and low level hospitals
      when it brands and products have been established in the higher ranks.





**Fourth** ,
      we use
      exclusive technology and absolute resource control (Acanthopanax) to promote
      our
      products in the domestic media, including television, radio, newspaper, magazine
      and trade publications. At a more mature stage of our domestic coverage, it
      is
      anticipated that we will have a substantial impact of Lysozyme and Hyperoxide
      mutase, through innovations and core technology, developed and owned by us
      that
      have been appraised by established specialists as the primary technology and
      innovations in the world related thereto. The biggest advantages are cost and
      quality when compared to traditional products.





**Sales
      Strategy**




Our
        sales
        team uses quantity targets to realize the management of sales of products,
        from
        where the sales team is rewarded. The regular sales force are independent
        sales
        distributors to purchase our product directly from us to sell to their customers
        and client. These independent sales distributors may receive a rebate of
        the
        purchase price on certain products based on volume of product sold. Our products
        will reach drug stores, hospitals and end consumer across China through this
        sales network.





19


*Sales
      Team*




Our
        sales
        team uses quantity targets to realize the management of sales of products,
        from
        where the sales team is rewarded. Each sales office is organized with full
        time
        managerial and financial functions organized under a general representative
        officer. The vast majority of the regular sales force are independent sales
        distributors to purchase our product directly from us to sell to their customers
        and client. These independent sales distributors may receive a rebate of
        the
        purchase price on certain products based on volume of product sold. Our products
        will reach drug stores, hospitals and end consumer across China through this
        sales network.




Renhuang PHARMACEUTICALS





*The
      Location of Our Independent Distributors' Sales Offices in
      China.*





In
      conjunction with the general sales managers, provincial managers and regional
      managers, we set a sales target at the beginning of every year. Based on monthly
      sales reports and general control mechanisms, budget is thereafter revised
      as
      needed.





**Sales
      channels related to leading products**




As
        noted
        above, we sell our products to our independent sales distributors, who in
        turn
        sell our products to their customers and clients. We believe, through
        discussions with our independent sales distributors, that our products are
        primarily sold through the following methods:


**Marketing
                Model**
            
            **Share
                of revenues**
            
            **Products
                selling**
            
            **Payment
                Time Frame**OTC
            
            65%
                of total revenue
            
            Acanthopanax
                final products, “Tianmai Pills” and “Shengmai” granulate.
            
            Payment
                for first shipment in conjunction with second delivery, 1 - 3 months.Direct
                Selling method
            
            19%
                of total revenue
            
            Shark
                Power health care products, Acanthopanax final products.
            
            Cash
                PaymentWhole
                Sale products
            
            16%
                of total revenue
            
            Acanthopanax
                final products and “Tornado Pills”.
            
            Payment
                calculated and paid monthly when products
                sold.





**Customers**




Our
        primary independent sales distributors are listed in the table below. These
        are
        the sales distributors that account for more than 5% of our revenue. The
        revenue
        figures listed below are revenues received from these distributors before
        any
        reduction for any volume rebates we may have paid to these distributors.


20
  Customer
                    
                    Revenue
                        Before Rebate (RMB)
                    
                    Revenue
                        Before Rebate (USD)
                    
                    Revenue
                        %Baojin
                        Yang
                    
                    
                    28,791,830.77
                    
                    
                    3,743,233.72
                    
                    
                    10.74
                    %Gang
                        Hua
                    
                    
                    27,411,358.97
                    
                    
                    3,563,758.20
                    
                    
                    10.22
                    %Hui
                        Zhao
                    
                    
                    24,173,054.70
                    
                    
                    3,142,745.39
                    
                    
                    9.01
                    %Jing
                        Hua
                    
                    
                    15,096,400.00
                    
                    
                    1,962,687.05
                    
                    
                    5.63
                    %Hongtao
                        Zhang
                    
                    
                    14,930,709.40
                    
                    
                    1,941,145.57
                    
                    
                    5.57
                    %Xuchang
                        Li
                    
                    
                    14,835,735.04
                    
                    
                    1,928,797.93
                    
                    
                    5.53
                    %Li
                        Dai
                    
                    
                    14,412,581.20
                    
                    
                    1,873,783.58
                    
                    
                    5.37
                    %Jianjun
                        Wu
                    
                    
                    14,018,822.22
                    
                    
                    1,822,590.87
                    
                    
                    5.23
                    %Yong
                        Hua
                    
                    
                    13,992,500.85
                    
                    
                    1,819,168.83
                    
                    
                    5.22
                    %Xue
                        Qin
                    
                    
                    13,905,618.80
                    
                    
                    1,807,873.27
                    
                    
                    5.19
                    %


**Corporate
      Information**





*Employees*





We
      employ
      approximately 360 full time individuals, which includes 45 people in
      managerial positions, 24 individuals as sales managers, 9 people in R&D
      department, and 281 general workers. We also have approximately 25 independent
      sales distributors in various sales offices that work as independent
      contractors.





**Government
      Regulation**





The
      pharmaceutical industry is a strong emerging area with the highest growth rate
      in output value. However, all government regulation is still on the improving
      stage. The Ministry of Public Health used to oversee drug approval and
      registration, but the SFDA (which is modeled from the US Food and Drug
      Administration) was specially set up to streamline this process. However, it
      has
      a relatively inexperienced staff and got off to a rather slow start, and the
      resulting regulatory gap might cause potential problems.





We
      successfully passed all GMP (Good Manufacturing Practice) investigations by
      SFDA, and received approval certificates. In September 2005, we received the
      certification for exporting products certificates by Entry-Exit Inspection
      and
      Quarantine Administration, and received the self-reporting inspection
      registration certificates.





On
      September 30, 2005, Harbin Renhuang Pharmaceutical Stock Co. Ltd. (Old Renhuang)
      obtained 30 million RMB (US $3.75 million) zero-interest rate loan from state
      government that was mainly used for construction purposes of the buildings
      leased by Renhuang China. This
      loan
      has been repaid in full.




**Environmental
      Matters**





We
      have
      not been required to perform any investigation or clean up activities, nor
      have
      we been subject to any environmental claims. There can be no assurance, however,
      that this will remain the case in the future.





**Trade
      Names and Service Marks**





We
      do not
      currently own any Trade Names, Trade Marks or Service Marks.





21




**Historical
      Changes in Business Strategy and Changes in Control**





We
      were
      incorporated in the State of Nevada on August 18, 1988 as Solutions,
      Incorporated. Since that time, we have undergone a series of name changes as
      follows: Suarro Communications, Inc., e-Net Corporation, e-Net Financial Corp.,
      e-Net.Com Corporation, e-Net Financial.Com Corporation, and on January 2, 2002
      to Renhuang Pharmaceuticals, Inc.





On
      April
      11, 2006, we received written consents in lieu of a meeting of stockholders
      from
      holders of 9,892,820 shares representing approximately 74% of the 13,355,181
      shares of the total issued and outstanding shares of our voting stock (the
      “Majority Stockholders”) approving an amendment to our Articles of Incorporation
      to change our name to Renhuang Pharmaceutical, Inc.





On
      July
      27, 2006, we effectuated the name change to Renhuang Pharmaceuticals,
      Inc.





**Recapitalization**





In
      November 1999, our outstanding common stock underwent a two-for-one forward
      split. Effective in April 2003, (a) our preferred stockholders exchanged their
      Series A and Series C preferred stock for newly created Series E and Series
      D
      preferred stock, respectively, (b) our President exchanged cancelled options
      and
      converted debt into common stock and newly created Series F preferred stock,
      and
      (c) our common stock underwent a one-for-twenty reverse stock split, resulting
      in a decrease in our outstanding common stock at the time from 99,350,000 shares
      to 4,967,500 shares.





On
      or
      about April 11, 2006, we received written consents in lieu of a meeting of
      stockholders from the Majority Stockholders approving the 1-for-30 reverse
      stock
      split of our Common Stock. On April 11, 2006, our Board of Directors approved
      the above-mentioned stock split, subject to stockholder approval and on August
      11, 2006, the Board of Directors effectuated the reverse stock
      split.




**Securities
      Sale**





On
      September 19, 2005, our Board of Directors approved, declared it advisable
      and
      in our best interests and directed that there be submitted to the holders of
      a
      majority of our voting stock for action by written consent the proposed sale
      by
      AMRES Holding and Rinehart to Viking (the “Securities Sale”), of their entire
      ownership interests in us consisting of an aggregate of approximately 10,379,731
      shares of common stock, par value $0.001 and warrants to purchase a total of
      3,450,000 shares of our common stock (collectively, the “Securities”) in
      exchange for an aggregate purchase price of $375,000 (the “Purchase Price”), of
      which $150,000 was paid out as a dividend to approximately 3,026,688 shares
      and
      was equal to approximately $0.0495 per share, and the balance to pay off company
      debt and liabilities, leaving us without assets and liabilities, as additional
      consideration in connection with the transactions contemplated by the Asset
      Sale. Approval of the Securities Sale by a majority of our stockholders was
      not
      required; nonetheless, effective on September 30, 2005, the Securities Sale
      was
      approved by written consent of a majority of our stockholders. Viking did not
      bear a related-party relationship to us or our management.





22




**Dividend**





AMRES distributed
      $150,000 of the Purchase Price as a cash dividend to its
      then-current shareholders on or about March 15, 2006. The dividend was paid
      to approximately 3,026,688 shares and was equal to approximately $0.0495 per
      share. The balance of the funds was used to resolve all of ours and AMRES’
outstanding obligations prior to the consummation of the Securities
      Sale.





**Closing
      Date**





On
      March
      3, 2006, the Closing Date, the transactions referred to above closed and we
      discontinued our operations.





**Merger
      of Renhuang Pharmaceuticals and Harbin Renhuang**





On
      August
      28, 2006, Renhuang Pharmaceuticals, Inc., a Nevada corporation (the “Company”)
      and Harbin Renhuang Pharmaceutical Company Limited, a Corporation incorporated
      under the laws of the British Virgin Island, (the “BVI”) entered into a Share
      Exchange Agreement (the “Agreement”) pursuant to which the Company acquired all
      of the outstanding capital stock of BVI in exchange for issuing 29,750,000
      shares of the Company’s common stock, par value $0.001 per share (the ‘‘Common
      Stock’’) to BVI’s stockholders, representing 85% of the Company’s capital stock
      on a fully diluted basis after taking into account the contemplated transaction.
      BVI is a holding company and owns 100% of Harbin Renhuang Pharmaceutical Co.
      Ltd., incorporated under the laws of the Peoples Republic of China (“Renhuang
      China”). As a result of this merger, all of our operations are conducted through
      Harbin Renhuang Pharmaceutical Co. Ltd., a company incorporated under the laws
      of the Peoples Republic of China and a wholly-owned subsidiary of Harbin
      Renhuang Pharmaceutical Company Ltd., a corporation incorporated under the
      laws
      of the British Virgin Islands and our wholly-owned subsidiary. Through Renhuang
      China we are primarily engaged in the fields of research, manufacturing and
      distribution of Chinese medical products and bio-pharmaceutical products in
      Mainland China





**ITEM
      1A – RISK FACTORS**





On
      at
      least an annual basis, we are required to provide our shareholders with a
      statement of risk factors and other considerations for their review. These
      risk
      factors and other considerations include:





***We
      will need to raise additional capital to expand our
      business.*** **





For
      the
      foreseeable future, we will fund all of our operations and capital expenditures
      from cash on hand and potential future internally generated cash flow.
      Currently, we believe we have cash on hand to fund our operations and planned
      expansions. However, changes may occur that would consume our available capital
      before that time, including changes in and progress of our development
      activities, acquisitions of additional candidates and changes in regulation.
      We
      will then need to seek additional sources of financing, which may not be
      available on favorable terms, if at all. If we do not succeed in raising
      additional funds on acceptable terms, we may be unable to complete our expansion
      and future growth. In addition, we could be forced to discontinue product
      development, reduce or forego sales and marketing efforts and forego attractive
      business opportunities. Any additional sources of financing will likely involve
      the issuance of our equity securities, which will have a dilutive effect on
      our
      stockholders.





23




***Our
      profitability is limited.***





We
      will
      need to generate significant revenues in order to achieve and maintain
      profitability. We may not be able to generate these revenues or achieve
      profitability in the future. Our failure to achieve or maintain profitability
      could negatively impact the value of our securities.





***We
      have a limited operating history as a publicly company, upon which to base
      an
      investment decision.*** **





Prior
      to
      being a publicly listed company in the United States, we were a privately held
      corporation in the Peoples Republic of China. Following the merger transaction,
      the company has been a public company under current management since September
      7, 2006. Our continued successful listing will require us to perform a variety
      of functions, including but not limited to the following:





·
            continuing
                to efficiently manage our business domestically and in any new
                markets;


·
            disclose
                and report information in a timely manner to the Securities and Exchange
                Commission and to the general public about our company and our business;
                and


·
            communicate
                with our shareholders.





***We
      need to obtain and maintain the necessary Chinese or worldwide regulatory
      approvals to commercialize our products.***





To
      commercialize ** some
      of
      our current and future products, we require approvals from SFDA and any
      FDA-equivalent regulatory authorities in foreign jurisdictions to commercialize
      our product candidate in those jurisdictions. Currently, we do not sell our
      products to the United States, but if we in the future plan to commercialize
      our
      products to the U.S. we will need FDA approval for some of our products. To
      apply for approval, we must submit to the FDA a New Drug Application, or NDA,
      demonstrating that the product candidate is safe for humans and effective for
      its intended use. This demonstration requires significant research and animal
      tests, which are referred to as pre-clinical studies, as well as human tests,
      which are referred to as clinical trials. Satisfaction of the FDA’s regulatory
      requirements typically takes many years, depends upon the type, complexity
      and
      novelty of the product candidate and requires substantial resources for
      research, development and testing. We cannot predict whether our research and
      clinical approaches will result in drugs that the FDA or FDA-equivalent in
      other
      jurisdictions, consider safe for humans and effective for indicated uses. The
      FDA has substantial discretion in the drug approval process and may require
      us
      to conduct additional pre-clinical and clinical testing or to perform
      post-marketing studies. The approval process may also be delayed by changes
      in
      government regulation, future legislation or administrative action or changes
      in
      FDA policy that occur prior to or during our regulatory review. Delays in
      obtaining regulatory approvals may:





·
            delay
                commercialization of, and our ability to derive product revenues
                from, our
                product candidate;


·
            impose
                costly procedures on us; and




24


·
              diminish
                  any competitive advantages that we may otherwise
                  enjoy.




In
      foreign jurisdictions, we must receive approval from the appropriate regulatory
      authorities before we can commercialize any drugs. Foreign regulatory approval
      processes generally include all of the risks associated with the FDA approval
      procedures described above.





We
      cannot
      guarantee that we will maintain and receive the approvals necessary to
      commercialize our current and future products for sale in China, United States
      or elsewhere.





***Clinical
      trials are very expensive, time-consuming and difficult to design and
      implement*** ***.*** ******





Human
      clinical trials are very expensive and difficult to design and implement, in
      part because they are subject to rigorous regulatory requirements. The clinical
      trial process is also time consuming. We estimate that clinical trials of our
      product candidate will take at least several years to complete. Furthermore,
      failure can occur at any stage of the trials, and we could encounter problems
      that cause us to abandon or repeat clinical trials. The commencement and
      completion of clinical trials may be delayed by several factors,
      including:





·
            unforeseen
                safety issues;


·
            determination
                of dosing issues;


·
            lack
                of effectiveness during clinical
                trials;


·
            slower
                than expected rates of patient
                recruitment;


·
            inability
                to monitor patients adequately during or after treatment;
                and


·
            inability
                or unwillingness of medical investigators to follow our clinical
                protocols.





In
      addition, we, SFDA (State FDA), FDA or FDA-equivalent in foreign jurisdictions,
      may suspend our clinical trials at any time if it appears that we are exposing
      participants to unacceptable health risks or if the regulatory bodies find
      deficiencies in our Investigational New Drug, or IND, submissions or the conduct
      of these trials. Therefore, we cannot predict with any certainty the schedule
      for future clinical trials.





***The
      results of our clinical trials may not support our product candidate
      claims.*** **





Even
      if
      our clinical trials are completed as planned, we cannot be certain that their
      results will support our product candidate claims. Success in pre-clinical
      testing and early clinical trials does not ensure that later clinical trials
      will be successful, and we cannot be sure that the results of later clinical
      trials will replicate the results of prior clinical trials and pre-clinical
      testing. The clinical trial process may fail to demonstrate that our product
      candidates are safe for humans and effective for indicated uses. This failure
      would cause us to abandon a product candidate and may delay development of
      other
      product candidates.





***Physicians,
      patients and other end consumer may abandon existing or choose not to accept
      and
      use our new drugs.*** **





Physicians
      and patients may not accept and use our products. Acceptance and use of our
      product will depend upon a number of factors including:





·
            perceptions
                by members of the health care community, including physicians, about
                the
                safety and effectiveness of our
                products;


·
            cost-effectiveness
                of our product relative to competing products;
                and




25


·
              effectiveness
                  of marketing and distribution efforts by us and our licensees and
                  distributors, if any.


Because
      we expect sales of our current and future products to generate substantially
      all
      of our product revenues for the foreseeable future, the failure to find market
      acceptance would harm our business and could require us to seek additional
      financing.





***Our
      drug-development program depends upon third-party research scientists who are
      out of our control.*** **





We
      depend
      upon independent investigators and collaborators, such as universities and
      medical institutions, to conduct our pre-clinical and clinical trials under
      agreements with us. These collaborators are not our employees and we cannot
      control the amount or timing of resources that they devote to our programs.
      These investigators may not assign as great a priority to our programs or pursue
      them as diligently as we would if we were undertaking such programs ourselves.
      If outside collaborators fail to devote sufficient time and resources to our
      drug-development programs, or if their performance is substandard, the approval
      of our applications, if any, and our introduction of new drugs, if any, will
      be
      delayed. These collaborators may also have relationships with other commercial
      entities, some of whom may compete with us. If our collaborators assist our
      competitors at our expense, our competitive position would be
      harmed.





***We
      need to increase our selling, marketing and distributing
      network.***





We
      need
      significant capital expenditures, time and management resources to market our
      products and to establish and develop an in-house marketing and sales force
      with
      technical expertise. There can be no assurance that we will be able to
      establish, maintain or develop in-house sales and distribution capabilities.
      To
      the extent that we depend on third parties for marketing and distribution,
      any
      revenues we receive will depend upon the efforts of such third parties, and
      there can be no assurance that such efforts will be successful.





***If
      we cannot compete successfully for market share against other similar product
      oriented companies, we may not achieve sufficient product revenues and our
      business will suffer.*** **





The
      market for our product candidates is characterized by intense competition and
      rapid technological advances. We will compete with a number of existing and
      future drugs and therapies developed, manufactured and marketed by others.
      Existing or future competing products may provide greater therapeutic
      convenience or clinical or other benefits for a specific indication than our
      products, or may offer comparable performance at a lower cost. If our products
      fail to capture and maintain market share, we may not achieve sufficient product
      revenues and our business will suffer.





We
      will
      compete against fully integrated pharmaceutical companies and smaller companies
      that are collaborating with larger pharmaceutical companies, academic
      institutions, government agencies and other public and private research
      organizations. Many of these competitors have either alone or together with
      their collaborative partners, operate larger research and development programs
      or have substantially greater financial resources than we do, as well as
      significantly greater experience in:





·
            developing
                drugs;


·
            undertaking
                pre-clinical testing and human clinical
                trials;


·
            obtaining
                regulatory approvals of drugs;


·
            formulating
                and manufacturing drugs; and




26




·
            launching,
                marketing and selling drugs.





***Developments
      by competitors may render our products or technologies obsolete or
      non-competitive.***





The
      biotechnology and pharmaceutical industries are intensely competitive and
      subject to rapid and significant technological change. A large number of
      companies are pursuing the development of pharmaceuticals that target the same
      diseases and conditions that we are targeting. We face competition from
      pharmaceutical and biotechnology companies in China and other countries. In
      addition, companies pursuing different but related fields represent substantial
      competition. Many of these organizations competing with us have substantially
      greater capital resources, larger research and development staffs and
      facilities, longer drug development history in obtaining regulatory approvals
      and greater manufacturing and marketing capabilities than we do. These
      organizations also compete with us to attract qualified personnel and parties
      for acquisitions, joint ventures or other collaborations.





***If
      we fail to adequately protect or enforce our intellectual property, the value
      of
      our intellectual property rights would diminish.*** **





Our
      success, competitive position and future revenues will depend in part on our
      ability and the abilities of our licensors to obtain and maintain patent
      protection for our products, methods, processes and other technologies, to
      preserve our trade secrets, to prevent third parties from infringing on our
      proprietary rights and to operate without infringing the proprietary rights
      of
      third parties.





Our
      success is partly dependent upon the skills, knowledge and experience of our
      scientific and technical personnel, our consultants and advisors as well as
      our
      licensors and contractors. To help protect our proprietary know-how and our
      inventions for which patents may be unobtainable or difficult to obtain, we
      rely
      on trade secret protection and confidentiality agreements. To this end, it
      is
      our policy to require all of our employees, consultants, advisors and
      contractors to enter into agreements which prohibit the disclosure of
      confidential information and, where applicable, require disclosure and
      assignment to us of the ideas, developments, discoveries and inventions
      important to our business. These agreements may not provide adequate protection
      for our trade secrets, know-how or other proprietary information in the event
      of
      any unauthorized use or disclosure or the lawful development by others of such
      information. If any of our trade secrets, know-how or other proprietary
      information is disclosed, the value of our trade secrets, know-how and other
      proprietary rights would be significantly impaired and our business and
      competitive position would suffer.





***We
      may not successfully manage our growth.*** **





Our
      success will depend upon the expansion of our operations and the effective
      management of our growth, which will place a significant strain on our
      management and on our administrative, operational and financial resources.
      To
      manage this growth, we must expand our facilities, augment our operational,
      financial and management systems and hire and train additional qualified
      personnel. If we are unable to manage our growth effectively, our business
      would
      be harmed.





***We
      rely on key executive officers and scientific advisors, and their knowledge
      of
      our business and technical expertise would be difficult to
      replace.*** **





We
      are
      highly dependent on our principal scientific, regulatory and medical advisors.
      We do not have “key person” life insurance policies for any of our officers. The
      loss of the technical knowledge and management and industry expertise of any
      of
      our key personnel could result in delays in product development, loss of
      customers and sales and diversion of management resources, which could adversely
      affect our operating results.





27


***Our
      manufacturing plants are located in China and our pharmaceutical and medical
      products production, sale and distribution is subject to Chinese
      regulation.***





Economic
      reforms adopted by the Chinese government have had a positive effect on the
      economic development of the country, but the government could change these
      economic reforms or any of the legal systems at any time. This could either
      benefit or damage our operations and profitability. Some of the things that
      could have this effect are: i) level of government involvement in the economy;
      ii) control of foreign exchange; methods of allocating resources;
      iii) international trade restrictions; and iv) international conflict.
      Additionally, as a manufacturer of pharmaceutical and medical products located
      in China, we are a state-licensed company and facility and subject to Chinese
      regulations and laws. The Chinese government has been active in regulating
      the
      pharmaceutical industry. If we were to lose our state-licensed status we would
      no longer be able to manufacture pharmaceuticals in China, which is our sole
      operation.





***We
      depend upon governmental laws and regulations that may be changed in ways that
      hurt our business.***





Our
      business and products are subject to government regulations mandating the
      manufacturing of pharmaceuticals in China and other countries. Changes in the
      laws or regulations in China, or other countries we sell into, that govern
      or
      apply to our operations could have a materially adverse effect on our business.
      For example, the law could change so as to prohibit the use of certain
      pharmaceuticals. If one of our pharmaceuticals or medical products are
      prohibited, this change would reduce our productivity of that product.





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





China
      only recently has permitted provincial and local economic autonomy and private
      economic activities. Chinese government has exercised and continues to exercise
      substantial control over virtually every sector of the Chinese economy through
      regulation and state ownership. Our ability to operate in China may be harmed
      by
      changes in its laws and regulations, including those relating to taxation,
      import and export tariffs, pharmaceutical regulations, and other matters. We
      believe that our operations in China are in material compliance with all
      applicable legal and regulatory requirements. However, the central or local
      governments of these jurisdictions may impose new, stricter regulations or
      interpretations of existing regulations that would require additional
      expenditures and efforts on our part to ensure our compliance with such
      regulations or interpretations.





Accordingly,
      government actions in the future, including any decision not to continue to
      support recent economic reforms and to return to a more centrally planned
      economy or regional or local variations in the implementation of economic
      policies, could have a significant effect on economic conditions in China or
      particular regions thereof, and could require us to divest ourselves of any
      interest we then hold in Chinese properties or joint ventures.




28





***Future
      inflation in China may inhibit our activity to conduct business in
      China.***





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





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





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




***The
      value of our securities will be affected by the foreign exchange rate between
      U.S. dollars and Renminbi.***





The
      value
      of our common stock will be affected by the foreign exchange rate between U.S.
      dollars and Renminbi, and between those currencies and other currencies in
      which
      our sales may be denominated. For example, to the extent that we need to convert
      U.S. dollars into Renminbi for our operational needs and should the Renminbi
      appreciate against the U.S. dollar at that time, our financial position, the
      business of the Company, and the price of our common stock may be harmed.
      Conversely, if we decide to convert our Renminbi into U.S. dollars for the
      purpose of declaring dividends on our common stock or for other business
      purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar
      equivalent of our earnings from our subsidiaries in China would be
      reduced.





***We
      give no assurances that any plans for future expansion will be
      implemented.***





Under
      our
      current business plan we intend to expand our production of our current
      products. However, we have not made any definitive plans or signed any binding
      agreements to implement this expansion strategy. We may decide to use operating
      income to finance these expenditures, which would reduce our operating capital.





***We
      have a limited operating history and limited historical financial information
      upon which you may evaluate our performance.***





We
      are in
      our early stages of development and face risks associated with a new company
      in
      a growth industry. We may not successfully address these risks and uncertainties
      or successfully implement our operating strategies. If we fail to do so, it
      could materially harm our business to the point of having to cease operations
      and could impair the value of our common stock to the point investors may lose
      their entire investment. Even if we accomplish these objectives, we may not
      generate positive cash flows or the profits we anticipate in the
      future.





29





***We
      will face substantial competition, some of which may be better capitalized
      and
      more experienced than us*** **.**





We
      face
      competition in the pharmaceutical and medical product industry. Although we
      view
      ourselves in a favorable position vis-à-vis our competition, some of the other
      pharmaceutical and medical product companies that sell into our markets may
      be
      more successful than us and/or have more experience and financial resources
      than
      we do. This additional experience and financial resources may enable our
      competitors to produce more effective pharmaceuticals and sell their product
      with more success than we are able to, which would decrease our
      sales.





***Our
      business is largely subject to the uncertain legal environment in China and
      your
      legal protection could be limited*** *.*





The
      Chinese legal system is a civil law system based on written statutes. Unlike
      common law systems, it is a system in which precedents set in earlier legal
      cases are not generally used. The overall effect of legislation enacted over
      the
      past 20 years has been to enhance the protections afforded to foreign invested
      enterprises in China. However, these laws, regulations and legal requirements
      are relatively recent and are evolving rapidly, and their interpretation and
      enforcement involve uncertainties. These uncertainties could limit the legal
      protections available to foreign investors, such as the right of foreign
      invested enterprises to hold licenses and permits such as requisite business
      licenses. In addition, some of our executive officers and our directors may
      be
      residents of China and not of the United States, and substantially all the
      assets of these persons are located outside the U.S. As a result, it could
      be
      difficult for investors to affect service of process in the United States,
      or to
      enforce a judgment obtained in the United States against us or any of these
      persons.





***Our
      common stock has been thinly traded and we cannot predict the extent to which
      a
      trading market will develop.***





Our
      common stock is traded on the Over-the-Counter Bulletin Board. Our common stock
      is thinly traded compared to larger more widely known companies. Thinly traded
      common stock can be more volatile than common stock trading in an active public
      market. We cannot predict the extent to which an active public market for our
      common stock will develop or be sustained.





***Because
      we are subject to the “penny stock“ rules, the level of trading activity in our
      stock may be reduced.***





Our
      common stock is traded on the OTC Electronic Bulletin Board. Broker-dealer
      practices in connection with transactions in “penny stocks“ are regulated by
      certain penny stock rules adopted by the Securities and Exchange Commission.
      Penny stocks, like shares of our common stock, generally are equity securities
      with a price of less than $5.00, other than securities registered on certain
      national securities exchanges or quoted on NASDAQ. The penny stock rules require
      a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
      from the rules, to deliver a standardized risk disclosure document that provides
      information about penny stocks and the nature and level of risks in the penny
      stock market. The broker-dealer also must provide the customer with current
      bid
      and offer quotations for the penny stock, the compensation of the broker-dealer
      and its salesperson in the transaction, and, if the broker-dealer is the sole
      market maker, the broker-dealer must disclose this fact and the broker-dealer's
      presumed control over the market, and monthly account statements showing the
      market value of each penny stock held in the customer's account. In addition,
      broker-dealers who sell these securities to persons other than established
      customers and “accredited investors“ must make a special written determination
      that the penny stock is a suitable investment for the purchaser and receive
      the
      purchaser's written agreement to the transaction. Consequently, these
      requirements may have the effect of reducing the level of trading activity,
      if
      any, in the secondary market for a security subject to the penny stock rules,
      and investors in our common stock may find it difficult to sell their
      shares.





30





**ITEM
      1B – UNRESOLVED STAFF COMMENTS**





This
      Item
      is not applicable to us as we are not an accelerated filer, a large accelerated
      filer, or a well-seasoned issuer; however, we have not received written comments
      from the Commission staff regarding our periodic or current reports under the
      Securities Exchange Act of 1934 within the last 180 days before the end of
      our
      last fiscal year that have not been resolved.





**ITEM
      2 - PROPERTIES**





Our
      executive offices in the United States are provided to us at no cost at the
      offices of one of our shareholders, Viking Investments USA, Inc., which are
      located at 65 Broadway, Suite 888, New York, New York. The fair market value
      of
      the office space we utilize i.e. approximately $2,000 per month.





Our
      operations in China are conducted out of our offices located at No. 281 Taiping
      Road, Taiping District Harbin, Heilongjiang Province, 150050, P.R. China. These
      offices are owned by Old Renhuang and we rent the space pursuant to a one year
      lease. We currently lease a total of 105,416 square feet, with approximately
      15,000 square feet used for executive offices and approximately 90,000 square
      feet used for production and inventory.





**ITEM
      3 - LEGAL PROCEEDINGS**





We
      are
      not a party to, or threatened by, any litigation or procedures.





**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





There
      have been no events that are required to be reported under this
      Item.





31





**PART
      II**





**ITEM
      5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES**





*Market
      Information*





Our
      common stock is currently quoted on the OTC Bulletin Board of the National
      Association of Securities Dealers, Inc., under the symbol “RHGP.” Our common
      stock is only traded on a limited or sporadic basis and should not be deemed
      to
      constitute an established public trading market. There is no assurance that
      there will be liquidity in the common stock.





The
      following table sets forth the high and low bid information for each quarter
      within the two most recent fiscal years, as provided by the NASDAQ Stock
      Markets, Inc. The information reflects prices between dealers, and does not
      include retail markup, markdown, or commission, and may not represent actual
      transactions.





Bid
                Prices (1)Quarter
                Ended
            
            High
            
            LowJuly
                31, 2005
            
            
            3.90
            
            
            1.20October
                31, 2005
            
            
            2.70
            
            
            1.20January
                31, 2006
            
            
            1.20
            
            
            0.90April
                30, 2006
            
            
            4.50
            
            
            0.60July
                31, 2006
            
            
            1.80
            
            
            1.20October
                31, 2006
            
            
            5.25
            
            
            0.30January
                31, 2007
            
            
            3.97
            
            
            1.85April
                30, 2007
            
            
            4.00
            
            
            2.70July
                31, 2007
            
            
            3.10
            
            
            2.00October
                31, 2007
            
            
            11.67
            
            
            1.15January
                31, 2008
            
            
            2.65
            
            
            1.15





(1)
      Bid
      prices reflect 1-for-30 reverse stock split in 2006.





The
      Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
      disclosure relating to the market for penny stocks in connection with trades
      in
      any stock defined as a penny stock. The Commission has adopted regulations
      that
      generally define a penny stock to be any equity security that has a market
      price
      of less than $5.00 per share, subject to a few exceptions that we do not meet.
      Unless an exception is available, the regulations require the delivery, prior
      to
      any transaction involving a penny stock, of a disclosure schedule explaining
      the
      penny stock market and the risks associated therewith.





*Holders*




As
        of May
        20,
        2008, there were 35,096,680  shares
        of
        our common stock issued and outstanding held by 83 holders of record. We
        believe
        many of the shares of our common stock are held in “street name” and, therefore,
        we believe the actual number of shareholders is substantially
        higher.





32





*Dividend
      Policy*





We
      distributed $150,000, as further described above under Discontinued Operations,
      as a cash dividend to our shareholders on or about March 15, 2006. The dividend
      was paid to approximately 3,026,688 shares equal to approximately $0.0495 per
      share.





We
      do not expect to pay any dividend in the foreseeable future. We intend to apply
      our earnings, if any, in expanding our operations and related activities. The
      payment of cash dividends on our common stock in the future will be at the
      discretion of the Board of Directors and will depend upon such factors as
      earnings levels, capital requirements, our financial condition and other factors
      deemed relevant by the Board of Directors.





**ITEM
      6 – SELECTED FINANCIAL DATA**





Renhuang
                Pharmaceuticals, Inc**.**
              
              For the fiscal year
                ended October 31,
              
              For the six
                Months
                Ended
                October 31,
              
              For the fiscal years ended April 30, (in 000s)2007
              
              2006
              
              2006
                  (1)
              
              2005
                  (1)
              
              2004
                  (1)Statement
                  of Operations Data:Total
                  revenues
              
              $
              28,040,174
              
              
              12,247,489
              
              
              N/A
              
              
              N/A
              
              
              N/ATotal
                  cost of revenue
              
              
              13,693,892
              
              
              6,143,277
              
              
              N/A
              
              
              N/A
              
              
              N/AGross
                  profit
              
              
              14,346,282
              
              
              6,104,212
              
              
              N/A
              
              
              N/A
              
              
              N/AOperating
                  income
              
              
              9,560,994
              
              
              4,216,732
              
              
              -
              
              
              -
              
              
              -Income
                  from discontinued operations
              
              
              N/A
              
              
              N/A
              
              
              879
              
              
              (3,528
              )
              
              (1,123
              )Other
                  Income
              
              
              35,638
              
              
              8,482Income
                  from continuing operations
              
              
              9,596,632
              
              
              4,225,214
              
              
              -
              
              
              -
              
              
              -Net
                  income (loss)
              
              
              9,596,632
              
              
              4,225,214
              
              
              877
              
              
              (3,580
              )
              
              (1,123
              )Net
                  income (loss) per common share from continuing operations
              
              
              0.274
              
              
              0.121
              
              
              0
              
              
              -
              
              
              -Net
                  income (loss) per common share from discontinued
                  operations
              
              
              N/A
              
              
              N/A
              
              
              0.12
              
              
              (0.73
              )
              
              (0.23
              )Net
                  income (loss) per basic common share
              
              
              0.274
              
              
              0.121
              
              
              0.12
              
              
              (0.73
              )
              
              (0.23
              )Balance
                  Sheet Data:Current
                  assets
              
              $
              22,283,186
              
              
              10,571,637
              
              
              0
              
              
              9,546
              
              
              7,903Total
                  assets
              
              
              24,889,471
              
              
              13,288,532
              
              
              0
              
              
              9,777
              
              
              8,269Current
                  liabilities
              
              
              3,495,971
              
              
              2,663,757
              
              
              0
              
              
              10,510
              
              
              7,796Total
                  liabilities
              
              
              3,495,971
              
              
              2,663,757
              
              
              0
              
              
              10,510
              
              
              7,796Total
                  stockholders’ equity (deficit)
              
              
              21,393,500
              
              
              10,624,775
              
              
              0
              
              
              (732
              )
              
              473Total
                  dividends per common share
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -


(1)
              Fiscal
                  year end numbers for April 30, 2006, 2005, and 2004, are from our
                  previous
                  operations as a company specializing in providing of home financing
                  through the brokerage of residential home
                  loans.




33





**ITEM
      7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION**





**Disclaimer
      Regarding Forward Looking Statements**





Our
      Management’s Discussion and Analysis or Plan of Operations contains not only
      statements that are historical facts, but also statements that are
      forward-looking (within the meaning of Section 27A of the Securities Act of
      1933
      and Section 21E of the Securities Exchange Act of 1934). Forward-looking
      statements are, by their very nature, uncertain and risky. These risks and
      uncertainties include international, national and local general economic and
      market conditions; demographic changes; our ability to sustain, manage, or
      forecast growth; our ability to successfully make and integrate acquisitions;
      raw material costs and availability; new product development and introduction;
      existing government regulations and changes in, or the failure to comply with,
      government regulations; adverse publicity; competition; the loss of significant
      customers or suppliers; fluctuations and difficulty in forecasting operating
      results; changes in business strategy or development plans; business
      disruptions; the ability to attract and retain qualified personnel; the ability
      to protect technology; and other risks that might be detailed from time to
      time
      in our filings with the Securities and Exchange Commission.





Although
      the forward-looking statements in this Registration Statement reflect the good
      faith judgment of our management, such statements can only be based on facts
      and
      factors currently known by them. Consequently, and because forward-looking
      statements are inherently subject to risks and uncertainties, the actual results
      and outcomes may differ materially from the results and outcomes discussed
      in
      the forward-looking statements. You are urged to carefully review and consider
      the various disclosures made by us in this report and in our other reports
      as we
      attempt to advise interested parties of the risks and factors that may affect
      our business, financial condition, and results of operations and
      prospects.





**Overview**





As
      of March 3, 2006 we discontinued our previous operations as a company
      specializing in the providing of home financing through the brokerage of
      residential home loans. On September 7, 2006, we acquired 100% of the issued
      and
      outstanding shares of Harbin Renhuang Pharmaceutical Company Limited, a
      corporation incorporated under the laws of the British Virgin Island, (‘‘BVI’’),
      whose only assets are 100% of Harbin Renhuang Pharmaceutical Co. Ltd.,
      incorporated under the laws of the Peoples Republic of China (“Renhuang China”)
      mainly focused on the research, production and sales of traditional Chinese
      and
      Western medical and bio-pharmaceutical products in China.





34





On
      May 1,
      2006, Harbin Renhuang Pharmaceutical Stock Co. Ltd., (“Old Renhuang”)
      transferred the majority of its operating assets to Renhuang China, with the
      exception of the buildings Old Renhuang owns (including where we rent our office
      space and production facilities), and Old Renhuang’s account receivables,
      inventories and other assets with zero or insignificant value. The principal
      business activities of Renhuang remained unchanged. On March 3, 2006 Renhuang
      Medicine for Animals Co. Ltd. a company controlled by Mr. Li Shaoming, invested
      25 million RMB (about US $3.3 million) in cash in Renhuang China.




Our
        pharmaceutical products are distributed through our approximately 25 independent
        sales distributors. These distributors have more than 60 sales offices with
        more
        than 2,000 sales people. Upon the effectiveness of the Merger, we adopted
        the
        business of Renhuang China, which we have continued as our sole line of
        business.





Upon
      closing of the Merger, BVI and its subsidiary Renhuang China
      became our wholly owned subsidiaries. The Former stockholders of BVI own
      approximately 85% of our issued and outstanding common stock.





**Reverse
      Merger**





Our
      acquisition of the BVI company and its subsidiary Renhuang China was
      accounted for as a reverse merger, because, after giving effect to the
      share exchanges, the former stockholders of BVI hold a majority of our
      outstanding common stock on a voting and fully diluted basis. As a result of
      the
      share exchanges, Renhuang was deemed to be the acquirer for accounting purposes.
      Accordingly, the financial statements presented are those of Renhuang China
      for
      all periods prior to our acquisition of the BVI company on September 7, 2006,
      and the financial statements of the consolidated companies from the acquisition
      date forward.





**Change
      in Fiscal Year**





On
      December 5, 2006, our Board of Directors approved the change of our fiscal
      year end from April 30 to October 31. Our Annual Report on Form 10-K for
      the period ended October 31, 2006 was a transition report, and included
      information for the six-month transitional period from May 1, 2006 to October
      31, 2006. For Old Renhuang’s six month comparative numbers for the same period
      in 2005, see Note 19 to the financial statements filed attached hereto. For
      our
      last three fiscal years please see our Annual Report on Form 10-K for the
      twelve-month periods ended April 30, 2006 and 2005.





**Year
      Ended October 31, 2007 Compared to Six Months Ended and Year Ended October
      31,
      2006**





**Introduction**





For
      the
      twelve months ended October 31, 2007, we generated $28,040,174 in revenues
      on
      cost of sales of $13,693,892. With these revenues and cost of sales for the
      year
      ended October 31, 2007, we had a net income of $9,596,632. Due to our change
      in
      fiscal year from April 30 th to
      October 31 st during
      2006, the numbers contained in our financial statements and the analysis
      contained herein are for the year ended October 31, 2006, but only our six
      months numbers ended October 31, 2006 are audited and therefore the numbers
      for
      the year ended October 31, 2006 are unaudited numbers. For the year ended
      October 31, 2006, we had revenues of $28,675,410, on cost of sales of
      $15,006,504. With these revenues and costs of sales we had a net income of
      $4,683,114.





35





**Revenues,
      Expenses and Loss from Operations**




Year
                  Ended October 31, 2007
              
              Six
                  Months Ended October 31, 2006
              
              Six
                  Months November 1, 2005 - April 30, 2006
                (Old
                  Renhuang)
                (unaudited,
                  per management’s records)
              
              Combined
                  November 1, 2005 to October 31, 2006
                (unaudited,
                  per management’s records)Revenue
              
              $
              28,040,174
              
              $
              12,247,489
              
              $
              16,427,921
              
              $
              28,675,410Cost
                  of Sales
              
              
              (13,693,892
              )
              
              (6,143,277
              )
              
              (8,863,227
              )
              
              (15,006,504
              )Selling
                  and Distribution Expenses
              
              
              (166,567
              )
              
              (299,484
              )
              
              (577,370
              )
              
              (876,854
              )Advertising
                  Expenses
              
              
              (1,358,900
              )
              
              (677,390
              )
              
              (2,917,988
              )
              
              (3,595,378
              )General
                  and Administrative Expenses
              
              
              (2,553,541
              )
              
              (657,574
              )
              
              (1,632,290
              )
              
              (2,289,864
              )Research
                  and Development
              
              
              (282,009
              )
              
              (121,272
              )
              
              (817,547
              )
              
              (938,819
              )Provision
                  for Doubtful Accounts
              
              
              (130,634
              )
              
              -
              
              
              (622,618
              )
              
              (622,618
              )Depreciation
                  and Amortization
              
              
              (293,637
              )
              
              (131,760
              )
              
              (328,051
              )
              
              (459,811
              )Other
                  Income (Cost)
              
              
              35,638
              
              
              8,482
              
              
              (210,930
              )
              
              (202,448
              )Net
                  Income
              
              $
              9,596,632
              
              $
              4,225,214
              
              $
              457,900
              
              $
              4,683,114


*Revenues*





Our
      revenues for the year ended October 31, 2007 were $28,040,174 compared to
      revenues of $28,675,410 for the year ended October 31, 2006. Our revenues were
      similar for the two comparable periods. During the year ended October 31, 2007,
      we increased production of our products with higher profit margins and that
      are
      in line with our overall strategy and decreased production of our products
      with
      lower profit margins. Our revenues for the year ended October 31, 2007 consisted
      primarily of sales of the following products: Acanthopanax products
      (approximately 53%), Shark Power Health Care products (approximately 13%),
      and
      other Chinese traditional medical products (approximately 34%).





*Cost
      of Sales*





Our
      cost
      of sales for the year ended October 31, 2007, were $13,693,892 and consisted
      primarily of raw material, labor and production costs, compared to our cost
      of
      sales for the year ended October 31, 2006 of $15,006,504.





*Selling
      and Distribution Expenses*





Our
      selling and distribution expenses are those expenses we have related to the
      actual sales of our products and the costs we incur in distributing those
      products. For the year ended October 31, 2007 our selling and distribution
      expenses were $166,567, compared to $876,854 for the year ended October 31,
      2006.





36





*Advertising
      Expenses*





For
      the
      year ended October 31, 2007 we had advertising expenses of $1,358,900 compared
      to $3,595,378 for the year ended October 31, 2006. Our advertising expenses
      for
      both periods were primarily related to the advertising of Acanthophanax and
      our
      traditional Chinese medicines. Our advertising expenses for the year ended
      October 31, 2007 were substantially less than our advertising expenses for
      the
      year ended October 31, 2006, due to the shift in our product portfolio. During
      2007 we enjoyed the benefits of our advertising outlay during 2006, while
      reducing our advertising expenditures during 2007.





*General
      and Administrative Expenses*





Our
      general and administrative expenses were $2,553,541 for the year ended October
      31, 2007. Of our $2,553,541 general and administrative expenses for the year
      ended October 31, 2007, the primary expenses were as follows: $69,825 for
      traveling expenses, $404,102
      for payroll, $100,702 for office expenses, and $120,878 for entertainment
      expenses. Our general and administrative expenses were $2,289,864 for the year
      ended October 31, 2006.




*Research
      and Development*





Our
      research and development expenses were $282,009 for the year ended October
      31,
      2007, compared to $938,819 for the year ended October 31, 2006. Our research
      and
      development expenses are primarily related to the development of our existing
      healthcare products.





*Depreciation
      and Amortization*





We
      had depreciation and amortization expenses of $293,637 for the year ended
      October 31, 2007, and $459,811 for the year ended October 31, 2006. For both
      periods our depreciation and amortization expenses related to machinery,
      equipment and vehicles.





*Net
      Income from Operations*





Our
      net
      income for the year ended October 31, 2007, was $9,596,632, compared to
      $4,683,114 for the year ended October 31, 2006. Our net income for this year
      was
      significantly higher this year than last year due to higher costs of sales
      and
      expenses, especially advertising expenses, for the year ended October 31, 2006.
      Due to a variety of factors that could occur in any year period our net income
      could differ significantly from year to year.





**Six
      Month Transitional Period Ended October 31, 2006 Compared to Six Months Ended
      October 31, 2005 (Unaudited)**





**Introduction**





From
      May
      1, 2006 through October 31, 2006, we generated $12,247,489 in revenues on cost
      of sales of $6,143,277. With these revenues and cost of sales for the six months
      ended October 31, 2006, we had a net income from operations of $4,225,214,
      and a
      net income attributable to shareholders of $4,225,214. As noted above, we
      acquired the majority of our current operations from Old Renhuang. For the
      six
      months ended October 31, 2005, Old Renhuang had revenues of $9,898,073, on
      cost
      of sales of $4,721,296. With these revenues and costs of sales Old Renhuang
      had
      a net income from operations of $2,025,629 and a net income attributable to
      shareholders of $1,768,776.





37





**Revenues,
      Expenses and Loss from Operations**





Six Months
              Ended October
              31, 2006
            
            Six Months Ended
              October 31, 2005
              (Old Renhuang -
              Unaudited)Revenue
            
            $
            12,247,489
            
            $
            9,898,073Cost
                of Sales
            
            
            6,143,277
            
            
            4,721,296Selling
                and Distribution Expenses
            
            
            299,484
            
            
            295,292Advertising
                Expenses
            
            
            677,390
            
            
            1,119,972General
                and Administrative Expenses
            
            
            657,574
            
            
            628,741Research
                and Development
            
            
            121,272
            
            
            647,391Depreciation
                and Amortization
            
            
            131,760
            
            
            459,752Other
                Cost (Income)
            
            
            (8,482
            )
            
            256,853Net
                Income (Loss)
            
            $
            4,225,214
            
            $
            1,768,776





*Revenues*





Our
      revenues of $12,247,489 increased by over 23% when compared to Old Renhuang’s
      revenues from the same period one year ago of $9,898,073. Due to the fact the
      six months ended October 31, 2006 was our first period with our current
      operations and we only conducted those operations from May 1, 2006 through
      October 31, 2006 our revenues of $12,247,489 may not be indicative of the
      revenues from these operations in future periods. Until we have conducted our
      current operations for several periods it is difficult to project our revenues
      for future periods. Our revenues for the six months ended October 31, 2006
      consisted primarily of sales of the following products: Acanthopanax products,
      Shark Power Health Care products, and other Chinese traditional medical
      products.





*Cost
      of Sales*





Our
      cost
      of sales for the six months ended October 31, 2006, were $6,143,277 and
      consisted primarily of raw material, labor and production costs, compared to
      Old
      Renhuang’s cost of sales for the same period one year ago of $4,721,296,
      representing approximately 50% of sales in both cases.





*Selling
      and Distribution Expenses*





Our
      selling and distribution expenses are those expenses we have related to the
      actual sales of our products and the costs we incur in distributing those
      products. For the six-month period ended October 31, 2006, our selling and
      distribution expenses were $299,484, compared to Old Renhuang’s selling and
      distribution expenses of $295,292. Our selling and distribution expenses are
      comparable to Old Renhuang’s from one year ago.





38





*Advertising
      Expenses*





For
      the
      six months ended October 31, 2006, we had advertising expenses of $677,390.
      These advertising expenses were primarily related to the advertising of
      Acanthophanax. Old Renhuang’s advertising expenses were $1,119,972 for the same
      period one year ago.





*General
      and Administrative Expenses*





Our
      general and administrative expenses were $657,574 for the six-month period
      ended
      October 31, 2006, comparable to $628,741 during the same period one year ago
      for
      Old Renhuang. Of our current $657,574 general and administrative expenses,
      the
      primary expenses were as follows: $304,363 for professional fees, $73,915 for
      traveling expenses, $228,496 for payroll, and $39,979 for office expenses.





*Research
      and Development*





For
      the
      six months ended October 31, 2006, we spent $121,272 on research and development
      compared to $647,391 for Old Renhuang during the same period one year ago.
      Our
      research and development expenses were significantly less for us when compared
      to Old Renhuang during the same period due to the fact $647,391 paid by Old
      Renhuang was carried over as paid and that research is being used by us in
      our
      operations.





*Depreciation
      and Amortization*





We
      had depreciation and amortization expenses of $131,760 for the six months from
      May 1, 2006 to October 31, 2006, which included machinery, equipment and
      vehicles. This is compared to $459,752 for Old Renhuang for the same period
      one
      year ago, which included depreciation on buildings that were not transferred
      to
      the Company.





*Net
      Income (Loss) from Operations*





Our
      net
      income for the six months ended October 31, 2006, was $4,225,214, which
      increased by over 138% when compared to $1,768,776 for Old Renhuang for the
      same
      period one year ago. This increase in net income compared to Old Renhuang for
      the same period one year ago is primarily due to a significant increase in
      sales
      and decrease in our expenses for the six months ended October 31, 2006, as
      discussed above.




*Liquidity
      and Capital Resources*





**Introduction**





Our
      cash,
      current assets, total assets, current liabilities, and total liabilities as of
      October 31, 2007 and 2006, respectively, are as follows:





October
                31,
              2007
            
            October
                31,
              2006Cash
                and Cash Equivalents
            
            $
            10,153,603
            
            $
            1,021,267Total
                Current Assets
            
            
            22,283,186
            
            
            10,571,637Total
                Assets
            
            
            24,889,471
            
            
            13,288,532Total
                Current Liabilities
            
            
            3,495,971
            
            
            2,663,757Total
                Liabilities
            
            $
            3,495,971
            
            $
            2,663,757





39





Sources
      and Uses of Cash





*Operations*





Net
      cash provided by (used in) operating activities was $8,876,363 for the year
      ended October 31, 2007, compared to ($2,529,639) for the six months ended
      October 31, 2006. Our cash from operating activities for the year ended October
      31, 2007 was primarily ($2,574,916) in net trade receivables, ($305,926) in
      inventories, $206,548 in other net receivables, ($430,146) in related party
      accounts payable, ($191,388) in third party accounts payable and accruals,
      and
      $1,306,967  in
      other payables.





*Investments*





Net
      cash used in investing activities was ($45,741) for the year ended October
      31,
      2007, compared to ($183,410) for the six months ended October 31, 2006. For
      the
      year ended October 31, 2007, all our cash used in investing activities related
      to the acquisition of property, plant and equipment





*Financing*





Net
      cash provided by financing activities was $0 for the year ended October 31,
      2007, compared to $3,680,577 for the six months ended October 31, 2006. The
      sole
      contributor to the cash used in financing activities during six months ended
      October 31, 2006 was an increase in paid-in cash. We did not obtain any paid-in
      cash for the year ended October 31, 2007.





**Introduction**





Our
      cash,
      current assets, total assets, current liabilities, and total liabilities as
      of
      October 31, 2006 and 2005, respectively, are as follows:





October 31,
              2006
            
            October 31, 2005
              (Old Renhuang –
              Unaudited)Cash
                and Cash Equivalents
            
            $
            1,021,267
            
            $
            3,439,402Total
                Current Assets
            
            
            10,571,637
            
            
            11,828,408Total
                Assets
            
            
            13,288,532
            
            
            23,622,646Total
                Current Liabilities
            
            
            2,663,757
            
            
            9,371,070Total
                Liabilities
            
            $
            2,663,757
            
            $
            13,089,464





Sources
      and Uses of Cash





*Operations*





Net
      cash used in operating activities was ($2,529,639) for the six months ended
      October 31, 2006, compared to ($1,320,373) for Old Renhuang for the six months
      ended October 31, 2005. Our cash from operating activities for the current
      six
      month period was primarily ($7,566,096) in net trade receivables, ($622,144)
      in
      inventories, ($1,143,834) in other net receivables, $786,715 in total accounts
      payables and accruals, and $1,877,042 in other payables.





40





*Investments*





Net
      cash from investing activities was ($183,410) for the six months ended October
      31, 2006, compared to ($503,845) for Old Renhuang for the same period one year
      ago. For the six months ended October 31, 2006, all our cash from investing
      activities related to the acquisition of property, plant and equipment in the
      amount of $76,800 and construction in progress in the amount of
      $106,610.





*Financing*





Net
      cash from financing activities was $3,680,577 for the six months ended October
      31, 2006, compared to net cash used in financing activities in the amount of
      $4,647,245 for Old Renhuang for the six months ended October 31, 2005. The
      sole
      contributor to the cash used in financing activities during six months ended
      October 31, 2006 was an increase in paid-in cash.





Debt
      Instruments, Guarantees, and Related Covenants





We
      do not have any long term debt and no significant short term debt, and have
      not
      entered into any guarantee arrangements or other related covenants.





**Critical
      Accounting Policies**





The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States of America requires our management
      to
      make certain estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. As such, in accordance with the use of
      accounting principles generally accepted in the United States of America, our
      actual realized results may differ from management’s initial estimates as
      reported. A summary of our significant accounting policies are located in the
      notes to the financial statements which are an integral component of this
      filing.





**Off-balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.





**Contractual
      Obligations**





Payments
                due by period (in RMB)Obligations
            
            Total
            
            1
                Year
            
            1-3
                Years
            
            3-5
                Years
            
            5
                YearsLong-Term
                Debt Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Capital
                Lease Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Operating
                Lease Obligations
            
            
            4,225,000
            
            
            2,935,000
            
            
            1,290,000
            
            
            -0-
            
            
            -0-Related
                Party
            
            
            2,100,000
            
            
            2,100,000
            
            
            -0-
            
            
            -0-
            
            
            -0-Third
                Party
            
            
            2,125,000
            
            
            835,000
            
            
            1,290,000
            
            
            -0-
            
            
            -0-Purchase
                Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Other
                Long-Term Liabilities
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Total
                Contractual Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-





As
      noted
      above, we do lease office space from Old Renhuang, but we rent the space
      pursuant to a one year lease and therefore, in accordance with GAAP, we have
      not
      capitalized this expense.





41





**ITEM
      7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Our
      primary operations are located in China. As a result we are exposed to gains
      and
      losses resulting from fluctuations in foreign currency exchange rates relating
      to certain sales and product purchases. We are also exposed to foreign currency
      gains and losses resulting from domestic transactions that are not denominated
      in U.S. dollars, and to fluctuations in interest rates related to our variable
      rate debt. Furthermore, we are exposed to gains and losses resulting from the
      effect that fluctuations in foreign currency exchange rates have on the reported
      results in our consolidated financial statements due to the translation of
      the
      operating results and financial position.





Our
      primary financial instruments are cash in banks and money market instruments.
      We
      do not believe that these instruments are subject to material potential
      near-term losses in future earnings from reasonably possible near-term changes
      in market rates or prices. We do not have derivative financial instruments
      for
      speculative or trading purposes. We are not currently exposed to any material
      currency exchange risk.





**ITEM
      8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





Report
                of Independent Certified Public Accountants
            
            F-2Consolidated
                Balance Sheet as of October 31, 2007 and 2006
            
            F-3 – F-4Consolidated
                Statement of Income for the year ended October 31, 2007 and the six
                months
                ended October 31, 2006
            
            F-5Consolidated
                Statement of Changes in Stockholders’ Equity for the year ended October
                31, 2007 and the six months ended October 31, 2006
            
            F-6Consolidated
                Statement of Cash Flows for the year ended October 31, 2007 and the
                six
                months ended October 31, 2006
            
            F-7
                – F-8Notes
                to Consolidated Financial Statements
            
            F-9





**ITEM
      9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





On
      March 8, 2006, our board of directors approved the dismissal of Singer Lewak
      Greenbaum & Goldstein LLP as our independent auditor. Singer, Lewak,
      Greenbaum & Goldstein LLP’s was our independent accountants for the fiscal
      year ending April 30, 2005 only and they opined on one year of financial
      statements, specifically, the year ending April 30, 2005.





Management
      of Renhuang Pharmaceuticals, Inc. has not had any disagreements with Singer
      Lewak Greenbaum & Goldstein LLP related to any matter of accounting
      principles or practices, financial statement disclosure or auditing scope or
      procedure. For the fiscal year ended April 30, 2005 and through Singer Lewak
      Greenbaum & Goldstein LLP dismissal on March 8, 2006, there has been no
      disagreement between the Company and Singer Lewak Greenbaum & Goldstein LLP
      on any matter of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure, which disagreement, if not resolved
      to the satisfaction of Singer Lewak Greenbaum & Goldstein LLP would have
      caused it to make a reference to the subject matter of the disagreement in
      connection with its reports.





42





In
      connection with their audit of our financial statements for the fiscal year
      ended April 30, 2005 and reviews of the interim periods preceding March 8,
      2006,
      there have been no disagreements with Singer Lewak Greenbaum & Goldstein LLP
      on any matter of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure, which disagreements if not resolved
      to the satisfaction of Singer Lewak Greenbaum & Goldstein LLP would have
      caused them to make reference thereto in their report on the financial
      statements.





On
      March
      8, 2006, we engaged Rotenberg & Co. LLP of Rochester, New York, as our new
      independent auditors.





On
      December 5, 2006 Rotenberg & Co., LLP, our independent accountants
      previously engaged as the principal accountants to audit our financial
      statements, was dismissed due to the fact that Rotenberg is going to cease
      auditing Chinese entities and we have subsidiaries that do business in
      China.





Rotenberg
      & Co, LLP, audited our financial statements for our fiscal year ended April
      30, 2006, and prior to our merger with Renhuang Pharmaceutical Company, Ltd.,
      of
      the British Virgin Islands (“BVI” which is now our wholly-owned subsidiary),
      audited the financial statements of Harbin Renhuang Pharmaceutical Company,
      Ltd., of the Peoples Republic of China (“RPCL” a subsidiary of BVI) for the
      fiscal years ended October 31, 2005 and 2004. The audit report of Rotenberg
      & Co., LLP on both our and RPCL’s financial statements for the fiscal years
      stated above (the “Audit Period”) did not contain any adverse opinion or
      disclaimer of opinion, nor were they qualified or modified as to uncertainty,
      audit scope or accounting principles, except our report was modified to include
      an explanatory paragraph wherein they expressed substantial doubt about our
      ability to continue as a going concern. During the Audit Period, and through
      December 5, 2006, there were no disagreements with Rotenberg & Co., LLP on
      any matter of accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure, which disagreements, if not resolved
      to the satisfaction of the former accountants, would have caused it to make
      reference to the subject matter of the disagreements in connection with its
      report, and there were no reportable events as described in Item 304(a)(1)(v)
      of
      Regulation S-K.





On
      December 5, 2006, we engaged Schwartz Levitsky Feldman, LLP/SRL, as our
      independent certified public accountants. The decision to change accountants
      was
      approved by our Board of Directors. During the two most recent fiscal years,
      or
      any subsequent interim period prior to engaging Schwartz Levitsky Feldman,
      LLP,
      we nor anyone acting on our behalf consulted with Schwartz Levitsky Feldman,
      LLP/SRL regarding (i) the application of accounting principles to a specific
      completed or contemplated transaction, or (ii) the type of audit opinion that
      might be rendered on the company’s financial statements where either written or
      oral advice was provided that was an important factor considered by the company
      in reaching a decision as to the accounting, auditing, or financial reporting
      issue, or (iii) any matter that was the subject of a disagreement with the
      company’s former accountant on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to the satisfaction of the former accountant,
      would have caused it to make reference to the subject matter of the
      disagreements in connection with its audit report.





43





**ITEM
      9A – CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures*





We
      conducted an evaluation, with the participation of our Chief Executive Officer
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as amended, or the Exchange Act, as of October 31, 2007,
      to ensure that information required to be disclosed by us in the reports filed
      or submitted by us under the Exchange Act is recorded, processed, summarized
      and
      reported, within the time periods specified in the Securities Exchange
      Commission’s rules and forms, including to ensure that information required to
      be disclosed by us in the reports filed or submitted by us under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive and principal financial officers, or persons performing similar
      functions, as appropriate to allow timely decisions regarding required
      disclosure. Based on that evaluation, our Chief Executive Officer have concluded
      that as of October 31, 2007, our disclosure controls and procedures were not
      effective at the reasonable assurance level due to the material weaknesses
      described below.





In
      light of the material weaknesses described below, we performed additional
      analysis and other post-closing procedures to ensure our consolidated financial
      statements were prepared in accordance with generally accepted accounting
      principles. Accordingly, we believe that the consolidated financial statements
      included in this report fairly present, in all material respects, our financial
      condition, results of operations and cash flows for the periods
      presented.





A
      material weakness is a control deficiency (within the meaning of the Public
      Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or
      combination of control deficiencies, such that there is a reasonable possibility
      that a material misstatement of the annual or interim financial statements
      will
      not be prevented or detected. Management has identified the following two
      material weaknesses which have caused management to conclude that, as of October
      31, 2007, our disclosure controls and procedures were not effective at the
      reasonable assurance level:





We
      were unable to meet our requirements to timely file our Annual Report on Form
      10-K for the year ended October 31, 2007. Management evaluated the impact of
      our
      inability to timely file periodic reports with the Securities and Exchange
      Commission on our assessment of our disclosure controls and procedures and
      has
      concluded that the control deficiency that resulted in the inability to timely
      make these filings represented a material weakness.





We
      did not maintain a sufficient complement of finance and accounting personnel
      with adequate depth and skill in the application of generally accepted
      accounting principles. In addition, we did not maintain a sufficient complement
      of finance and accounting personnel to handle the matters necessary to timely
      file our Annual Report Form 10-K for the year ended October 31, 2007. Management
      evaluated the impact of our lack of sufficient finance and accounting personnel
      on our assessment of our disclosure controls and procedures and has concluded
      that the control deficiency that resulted in our lack of sufficient personnel
      represented a material weakness.





To
      address these material weaknesses, management performed additional analyses
      and
      other procedures to ensure that the financial statements included herein fairly
      present, in all material respects, our financial position, results of operations
      and cash flows for the periods presented.





*Remediation
      of Material Weaknesses*





To
      remediate the material weaknesses in our disclosure controls and procedures
      identified above, subsequent to October 31, 2007, we are working with our
      independent auditors to help remediate these issues. We will periodically
      reassess our internal control structure and procedures for financial reporting
      to ensure they are sufficient.





44





*Changes
      in Internal Control over Financial Reporting*





Except
      as
      noted above, there were no changes in our internal control over financial
      reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
      during our most recently completed fiscal six months that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.





**ITEM
      9A(T) – CONTROLS AND PROCEDURES**





We
      are
      not required to furnish the information required by this item until we report
      on
      our fiscal year ending October 31, 2008.





**ITEM
      9B – OTHER INFORMATION**





There
      have been no events that are required to be reported under this
      Item.





**PART
      III**





**ITEM
      10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE** ****





*Directors
      and Executive Officers*





The
      following table sets forth the names and ages of our current directors and
      executive officers, the principal offices and positions held by each person,
      and
      the date such person became a director or executive officer. Our executive
      officers are elected annually by the Board of Directors. The directors serve
      one
      year terms until their successors are elected. The executive officers serve
      terms of one year or until their death, resignation or removal by the Board
      of
      Directors. Unless described below, there are no family relationships among
      any
      of the directors and officers.





Name
            
            Age
            
            Position(s)Shaoming
                Li
            
            45
            
            Chairman
                of the Board of Directors,
              President
                and Chief Executive OfficerFanrong
                Meng
            
            35
            
            Vice
                President, DirectorAndy
                Wu
            
            39
            
            DirectorZuoliang
                Wang
            
            36
            
            Interim
                Chief Financial OfficerJiang
                He
            
            36
            
            Secretary





**Mr.
      Li Shaoming** has served as the Chairman of the Board of Directors since founding Harbin
      Renhuang Pharmaceutical Co. Ltd in 1996. Mr. Li has more than 20 years
      experience from the pharmaceutical and finance industry. From 1984 to 1996,
      Mr.
      Li served as Vice Chairman of Shenzhen Health Pharmaceutical Co. Ltd, a company
      dedicated to drug research, production, and sales. Mr. Li is a professor at
      Harbin Business University and Northeastern Agriculture University. Mr. Li
      also
      served as Vice Chairman of Heilongjiang Provincial Chinese Traditional Medicine
      Association and Heilongjiang Provincial Medicine Association. Mr. Li Shaoming
      graduated from Central University of Finance and Economics in Beijing, China
      with a bachelor degree in finance.





**Mr.
      Fanrong Meng** has served as the Chief Executive Officer of Harbin Venture Capital Ltd. since
      2001. Mr. Meng has more than 15 years investment experience in China. In 1997,
      he participated in the successful Initial Public Listing of Asiapower Investment
      in Singapore. Mr. Meng also has participated in various international investment
      banking transactions with private and publicly listed companies. Mr. Meng
      Fanrong graduated from Xiamen University with a master degree in
      Finance.





45





**Mr.
      Andy Wu** joined our Board of Directors as an independent Director and Chairman of our
      Audit Committee effective on January 25, 2007. Mr. Wu is currently a Tax
      Manager at PWC Beijing responsible for the overall operations of the Dalian
      office, including IIT filing, tax health check, assistance on setting up new
      enterprise/RO, assistance in tax audit defense, tax due diligence, tax review
      for IPO projects, assistance in negotiation for deemed profit rates, and general
      tax and business consulting. Mr. Wu has held this position since January, 2006.
      During 2005, Mr. Wu was an Assistant Tax Manager at KPMG Shanghai, with his
      main
      responsibilities involving general tax and business consulting and due diligence
      work. From August 2004 to March 2005, Mr. Wu was a Senior Tax Consultant with
      Deloitte’s Suzhou Office, primarily responsible for tax review, Due Diligence,
      IIT compliance, and general tax advisory projects. From March 1998 to August
      2001, Mr. Wu was the Chief Officer of the Collections Division for the Nangang
      Branch of Harbin State Tax Bureau, where he was responsible for managing the
      operations of the Collections Division. Mr. Wu received a Doctorate Finance
      and
      Taxation from Xiamen University in June 2004, a Master in Finance and Taxation
      from Dongbei University of Finance in January 2001, and his Bachelor in Taxation
      from Xiamen University in July 1992.





**Mr.
      Wang Zuoliang** was hired as our interim Chief Financial Officer effective on January 25, 2007.
      Mr. Wang has served as Chief Accounting Officer of Harbin Renhuang
      Pharmaceutical Co. Ltd., our wholly-owned subsidiary, since 2005. Mr. Wang
      has
      more than 10 years experience in accounting and is familiar with our financial
      condition and the internal preparation of our financial statements. From 2004
      to
      2005, Mr. Wang served as the Chief Financial Officer of Harbin Huijiabei Food
      Co. Ltd. From 2001 to 2004, Mr. Wang served as the manager of the accounting
      department of China Resource Breweries Limited, Harbin Office. Mr. Wang Zuoliang
      graduated from Qiqihaer Mechanic Institute in 1994 with a bachelor degree in
      engineering management.





**Mr.
      Jiang He** was
      hired as our as special assistant to the President in 2004. In this role he
      is
      in charge of asset management, risk and crisis management, and internal audit.
      From 2001 to 2004, prior to joining our company, he was the vice general manager
      of Heilongjiang Tiansheng High Tech Co. Ltd. In this position Mr. Jiang was
      primarily responsible for managing projects, such as, but not limited to, Clean
      Coal Projects. Mr. Jiang is currently studying for his MBA from Harbin Business
      School, and is projected to get his MBA degree in 2007. He received his Masters
      degree in Industrial Economics in July, 2004, and his Bachelor degree in
      Management from Jilin University in 1992.





To
      our knowledge, none of the directors presently serve as directors of public
      corporations other than Renhuang Pharmaceuticals, Inc.





*Board
      Meetings and Committees*





During
      the fiscal year ended October 31, 2007, the Board of Directors met on numerous
      occasions and took written action on numerous other occasions. All the members
      of the Board attended the meetings. The written actions were by unanimous
      consent.





46





On
      April 1, 2006, Mr. Shaoming and Mr. Zuoliang Wang of our Board of Directors
      formed an Audit Committee. Mr. Wang is no longer on the Board of Directors
      or
      Audit Committee. Mr. Andy Wu was appointed to our Board of Directors and as
      the
      Chairman of the Audit Committee effective January 25, 2007. During the year
      ended October 31, 2007, the Audit Committee met on one occasion. In accordance
      with a written charter adopted by the Company’s Board of Directors, the Audit
      Committee assists the Board of Directors in fulfilling its responsibility for
      oversight of the quality and integrity of the Company’s financial reporting
      process, including the system of internal controls. In connection with the
      audit
      of our financial statements for the year ended October 31, 2007, the Audit
      Committee (i) reviewed and discussed the audited financial statements with
      management, (ii) discussed with the independent auditors the matters required
      to
      be discussed by SAS 61, (iii) received the written disclosures and the letter
      from the independent accountants required by Independence Standards Board
      Standard No. 1, (iv) discussed with the independent accountant the independent
      accountant’s independence, and (v) made appropriate recommendations to our Board
      of Directors concerning inclusion of the audited financial statements in our
      annual report on Form 10-K.





*Code
      of Ethics*





We
      have not adopted a written code of ethics, primarily because we believe and
      understand that our officers and directors adhere to and follow ethical
      standards without the necessity of a written policy.





*Compensation
      Committee*





On
      April
      1, 2006, Mr. Shaoming and Mr. Zuoliang Wang of our Board of Directors formed
      an
      Compensation Committee. Mr. Wang is no longer on the Board of Directors or
      Compensation Committee. During the year ended October 31, 2007, the Compensation
      Committee met on one occasion.





**ITEM
      11 - EXECUTIVE COMPENSATION**





*Executive
      Officers and Directors*





We
      do not have written employment agreements with officers or directors. Our
      Chairman, President and CEO, Mr. Shaoming Li receives US $31,250 in annual
      salary and is reimbursed for out of pocket expenses. Our interim Chief Financial
      Officer, Mr. Wang Zuoliang, and our Secretary, Mr. Jiang He, each receive US
      $4,500 in annual salary and are reimbursed for out of pocket
      expenses.





The
      Summary Compensation Table shows certain compensation information for services
      rendered in all capacities for the fiscal years ended October 31, 2007, 2006
      and
      2005. Other than as set forth herein, no executive officer’s salary and bonus
      exceeded $100,000 in any of the applicable years. The following information
      includes the dollar value of base salaries, bonus awards, the number of stock
      options granted and certain other compensation, if any, whether paid or
      deferred.





47




**Name
                  and**
                **Principal
                  Position**
              
              **Year**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Stock
                  Awards**
                **($)**
              
              **Option
                  Awards**
                **($)**
              
              **Nonequity
                  incentive plan compensation**
                **($)**
              
              **Nonqualified
                  deferred compensation earnings**
                **($)**
              
              **All
                  other compensation**
                **($)**
              
              **Total**
                **($)**Shaoming
                  Li
              
              2007
              
              
              31,250
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              31,250President,
                  Chief Executive Officer, and Director
              
              2006
              
              
              31,250
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              31,2502005Fanrong
                  Meng
              
              2007
              
              
              4,500
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              4,500Vice
                  President, Director
              
              20062005Zouliang
                  Wang
              
              2007
              
              
              4,500
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              4,500Interim
                  Chief Financial Officer
              
              20062005Jiang
                  He
              
              2007
              
              
              4,500
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              4,500Secretary
              
              20062005Andy
                  Wu
              
              2007
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Independent
                  Director
              
              20062005Magnus
                  Moliteus
              
              2007
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              31,699
              (1)
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              31,699Ex-
                  Director
              
              2006
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A2005
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
  (1)  We
        entered
        into a Director appointment agreement with Mr. Magnus Moliteus dated April
        16,
        2007, pursuant to which we issued Mr. Magnus Moliteus 15,000 warrants, which
        terminates on April 16, 2010, to purchase 15,000 shares of our common stock
        at
        $3.02 per share. Pursuant to this same agreement, on July 31, 2007, 10,000
        warrants were issued to Mr. Magnus Moliteus. We valued the warrants using
        the
        Black-Scholes calculation model, and the warrants were deemed to have a value
        of
        $22,442 and $9,257 respectively. See Note 16 to the attached financial
        statements.








48




Outstanding
        Equity Awards at Fiscal Year-End
 
 The
        following table sets forth certain information concerning outstanding stock
        awards held by the Named Executive Officers as of December 31,
        2007:
 
 **Option
                  Awards**
              
              **Stock
                  Awards****Name**
              
              **Number
                  of Securities Underlying Unexercised Options**
                **(#)**
                **Exercisable**
              
              **Number
                  of Securities Underlying Unexercised Options**
                **(#)**
                **Unexercisable**
              
              **Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options**
                **(#)**
              
              **Option
                  Exercise Price**
                **($)**
              
              **Option
                  Expiration Date**
              
              **Number
                  of Shares or Units of Stock That Have Not Vested**
                **(#)**
              
              **Market
                  Value of Shares or Units of Stock That Have Not
                  Vested**
                **($)**
              
              **Equity
                  Incentive Plan Awards: Number of Unearned Shares, Units or Other
                  Rights
                  That Have Not Vested**
                **(#)**
              
              **Equity
                  Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                  Units or
                  Other Rights That Have Not Vested**
                **($)**Shaoming
                  Li
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Fanrong
                  Meng
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Zouliang
                  Wang
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Jiang
                  He
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Andy
                  Wu
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              N/A
              
              
              N/A
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Magnus
                  Moliteus
              
              
              25,000
              
              
              -0-
              
              
              -0-
              
              
              (1
              )
              
              (1
              )
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
 
 (1)  We
        entered
        into a Director appointment agreement with Mr. Magnus Moliteus dated April
        16,
        2007, pursuant to which we issued Mr. Magnus Moliteus 15,000 warrants, which
        terminates on April 16, 2010, to purchase 15,000 shares of our common stock
        at
        $3.02 per share. Pursuant to this same agreement, on July 31, 2007, 10,000
        warrants were issued to Mr. Magnus Moliteus. We valued the warrants using
        the
        Black-Scholes calculation model, and the warrants were deemed to have a value
        of
        $22,442 and $9,257 respectively. See Note 16 to the attached financial
        statements.


49


*2003
      Omnibus Securities Plan*





On
      February 28, 2003, our Board of Directors approved the Renhuang Pharmaceuticals,
      Inc. 2003 Omnibus Securities Plan, which was approved by our shareholders on
      April 11, 2003. The Plan offers selected employees, directors, and consultants
      an opportunity to acquire our common stock, and serves to encourage such persons
      to remain employed by us and to attract new employees. The plan allowed for
      the
      award of stock and options, up to 25,000 shares (after giving effect to the
      1-for-20 reverse stock split effective April 21, 2003, and the 1-for-30 reverse
      stock split in 2006) of our common stock. On May 1 of each year, the number
      of
      shares in the 2003 Securities Plan should automatically be adjusted to an amount
      equal to ten percent (10%) of our outstanding stock on April 30 of the
      immediately preceding year. As of October 31, 2007, there are no options or
      other financial instruments outstanding under the 2003 Omnibus Securities
      Plan.




*Board
      Compensation*





On
      April
      16, 2007, we appointed Mr. Magnus Moliteus to our Board of Directors. Under
      a
      Director appointment agreement, as compensation for his services as a Director,
      Mr. Moliteus received a warrant to acquire 15,000 shares of our common stock
      at
      signing, plus an additional 10,000 options and $10,000 annually thereafter,
      with
      the first payment paid at the end of July, 2007.





On
      January 15, 2007, we appointed Andy Wu to our Board of Directors. As
      compensation for his services as a Director, Mr. Wu was to receive options
      to
      acquire 10,000 options at signing, plus $3,000. As of October 31, 2007, we
      had
      not issued the options to Mr. Wu.





On
      September 16, 2006, we entered into an oral agreement with Ms. Edith Kong under
      which she was hired to be our interim Chief Financial Officer and appointed
      to
      the Board of Directors. On January 25, 2007, Ms. Kong resigned from her
      positions as interim Chief Financial Officer and a Director. At the time of
      her
      resignation we agreed to pay Ms. Kong $32,000 in cash for her services. This
      is
      the only compensation we agreed to pay Ms. Kong for her services.





There
      are
      currently no other agreements with any of the directors, or director nominees
      for compensation. Our directors are entitled to reimbursement for their travel
      expenses. We do not pay additional amounts for committee participation or
      special assignments of the Board of Directors.




The
        following table sets forth director compensation as of October 31,
        2007:
 **Name**
                  
                  **Fees
                      Earned or Paid in Cash**
                    **($)**
                  
                  **Stock
                      Awards**
                    **($)
                      ***
                  
                  **Option
                      Awards**
                    **($)
                      ***
                  
                  **Non-Equity
                      Incentive Plan Compensation**
                    **($)**
                  
                  **Nonqualified
                      Deferred Compensation Earnings**
                    **($)**
                  
                  **All
                      Other Compensation**
                    **($)**
                  
                  **Total**
                    **($)**Shaoming
                      Li
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  **-0-**Fanrong
                      Meng
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  **-0-**Andy
                      Wu
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                      (1
                  )
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  **-0-**Magnus
                      Moliteus
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  31,699
                      (2
                  )
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  **31,699**
 50
 *
              Based
                  upon the aggregate grant date fair value calculated in accordance
                  with the
                  Financial Accounting Standards Board (“FASB”) Statement of Financial
                  Accounting Standard (“FAS”) No. 123R, Share Based Payment. Our policy and
                  assumptions made in valuation of share based payments are contained
                  in
                  Note 2 to our December 31, 2006 financial
                  statements.
 
 (1)  We
          entered into a Director appointment agreement with Mr. Andy Wu dated February
          15, 2007, pursuant to which we are obligated to issue Mr. Wu warrants,
          exercisable for three (3) years, to purchase 5,000 shares of our common
          stock at
          $3.02 per share; and warrants each July 31, beginning in 2007, exercisable
          for
          three (3) years, to purchase 5,000 shares of our common stock at the then
          fair
          market value of our common stock. All warrants are to be issued pursuant
          to the
          terms of form warrant agreement, with the remaining terms to be agreed
          to by the
          parties. As of October 31, 2007, we had not agreed to a warrant agreement
          or
          issued the warrants to Mr. Wu, and, therefore, we did not include them
          as
          compensation in the above director’s compensation table.
 (2)  We
            entered into a Director appointment agreement with Mr. Magnus Moliteus
            dated
            April 16, 2007, pursuant to which we issued Mr. Magnus Moliteus 15,000
            warrants,
            which terminates on April 16, 2010, to purchase 15,000 shares of our
            common
            stock at $3.02 per share. Pursuant to this same agreement, on July 31,
            2007,
            10,000 warrants were issued to Mr. Magnus Moliteus. We valued the warrants
            using
            the Black-Scholes calculation model, and the warrants were deemed to
            have a
            value of $22,442 and $9,257 respectively. See Note 16 to the attached
            financial
            statements.


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





The
      following table sets forth, as of May 10, 2008, certain information with respect
      to the Company’s equity securities owned of record or beneficially by (i) each
      Officer and Director of the Company; (ii) each person who owns beneficially
      more
      than 10% of each class of the Company’s outstanding equity securities; and (iii)
      all Directors and Executive Officers as a group.


**Common
                    Stock****Title of Class**
                
                **Name and Address**
                  **of Beneficial Owner**
                
                **Amount and Nature of**
                  **Beneficial Ownership**
                
                **Percent**
                  **of Class (1)**Common Stock
                
                Shaoming
                    Li (2)(3)
                
                17,850,000
                (4)
                50.85
                %(4)Common
                    Stock
                
                Fanrong
                    Meng (2)
                
                0
                
                0
                %Common
                    Stock
                
                Andy
                    Wu (2)
                
                0
                
                0
                %Common
                    Stock
                
                Jiang
                    He (2)
                
                0
                
                0
                %Common
                    Stock
                
                Zuoliang
                    Wang (2)
                
                0
                
                0
                %Common
                    Stock
                
                Magnus
                    Moliteus (2)
                
                25,000
                (5)
                >1
                %Common
                    Stock
                
                China
                    Wealth Source Co.
                
                4,278,000
                
                12.19
                %Common
                    Stock
                
                All Directors and Officers
                  As
                    a Group (4 persons)
                
                17,860,000
                (4)(5)
                50.85
                %(4)(5)





(1)
            Unless
                otherwise indicated, based on 35,096,680 shares of common stock issued
                and
                outstanding following the Merger. Shares of common stock subject
                to
                options or warrants currently exercisable, or exercisable within
                60 days,
                are deemed outstanding for purposes of computing the percentage of
                the
                person holding such options or warrants, but are not deemed outstanding
                for the purposes of computing the percentage of any other
                person.





(2)
            Indicates
                one of our officers or directors.





(3)
            Unless
                indicated otherwise, the address of the shareholder is No. 281, Taiping
                Road, Taiping District, Harbin, Heilongjiang Province, 150050, P.R.
                China.





(4)
            Includes
                17,850,000 shares of Common Stock owned by Celebrate Fortune Company
                Limited, an entity controlled by Mr. Shaoming
                Li.




(5)
              Includes
                  Warrants to purchase 25,000 shares of common
                  stock.





51




**ITEM
      13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





*Convertible
      note*





On
      October 11, 2004, we issued a secured convertible note payable totaling $125,000
      to AMRES Holding, a related party partially owned and controlled by Mr. Vince
      Rinehart, our then Chief Executive Officer. The note was secured by
      substantially all of AMRES’ assets. Interest on this note was payable quarterly
      beginning on January 1, 2005 at 12% per annum. Pursuant to its terms, the note
      matured on October 11, 2006. The was convertible into our common stock at 75%
      of
      the average closing bid price for the five days preceding the date of the
      conversion notice. As additional consideration, we issued a warrant to AMRES
      Holding to purchase 250,000 shares of our common stock at $0.10 per share.
      The
      warrant was exercisable at any time between the closing date and a date which
      was five years from the closing date. We allocated the proceeds of the note
      to
      the note and warrants based on their relative fair values, resulted in a
      discount related to the warrant of $10,175. The discount was amortized over
      the
      life of the note. As the conversion feature of the note at the time of issuance
      was beneficial to the holder, we recorded a discount on the note of $57,413.
      The
      discount was amortized over the term of the note as interest expense. During
      the
      quarter ended July 31, 2005, the note was fully repaid, and the unamortized
      discount of $17,185 was immediately charged to interest expense.





On
      January 18, 2005, we issued a convertible note payable to a private investor
      totaling $55,000. We received proceeds, net of all costs and fees, in the amount
      of $47,980. Interest on this note is payable monthly at 10% per annum, and
      the
      note matures on June 15, 2005. The note is convertible into shares of AMRES
      common stock at 50% of the bid price of AMRES common stock as reported on the
      Pink Sheet Market for the three trading days immediately preceding the date
      of
      the conversion notice. As the conversion feature of the note at the time of
      issuance was beneficial to the holder, we recorded a discount on the note of
      $55,000. The discount is being amortized over the term of the note as interest
      expense. During the year ended April 30, 2005, $17,500 of this convertible
      note
      payable was converted into 2,000,000 shares of AMRES common stock. The
      unamortized discount amount of $7,621 at the time of conversion was immediately
      charged to interest expense. The convertible note payable matured on June 15,
      2005 and the discount was fully amortized on the same day.





*Sale
      and disposition of assets to related party*





On
      December 28, 2005, a Warranty bill of Sale was executed which sold certain
      AMRES
      assets to AMRES Holding, a limited liability company partially owned by Vincent
      Rinehart, our then Chief Executive Officer. The sale resulted in a total loss
      of
      $110,611 to AMRES. The following described chattels and personal properties
      were
      included in the sale: 1.) Wells Fargo Bank Savings Account #690-6530787 as
      of
      12-19-05 in the sum of $125,000.00 pledged as a collateral for Surety Bonds
      issued by The Hartford Insurance Company, VA; 2)166,667 shares of stock in
      M-GAB
      Development Corp and 166,667 warrant securities as fully described in warrant
      purchase agreement dated March 8, 2004, all of which have been fully assigned
      to
      Mr. Rinehart from Renhuang Pharmaceuticals, Inc.; 3) complete Nortel Phone
      system, including all software, numbers and hardware, and which AMRES Holding
      agrees to assume the lease/purchase contract associated with said system; 4)
      all
      websites and URL’s owned by AMRES including but not limited to loancomp.com;
      amres.net; americanresidentialfunding.com; amresdirect.com/net/biz;
      fhafunding.com; losangeleshomeloans.com; lasvegashomeloan.com;
      residentialfunding.com; redcarpetmortgage.com 5) any and all copyright or
      trademarks seller owns or claims title to, including but not limited to AMRES,
      American Residential Funding, the “eagle/home in red/white/blue” image, as well
      as all trademarks rights associated with same; 6) all lawsuits wherein American
      Residential funding, Inc. is the Plaintiff, including but not limited to:
      various small claims against Shuler, Rothwell, Qayed, Harding, Henderson, and
      civil suits against Herrera, Winters, Oreste.


52




Rinehart,
      is the managing member of AMRES Holding and an officer and director of AMRES,
      and as such there may have existed a conflict of interest in the related-party
      transaction, which conflict of interest was waived by the Board of Directors
      and
      the majority of our voting stockholders.





On
      March 3, 2006, in exchange for substantially all of our assets, including but
      not limited to, all of our ownership interest in AMRES, (i) Rinehart delivered
      a
      majority of his ownership interest in us, consisting of 831,375 shares of common
      stock and 1,880,000 shares of our common stock acquired upon the conversion
      of
      18,800 shares of Series F Convertible Preferred Stock, to Viking. Rinehart
      kept
      156,900 shares of our common stock; (ii) Rinehart terminated that certain
      Employment Agreement dated June 1, 2001; (iii) AMRES assumed all obligations
      under that certain real property lease by and between us and Fifth Street
      Properties-DS, LLC; (iv) AMRES delivered to Viking its ownership interest in
      us,
      consisting of 4,137,500 shares of our common stock; and (v) AMRES Holding
      delivered warrants to acquire 250,000 shares of our common stock to Viking.
      In
      consideration for the above, Viking paid to $375,000 of which $150,000 was
      paid
      as a cash dividend to our shareholders on or about May 1, 2006 to approximately
      3,026,688 shares and was equal to approximately $0.0495 per share. The balance
      of the funds was used to resolve all of ours and AMRES’ outstanding obligations
      prior to the consummation of the Securities Sale.





Rinehart
      is the managing member of AMRES Holding and an officer and director of AMRES.
      Viking does not bear a related-party relationship to us or our management.
      The
      consideration given or received for the assets was determined by arm’s length
      negotiations between all the parties involved.





*Completion
      of Acquisition or Disposition of Assets*





On
      March 3, 2006, we completed the disposition of substantially all of our assets,
      including but not limited to, all of our ownership interest in our subsidiary,
      AMRES to AMRES Holding, under control of Rinehart. Effective on September 30,
      2005, the disposition was approved by written consent of a majority of our
      stockholders.





In
      exchange for substantially all of our assets, including but not limited to,
      all
      of our ownership interest in AMRES, (i) Rinehart delivered a majority of his
      ownership interest in us, consisting of 831,375 shares of common stock and
      1,880,000 shares of our common stock acquired upon the conversion of 18,800
      shares of Series F Convertible Preferred Stock, to Viking. Rinehart kept 156,900
      shares of our common stock; (ii) Rinehart terminated that certain Employment
      Agreement dated June 1, 2001 (iii) AMRES assumed all obligations under that
      certain real property lease by and between us and Fifth Street Properties-DS,
      LLC; (iv) AMRES delivered to Viking its ownership interest in us, consisting
      of
      4,137,500 shares of our common stock; and (v) AMRES Holding delivered warrants
      to acquire 250,000 shares of our common stock to Viking.





Rinehart
      is the managing member of AMRES Holding and an officer and director of AMRES,
      and as such there may have existed a conflict of interest in the related-party
      transaction, which conflict of interest was waived by or Board of Directors
      and
      the majority of our voting stockholders. Viking does not bear a related-party
      relationship to us or our management.





The
      consideration given or received for the assets was determined by arm’s length
      negotiations between all the parties involved.


53


**ITEM
      14 – PRINCIPAL ACCOUNTING FEES AND SERVICES**





*Audit
      Fees*





During
      the year ended October 31, 2007, Schwartz Levitsky Feldman LLP billed us
      $178,000 in fees for professional services for the audit of our financial
      statements and review of financial statements included in our Form 10-Q’s, as
      applicable. During the six months ended October 31, 2006, Rotenberg & Co.
      LLP billed us $172,500 in fees for professional services for the audit of our
      financial statements and review of our financial statements included in our
      Form
      10-Q’s, as applicable. During the fiscal years ended April 30, 2006.and 2005,
      Singer Lewak Greenbaum & Goldstein LLP billed us $109,352.25, and Rotenberg
      billed us $0.00, respectively, in fees for professional services for the audit
      of our annual financial statements and review of financial statements included
      in our Form 10-Q’s, as applicable.





*Audit
      - Related Fees*





During
      the year ended October 31, 2007, Schwartz Levitsky Feldman LLP billed us $5,000
      in fees for the audit of our financial statements. During the six months ended
      October 31, 2006, Schwartz Levitsky Feldman LLP billed us $125,000 in fees
      for
      the audit of our financial statements and Rotenberg & Co. LLP billed us $0
      relating to procedures performed in connection with proxy and registration
      information filed with the SEC. There were no amounts billed related to any
      assurance and related services related to the performance of the audit or review
      of our financial statements. During the fiscal years ended April 30, 2006 and
      2005, Singer Lewak Greenbaum & Goldstein LLP billed us $0.00, relating to
      procedures performed in connection with proxy and registration information
      filed
      with the SEC. There were no amounts billed related to any assurance and related
      services related to the performance of the audit or review of our financial
      statements.





*Tax
      Fees*





During
      the year ended October 31, 2007, Schwartz Levitsky Feldman LLP billed us $0
      for
      professional services for tax preparation. During the six months ended October
      31, 2006, Rotenberg & Co. LLP billed us $0 for professional services for tax
      preparation. During the fiscal years ended April 30, 2006 and 2005, Singer
      Lewak
      Greenbaum & Goldstein LLP billed us $0.00, and Rotenberg & Co. LLP
      billed us zero, respectively, for professional services for tax
      preparation.





*All
      Other Fees*





During
      the year ended October 31, 2007, Schwartz Levitsky Feldman LLP did not bill
      us
      for any other fees. During the six months ended October 31, 2006, Rotenberg
      & Co. LLP did not bill us for any other fees. During the fiscal years ended
      April 30, 2006 and 2005, Singer Lewak Greenbaum & Goldstein LLP and
      Rotenberg & Co. LLP did not bill us for any other fees.





Of
      the
      fees described above for the year ended October 31, 2007, 100% were approved
      by
      either the entire Board of Directors or the Audit Committee. Of the fees
      described above for the six months ended October 31, 2006, 100% were approved
      by
      either the entire Board of Directors or the Audit Committee. Of the fees
      described above for the fiscal year ended April 30, 2005, 100% were approved
      by
      the Board of Directors of the Company as there was not an Audit Committee in
      place at the time of the approvals. Of the fees described above for the fiscal
      year ended April 30, 2004, 100% were approved by the Audit Committee. The Audit
      Committee’s pre-approval policies and procedures were detailed as to the
      particular service and the audit committee was informed of each service and
      such
      policies and procedures did not include the delegation of the audit committee’s
      responsibilities.


54







**PART
      IV**





**ITEM
      15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES** ****





**(a)(1)**  **Financial
      Statements**





The
      following financial statements are filed as part of this report:





Report
                of Independent Certified Public Accountants
            
            F-2Consolidated
                Balance Sheet as of October 31, 2007 and 2006
            
            F-3 – F-4Consolidated
                Statement of Income for the year ended
              October
                31, 2007 and the six months ended October 31, 2006
            
            F-5Consolidated
                Statement of Changes in Stockholders’ Equity
              for
                the year ended October 31, 2007 and the six months ended October
                31, 2006
            
            F-6Consolidated
                Statement of Cash Flows for the year ended October 31, 2007 and the
                six
                months ended October 31, 2006
            
            F-7
                – F-8Notes
                to Consolidated Financial Statements
            
            F-9





**(a)(2)**  **Financial
      Statement Schedules**





We
      do not
      have any financial statement schedules required to be supplied under this
      Item.





**(a)(3)**  **Exhibits**





Refer
      to
      (b) below.




**(b)**  **Exhibits**





3.1
                (1)
            
            Restated
                Articles of Incorporation, as filed with the Nevada Secretary of
                State on
                April 21, 2003.3.2
                (5)
            
            Amendment
                to Articles of Incorporation, as filed with the Nevada Secretary
                of State
                on July 28, 2006.3.3
                (1)
            
            Second
                Restated Bylaws10.1
                (2)
            
            Common
                Stock Purchase Agreement dated September 19, 2005.10.2
                (2)
            
            Securities
                Purchase Agreement dated September 16, 2005.10.3
                (3)
            
            Reorganization,
                Stock and Asset Purchase Agreement dated September 30,
                2005.10.4
                (3)
            
            Stock
                Purchase Agreement dated September 30,
                2005.





55






10.5
                (4)
            
            Securities
                Purchase Agreement dated September 16, 2005.10.6
                (6)
            
            Loan
                Agreement with Heilongjiang Yuejintiande Building and Installation
                Project
                Co., Ltd.10.7
            
            Director
                Appointment Letter Agreement with Mr. Andy Wu dated February 15,
                200710.8
            
            Director
                Appointment Letter Agreement with Mr. Magnus Moliteus dated April
                16,
                200721.1
            
            Subsidiaries
                of the Registrant31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive
                Officer31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial
                Officer32.1
            
            Chief
                Executive Officer Certification Pursuant to 18 USC, Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Chief
                Financial Officer Certification Pursuant to 18 USC, Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





(1)
            Incorporated
                by reference to our Current Report on Form 8-K dated April 21, 2003,
                filed
                with the Commission on April 22,
                2003.


(2)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on September 23, 2005.


(3)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on October 3, 2005.


(4)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on October 14, 2005.


(5)
            Incorporated
                by reference from our Annual Report on Form 10-K filed with the Commission
                February 13, 2007. (6)
            Incorporated by reference from our First Amended
              Transition Report on Form 10-K/A filed with the Commission on February
              22,
              2007.






56





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**Renhuang
                Pharmaceuticals, Inc.**Dated:
                May 27, 2008
            
            /s/
                Li ShaomingBy:
            Li
                ShaomingChairman,
                President andChief
                Executive OfficerDated:
                May 27, 2008
            
            /s/
                Zuoliang WangBy:
            Zuoliang
                WangInterim
                Chief Financial Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Dated: May
                27, 2008
            
            /s/
                Andy WuBy:
            Andy
                Wu, DirectorDated: May
                27, 2008
            
            /s/
                Fanrong MengBy:
            Fanrong
                Meng, Director






57





Financial
      Statements and Report of





Independent
      Certified Public Accountants





RENHUANG
      PHARMACEUTICALS, INC.





Fiscal
      Year Ended October 31, 2007 and





Six
      Months Ended October 31, 2006





1







**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      FINANCIAL STATEMENTS**


**OCTOBER
      31, 2007**


**AMOUNTS
      EXPRESSED IN US DOLLARS**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheets as of October 31, 2007 and 2006
            F-3
                - F-4Consolidated
                Statements of Income for the year ended October 31, 2007 and the
                six
                months ended October 31, 2006
            F-5Consolidated
                Statements of Changes in Equity for the year ended October 31, 2007and
                the six months ended October 31, 2006
            F-6Consolidated
                Statements of Cash Flows for the year ended October 31, 2007 and
                the six
                months ended October 31, 2006
            F-7
                - F-8Notes
                to Consolidated Financial Statements
            F-9





F-1





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Directors and Stockholders of


Renhuang
      Pharmaceuticals, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Renhuang
      Pharmaceuticals, Inc. as at October 31, 2007 and 2006, and the related
      consolidated statements of income cash flows and changes in stockholders’ equity
      for the year ended October 31, 2007 and for the six months ended October 31,
      2006. These consolidated financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.




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




In
      our
      opinion, these consolidated financial statements referred to above present
      fairly, in all material respects, the financial position of Renhuang
      Pharmaceuticals, Inc. as of October 31, 2007 and 2006, and the results of its
      operations and its cash flows for the year ended October 31, 2007 and for the
      six months ended October 31, 2006 in conformity with generally accepted
      accounting principles in the United States of America.




**“Schwartz
                Levitsky Feldman LLP”**/s/
                Schwartz Levitsky Feldman llpToronto,
                Ontario, Canada
            Chartered
                AccountantsMay
                15, 2008
            Licensed
                Public Accountants





1167
      Caledonia Road


Toronto,
      Ontario M6A 2X1


Tel:
      416
      785 5353


Fax:
      416
      785 5663





F-2




**RENHUANG
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS**
 **AS
        OF OCTOBER 31, 2007 AND 2006**
 (In
        US$)
 
 **ASSETS**
 
 **October 31,**
                **2007**
              
              **October 31,**
                **2006****CURRENT
                  ASSETS**Cash
                  and cash equivalents (NOTE 5)
              
              $
              10,153,603
              
              $
              1,021,267Accounts
                  receivable, net (NOTE 6)
              
              
              10,480,549
              
              
              7,566,096Inventories
                  (NOTE 8)
              
              
              969,672
              
              
              622,144Prepayments
              
              
              9,917
              
              
              102,473Other
                  receivables, net (NOTE 7)
              
              
              669,445
              
              
              1,143,834**DEFERRED
                  EXPENSES**
              
              
              —
              
              
              115,823**TOTAL
                  CURRENT ASSETS**
              
              
              22,283,186
              
              
              10,571,637**PROPERTY,
                  PLANT AND EQUIPMENT, NET**(NOTE
                  9)
              
              
              2,606,285
              
              
              2,610,285**CONSTRUCTION
                  IN PROGRESS**(NOTE
                  10)
              
              
              —
              
              
              106,610**TOTAL
                  ASSETS**
              
              $
              24,889,471
              
              $
              13,288,532
 
 The
        accompanying notes are an integral part of the consolidated financial
        statements
  F-3
 
 **RENHUANG
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS**
 **AS
        OF OCTOBER 31, 2007 AND 2006**
 (In
        US$)
  **LIABILITIES
        AND STOCKHOLDERS' EQUITY**
 
 **October
                  31,**
                **2007**
              
              **October
                  31,**
                **2006****CURRENT
                  LIABILITIES**Accounts
                  payables (NOTE 11)-
                  due to related parties
              
              $
              —
              
              $
              419,910-
                  due to third parties
              
              
              188,600
              
              
              366,805Other
                  payables (NOTE 12)-
                  due to related parties
              
              
              —
              
              
              —-
                  due to third parties
              
              
              3,307,371
              
              
              1,877,042**TOTAL
                  CURRENT LIABILITIES**
              
              
              3,495,971
              
              
              2,663,757**TOTAL
                  LIABILITIES**
              
              
              3,495,971
              
              
              2,663,757**RELATED
                  PARTY TRANSACTIONS (NOTE 17)****COMMITMENTS
                  AND CONTINGENCIES (NOTE 18)****STOCKHOLDERS'
                  EQUITY**Common
                  Stock - Authorized common shares 100,000,000, outstanding number
                  of shares
                  35,096,681 (35,000,181 in 2006) at par value of 0.001; authorized
                  preferred shares 1,000,000, outstanding number of shares nil (nil
                  in
                  2006)
              
              
              35,097
              
              
              35,000Additional
                  paid-in capital
              
              
              6,627,099
              
              
              6,310,822Reserves
                  (NOTE 13)
              
              
              1,841,734
              
              
              847,133Retained
                  earnings
              
              
              11,980,112
              
              
              3,378,081Accumulated
                  other comprehensive income
              
              
              909,458
              
              
              53,739**TOTAL
                  STOCKHOLDERS' EQUITY**
              
              
              21,393,500
              
              
              10,624,775**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              24,889,471
              
              $
              13,288,532
 
 The
        accompanying notes are an integral part of the consolidated financial
        statements
 
 F-4
 **RENHUANG
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF INCOME**
 **FOR
        THE YEAR ENDED OCTOBER 31, 2007 AND FOR THE SIX MONTHS ENDED OCTOBER 31,
        2006**
 (In
        US$)
 
 **Year Ended**
                **October 31, 2007**
              
              **Six Months Ended**
                **October 31, 2006**
                **(Note 20)**SALES
              
              $
              28,040,174
              
              $
              12,247,489COST
                  OF SALES
              
              
              (13,693,892
              )
              
              (6,143,277
              )GROSS
                  PROFIT
              
              
              14,346,282
              
              
              6,104,212SELLING
                  AND DISTRIBUTION EXPENSES
              
              
              (166,567
              )
              
              (299,484
              )ADVERTISING
                  EXPENSE
              
              
              (1,358,900
              )
              
              (677,390
              )GENERAL
                  AND ADMINISTRATIVE EXPENSES
              
              
              (2,553,541
              )
              
              (657,574
              )RESEARCH
                  AND DEVELOPMENT
              
              
              (282,009
              )
              
              (121,272
              )PROVISION
                  FOR DOUBTFUL ACCOUNTS
              
              
              (130,634
              )
              
              —DEPRECIATION
                  AND AMORTIZATION
              
              
              (293,637
              )
              
              (131,760
              )INCOME
                  FROM OPERATIONS
              
              
              9,560,994
              
              
              4,216,732OTHER
                  INCOME
              
              
              35,638
              
              
              8,482INCOME
                  BEFORE INCOME TAXES
              
              
              9,596,632
              
              
              4,225,214INCOME
                  TAXES (NOTE 14)
              
              
              —
              
              
              —NET
                  INCOME
              
              
              9,596,632
              
              $
              4,225,214BASIC
                  EARNINGS PER SHARE
              
              
              0.274
              
              
              0.121DILUTED
                  EARNING PER SHARE
              
              
              0.274
              
              
              0.121WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –BASIC
              
              
              35,039,310
              
              
              35,000,181WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –DILUTED
              
              
              35,039,550
              
              
              35,000,181
 The
          accompanying notes are an integral part of the consolidated financial
          statements
 F-5
 
 **RENHUANG
        PHARMACEUTICALS, INC AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**
 **FOR
        THE YEAR ENDED OCTOBER 31, 2007 AND FOR THE SIX MONTHS ENDED OCTOBER 31,
        2006**
 (In
        US$)
  AccumulatedAdditional
              
              
              
              
              
              OtherCommon Stock
              
              Paid-in
              
              
              
              Retained
              
              comprehensive
              
              TotalShares
              
              Amount
              
              capital
              
              Reserves
              
              Earnings
              
              income
              
              EquityBalance
                  at May 1, 2006
              
              
              -
              
              
              -
              
              $
              6,345,822
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              6,345,822Recapitalization
                  pursuant to reverse acquisition
              
              
              35,000,181
              
              $
              35,000
              
              $
              (35,000
              )Net
                  income for the year
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              4,225,214
              
              
              —
              
              
              4,225,214Transfer
                  to reserves
              
              
              
              
              
              —
              
              
              —
              
              
              847,133
              
              
              (847,133
              )
              
              —
              
              
              —Other
                  comprehensive income-
                  foreign currency translation
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              53,739
              
              
              53,739Balance
                  at October 31, 2006
              
              
              35,000,181
              
              $
              35,000
              
              $
              6,310,822
              
              $
              847,133
              
              $
              3,378,081
              
              $
              53,739
              
              $
              10,624,775Issuance
                  of common stock (NOTE 15)
              
              
              96,500
              
              
              97
              
              
              284,578
              
              
              —
              
              
              —
              
              
              —
              
              
              284,675Net
                  income for the year
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              9,596,632
              
              
              —
              
              
              9,596,632Transfer
                  to reserves
              
              
              
              
              
              —
              
              
              —
              
              
              994,601
              
              
              (994,601
              )
              
              —
              
              
              —Warrants
                  issued to director (NOTE 16)
              
              
              
              
              
              —
              
              
              31,699
              
              
              —
              
              
              —
              
              
              —
              
              
              31,699Other
                  comprehensive income-
                  foreign currency translation
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              855,719
              
              
              855,719Balance
                  at October 31, 2007
              
              
              35,096,681
              
              $
              35,097
              
              $
              6,627,099
              
              $
              1,841,734
              
              $
              11,980,112
              
              $
              909,458
              
              $
              21,393,500
  The
        accompanying notes are an integral part of the consolidated financial
        statements
 
 F-6
 
 **RENHUANG
        PHARMACEUTICALS, INC AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEAR ENDED OCTOBER 31, 2007 AND**
 **FOR
        THE SIX MONTHS ENDED OCTOBER 31, 2006**
 (In
        US$)
 
 **Year Ended**
                **October 31, 2007**
              
              **Six Months Ended**
                **October 31, 2006**
                **(Note 20)****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income
              
              $
              9,596,632
              
              $
              4,225,214Adjustments
                  to reconcile net income to net cash from operating activities
                  :Depreciation
                  and amortization
              
              
              293,637
              
              
              131,760Provision
                  for bad debts
              
              
              130,634
              
              
              —Fair
                  value of warrants issued
              
              
              31,699
              
              
              —Fair
                  value of shares issued
              
              
              284,675
              
              
              —Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (2,574,916
              )
              
              (7,566,096
              )Inventories
              
              
              (305,926
              )
              
              (622,144
              )Amount
                  due from related parties
              
              
              (430,146
              )
              
              —Other
                  receivables, net
              
              
              520,523
              
              
              (1,143,834
              )Deferred
                  expenses
              
              
              118,647
              
              
              (115,823
              )Prepayments
              
              
              95,325
              
              
              (102,473
              )Accounts
                  payable and accruals-
                  Related Parties
              
              
              —
              
              
              419,910-
                  Third Parties
              
              
              (191,388
              )
              
              366,805Other
                  Payables – Third Parties
              
              
              1,306,967
              
              
              1,877,042**NET
                  CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES**
              
              
              8,876,363
              
              
              (2,529,639
              )**CASH
                  FLOWS USED IN INVESTING ACTIVITIES:**Acquisition
                  of property, plant and equipment
              
              
              (45,741
              )
              
              (76,800
              )Construction
                  in Progress
              
              
              —
              
              
              (106,610
              )**NET
                  CASH USED IN INVESTING ACTIVITIES**
              
              
              (45,741
              )
              
              (183,410
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Increase
                  of paid-in capital
              
              
              —
              
              
              3,680,577**NET
                  CASH PROVIDED BY INVESTING ACTIVITIES**
              
              
              —
              
              
              3,680,577
 
 F-7
  **RENHUANG
        PHARMACEUTICALS, INC AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE YEAR ENDED OCTOBER 31, 2007 AND**
 **FOR
        THE 6 MONTHS ENDED OCTOBER 31, 2006**
 (In
        US$)
 
 **Year Ended**
                **October 31, 2007**
              
              **Six Months Ended**
                **October 31, 2006**
                **(Note 20)****NET
                  CHANGE IN CASH AND CASH EQUIVALENTS**
              
              
              8,830,622
              
              
              967,528EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
              
              
              301,714
              
              
              53,739Cash
                  and cash equivalents, beginning of period
              
              
              1,021,267
              
              
              —Cash
                  and cash equivalents, end of period
              
              $
              10,153,603
              
              $
              1,021,267**SUPPLEMENTARY
                  DISCLOSURE OF NON-CASH INVESTING AND FINANCING
                  ACTIVITIES**Issuance
                  of common shares for financing services
              
              
              284,675
              
              
              —Warrants
                  granted to a director for services
              
              
              31,699
              
              
              —Property,
                  plant and equipment received from stockholders as part of paid-in
                  capital
              
              
              —
              
              
              2,665,245
 
 F-8
  **RENHUANG
        PHARMACEUTICALS, INC AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **OCTOBER
        31, 2007 AND 2006**
 
 **1.
        REORGNIZATION TRANSACTIONS**
  On
        August
        11, 2006 the Company performed a one for thirty reverse stock split, rounded
        up
        to the nearest whole share.
  On
        September 7, 2006 the Company acquired Harbin Renhuang Pharmaceutical Company
        Limited, a Corporation incorporated under the laws of the British Virgin
        Island
        on January 18, 2006, (the “BVI”) including its 100% owned and only subsidiary,
        Harbin Renhuang Pharmaceutical Co. Ltd., incorporated under the laws of the
        Peoples Republic of China on February 15, 2006 (“Renhuang China”) in
        exchange for issuing 29,750,000 shares of the Company's common stock, par
        value
        $0.001 per share (the ``Common Stock'') to the BVI's stockholders, representing
        85% of the Company's capital stock on a fully diluted basis after taking
        into
        account the contemplated transaction. This transaction is referred to throughout
        this report as the “Merger”.
  The
        Merger agreement was filed as Exhibit 10.1 to the Company's Current Report
        on
        Form 8-K filed with the Securities and Exchange Commission on August 29,
        2006
        and is incorporated herein by reference. The foregoing description of the
        Merger
        and the transactions contemplated thereby do not purport to be complete and
        are
        qualified in their entireties to the Merger agreement.
  On
        August
        31, 2006, the Company's Board of Directors approved the Merger.
  Upon
        closing of the Merger, BVI became a wholly owned subsidiary of the Company.
  After
        giving effect to the Merger and the rounding up of shares after reverse stock
        split on August 11, 2006, the Company has 35,000,181 common shares issued
        reverse and outstanding and the former stockholders of BVI own approximately
        85%
        of the issued and outstanding Common Stock of the Company. Accordingly, the
        Merger represents a change in control of the Company.
  On
        May 1,
        2006, principal revenue producing activities in Harbin Renhuang Pharmaceuticals
        Stock Co., Ltd, the predecessor company, have been transferred to Renhuang
        China
        at the carrying amounts of the transferor.
  On
        December 5, 2006, the Company’s Board of Directors approved a change in the
        Company’s fiscal year end from April 30 to October 31, effective as of October
        31, 2006.
  For
        accounting purposes, the Merger has been accounted for as a recapitalization
        with the Company as the accounting acquiree and the BVI as the accounting
        acquirer. Upon effectiveness of the Merger, Renhuang China's business plan
        became the business plan of the Company.
  **2.
        ORGANIZATION AND PRINCIPAL ACTIVITIES**
  Renhuang
        Pharmaceuticals, Inc., (“Renhuang”) or the (“Company”) was incorporated in the
        State of Nevada on August 18, 1988 as Solutions, Incorporated. Since that
        time,
        the Company has undergone a series of name changes as follows: Suarro
        Communications, Inc., e-Net Corporation, e-Net Financial Corp., e-Net.Com
        Corporation, e-Net Financial.Com Corporation, Anza Capital, Inc. and finally
        on
        July 28, 2006 the Company changed its name to Renhuang Pharmaceuticals,
        Inc.
  F-9
  On
        March
        3, 2006 the Company discontinued its operations and became a “shell”
company.
  Shares
        of
        the Company's Common Stock are trading on the NASD-Over the Counter (OTC)
        Bulletin Board Market under the symbol RHGP.
  Unless
        otherwise provided in this current report, all references in this current
        report
        to “we”, “us”, “our company”, “our”, or the “Company” refer to the consolidated
        Renhuang Pharmaceuticals, Inc. entity.
  The
        subsidiary company Harbin Renhuang Pharmaceuticals Co., Ltd (“the subsidiary”)
        is incorporated at Harbin City in the People’s Republic of China (“the PRC” or
“China”) in 1996. The subsidiary is principally engaged in production and sales
        of nutraceutical and bio-pharmaceutical products including tablets, drinks
        and
        health food. The subsidiary’s extensive sales network covers various provinces,
        cities, and counties throughout China.
  The
        products are made in the two plant facilities located at Harbin City with
        specialized machinery under stringent cleanliness and hygienic
        processes.
  The
        Company is subject to the consideration and risks of operating in the PRC.
        These
        include risks associated with the political and economic environment, foreign
        currency exchange and the legal system in the PRC.
  The
        economy of PRC differs significantly from the economies of the “western”
industrialized nations in such respects as structure, level of development,
        gross national product, growth rate, capital reinvestment, resource allocation,
        self-sufficiency, rate of inflation and balance of payments position, among
        others. Only recently has the PRC government encouraged substantial private
        economic activities. The Chinese economy has experienced significant growth
        in
        the past several years, but such growth has been uneven among various sectors
        of
        the economy and geographic regions. Actions by the PRC government to control
        inflation have significantly restrained economic expansion in the recent
        past.
        Similar actions by the PRC government in the future could have a significant
        adverse effect on economic conditions in PRC.
  Many
        laws
        and regulations dealing with economic matters in general and foreign investment
        in particular have been enacted in the PRC. However, the PRC still does not
        have
        a comprehensive system of Laws, and enforcement of existing laws may be
        uncertain and sporadic.
  The
        Company’s operating assets and primary sources of income and cash flows are of
        interests in the PRC. The PRC economy has, for many years, been a
        centrally-planned economy, operating on the basis of annual, five-year and
        ten-year state plans adopted by central PRC governmental authorities, which
        set
        out national production and development targets. The PRC government has been
        pursuing economic reforms since it first adopted its “open-door” policy in 1978.
        There is no assurance that the PRC government will continue to pursue economic
        reforms or that there will not be any significant change in its economic
        or
        other policies, particularly in the event of any change in the political
        leadership of, or the political, economic or social conditions in, the PRC.
        There is no assurance that the Company will not be adversely affected by
        any
        such change in governmental policies or any unfavorable change in the political
        economic or social conditions, the laws or regulations, or the rate or method
        of
        taxation in the PRC.
  As
        many
        of the economic reforms which have been or are being implemented by the PRC
        government are unprecedented or experimental, they may be subject to adjustment
        or refinement, which may have adverse effects on the Company. Further, through
        state plans and other economic and fiscal measures, it remains possible for
        the
        PRC government to exert significant influence on the PRC economy.
  The
        Company’s financial instruments that are exposed to concentration of credit risk
        consist primarily of cash and cash equivalents, accounts receivable from
        customers and other receivables. Cash and cash equivalents are maintained
        with
        major banks in the PRC. The company and other public business activity is
        primarily with customers in the PRC.
  F-10
  Any
        devaluation of the Renminbi (RMB) against the United States dollar would
        consequently have adverse effects on the Company’s financial performance and
        asset values when measured in terms of the United States dollar. Should the
        RMB
        significantly devalue against the United States dollar, such devaluation
        could
        have a material adverse effect on the Company’s earnings and the foreign
        currency equivalent of such earnings. The Company does not hedge its RMB
        -
        United States dollar exchange rate exposure.
  **3.
        BASIS OF PRESENTATION**
  The
        consolidated financial statements include the financial statements of the
        Company and its wholly-owned subsidiaries Harbin Renhuang Pharmaceutical
        Company
        Limited and Harbin Renhuang Pharmaceutical Co. Ltd. and are prepared in
        accordance with generally accepted accounting principles of the United States
        of
        America.
  **4.
        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES**
  **A.
        CASH AND CASH EQUIVALENTS**
  The
        Company considers cash and cash equivalents to include cash on hand and demand
        deposits with banks with an original maturity of three months or less.
  **B.
        ACCOUNTS RECEIVABLE**
  Trade
        receivables are recognized and carried at the original invoice amount less
        allowance for any uncollectible amounts. An estimate for doubtful accounts
        is
        made when collection of the full amount is no longer probable. Bad debts
        are
        written off as incurred. An account is considered past due after ninety
        (90) days from the invoice date. The allowance on the doubtful accounts was
        $134,295 as at October 31, 2007 ($nil in 2006)
  **C.
        INVENTORIES**
  Inventories
        are stated at the lower of cost and net realizable value. Cost is calculated
        on
        the weighted average basis and includes all costs to acquire and other costs
        incurred in bringing the inventories to their present location and condition.
        The Company evaluates the net realizable value of its inventories on a regular
        basis and records a provision for loss, if material, to reduce the computed
        weighted average cost if it exceeds the net realizable value.
  **D.
        PROPERTY, PLANT AND EQUIPMENT**
  Property,
        plant and equipment are carried at cost. The cost of repairs and maintenance
        is
        expensed as incurred; major replacements and improvements are capitalized.
  When
        assets are retired or disposed of, the cost and accumulated depreciation
        are
        removed from the accounts, and any resulting gains or losses are included
        in
        income in the year of disposition.
  The
        Company recognizes depreciation of its property, plant and equipment on a
        straight-line basis over the estimated useful lives of the assets based on
        their
        costs less 5% residual value. The useful lives for property, plant and equipment
        are estimated as follows:
  plant
                  and machinery
              
              10
                  yearsoffice
                  equipment and furnishings
              
              5
                  to 10 yearsMotor
                  vehicles
              
              5
                  to 10 years
  F-11
  **E.
        FAIR VALUE OF FINANCIAL INSTRUMENTS**
  The
        carrying value of financial instruments including cash, accounts receivables,
        other receivables, accounts payable, other payables and accrued expenses
        and
        debts, approximates their fair value at October 31, 2007 due to the relatively
        short-term nature of these instruments.
  **F.
        CONSTRUCTION IN PROGRESS**
  Construction
        in progress represents direct costs of construction or acquisition and design
        fees incurred. Capitalization of these costs ceases and the construction
        in
        progress is transferred to plant and equipment when substantially all the
        activities necessary to prepare the assets for their intended use are completed.
        No depreciation is provided until it is completed and ready for intended
        use.
  **G.
        INCOME TAXES**
  The
        Company accounts for income tax under the provisions of Statements of Financial
        Accounting Standards No. 109, which requires recognition of deferred tax
        assets
        and liabilities for the expected future tax consequences of events that have
        been included in the consolidated financial statements. Deferred income taxes
        are provided using the liability method. Under the liability method, deferred
        income taxes are recognized for all significant temporary differences between
        the tax and financial statement bases of assets and liabilities. In addition,
        the Company is required to record all deferred tax assets, including future
        tax
        benefits of capital losses carried forward, and to record a “valuation
        allowance” for any deferred tax assets where it is more likely than not that the
        asset will not be realized.
  In
        accordance with the relevant income tax laws applicable to wholly foreign
        owned
        enterprises (WFOE) operating in PRC, the profits of the Company are fully
        exempt
        from income tax for two years (“tax holiday”), commencing from the first profit
        making year of operations, followed by a 50% exemption for the immediate
        next
        three years (“tax preferential period”), after which the profits of the Company
        will be taxable at the full rate, currently 25%.
  **H.
        RELATED PARTIES**
  Parties
        are considered to be related if one party has the ability, directly or
        indirectly, to control the other party or exercise significant influence
        over
        the other party in making financial and operational decisions. Parties are
        also
        considered to be related if they are subject to common control or common
        significant influence. Related parties may be individuals or corporate
        entities.
  **I.
        IMPAIRMENT OF LONG-TERM ASSETS**
  In
        accordance with the provisions of SFAS No. 144, “Accounting for the Impairment
        or Disposal of Long-Lived Assets”, the Company’s policy is to record an
        impairment loss against the balance of a long-lived asset in the period when
        it
        is determined that the carrying amount of the asset may not be recoverable.
        The
        determination is based on an evaluation of such factors as the occurrence
        of a
        significant event, a significant change in the environment in which the business
        assets operate or if the expected future non-discounted cash flows of the
        business was determined to be less than the carrying value of the assets.
        If
        impairment is deemed to exist, the assets will be written down to fair value.
        Management also evaluates events and circumstances to determine whether revised
        estimates of useful lives are warranted. As of October 31, 2007, management
        expects its long-lived assets to be fully recoverable.
  **J.
        FOREIGN CURRENCY TRANSLATION**
  The
        company maintains its books and accounting records in Renminbi ("RMB"), the
        PRC's currency, being the functional currency.
  F-12
  Foreign
        currency transactions in RMB are reflected using the temporal method. Under
        this
        method, all monetary items are translated into the functional currency at
        the
        rate of exchange prevailing at the balance sheet date. Non-monetary items
        are
        translated at historical rates. Income and expenses are translated at the
        rate
        in effect on the transaction dates. Transaction gains and losses if any,
        are
        included in the determination of net income (loss) for the period.
  In
        translating the financial statements of the Company from its functional currency
        into its reporting currency in United States dollars, balance sheet accounts
        are
        translated using the closing exchange rate in effect at the balance sheet
        date
        and income and expense accounts are translated using an average exchange
        rate
        prevailing during the reporting period. Adjustments resulting from the
        transaction, if any, are included in accumulated other comprehensive income
        (loss) in stockholders’ equity.
  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$ at
        the rates used in translation. The Foreign exchange rate between the RMB
        and the
        United States dollar on October 31, 2007 and 2006 and the average through
        November 1, 2006 to October 31, 2007 and May 1, 2006 to October 31, 2006
        are:
  2007
              
              2006Balance
                  Sheet- Year end RMB : US$ exchange rate
              
              
              7.4820:1
              
              
              7.8792:1Operating
                  Statement: Average yearly RMB : US$ exchange rate
              
              
              7.6917:1
              
              
              7.9720:1
  **K.
        USE OF ESTIMATES**
  The
        preparation of 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 period. Significant estimates primarily related to the
        realizable value of accounts receivable, other receivables, inventories,
        the
        useful lives of plant and equipment and accruals of liabilities. Actual results
        when ultimately realized could differ from those estimates.
  **L.
        REVENUE RECOGNITION**
  The
        Company recognizes revenue when the significant risks and rewards of ownership
        have transferred pursuant to PRC law, including factors such as when persuasive
        evidence of an arrangement exists, delivery has occurred, the sales price
        is
        fixed and determinable, and collectibility is reasonably assured. Renhuang
        generally recognizes products sales when the product is shipped. In the current
        period, no returns of any significance have occurred.
  The
        Company provides a rebate to the sales agents as an incentive plan. The rebate
        rate is setup for each product. When revenue is recognized, the revenue is
        reduced by the amount of rebate. On average, the rebate rate is 17% of gross
        revenue.
  In
        accordance with the provisions of Staff Accounting Bulletin No. 104, revenue
        is
        recognized when merchandise is shipped, title passes to the customer and
        collectibility is reasonably assured.
  F-13


**M.
      CONCENTRATION OF CREDIT RISK**




Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist primarily of trade accounts receivable. The Company
      performs ongoing credit evaluations with respect to the financial condition
      of
      its creditors, but does not require collateral. In order to determine the value
      of the Company's accounts receivable, the Company records a provision for
      doubtful accounts to cover probable credit losses. Management reviews and
      adjusts this allowance periodically based on historical experience and its
      evaluation of the collectibility of outstanding accounts
      receivable.




**N.
      RESEARCH AND DEVELOPMENT**




Research
      and development (“R&D”) costs are expensed as incurred. Engineers and
      technical staff are involved in the production of our products as well as
      on-going research, with no segregation of the portion of their salaries relating
      to research and development from the portion of their salaries relating to
      production. The total salaries are included in cost of sales. R&D for the
      year ended October 31, 2007 and 2006 are $282,009 and $121,272,
      respectively.




**O.
      ADVERTISING**




Advertising
      costs consist primarily of promoting the Company and the Company’s products
      through printed advertisements in trade publications and television. Advertising
      costs are expensed as incurred. They are separately disclosed in income
      statements.




**P.
      STOCK-BASED COMPENSATION**




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised
      2004), “Share-Based Payment” (“SFAS 123R”), which revises SFAS No. 123,
“Accounting-Based Compensation” (“SFAS 123”) and supersedes Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”). Under the fair value recognition provisions of SFAS 123R,
      the Company is required to measure the cost of employee services received in
      exchange for stock-based compensation measured at the grant date fair value
      of
      the award.




**Q.
      CLASSIFICATION OF OPERATING COSTS AND EXPENSES**




The
      Company records its operating costs and expenses generally with the following
      classifications:




Cost
      of Goods Sold


Cost
      of
      goods sold consists primarily of raw materials, direct labor and manufacturing
      overhead. Manufacturing overhead includes an allocation of purchasing and
      receiving costs, inspection fees, warehousing utilities, supplies, factory
      and
      equipment repairs and maintenance, safety equipment and supplies, packing
      materials, and loading fees.




Selling
      Expenses


Selling
      expenses includes primarily of transportation and freight charges of delivering
      to customers, travel and entertainment, maintenance, payroll for sales staff,
      payroll taxes and benefits, advertising and promotion, telephone and utilities,
      insurance, sales commissions and exports fees.




General
      and Administrative Expenses


General
      and administrative expenses includes primarily of general office expenses,
      travel and entertainment, transportation, administrative payroll, payroll taxes
      and benefits, maintenance, telephone, utilities, printing, professional fees,
      continuing education, licenses and fees.


F-14


**R.
      SEGMENTS**




No
      business segment analysis is provided for the year ended October 31, 2007,
      as no
      revenue and no income from operations is attributable to the segment other
      than
      sales of pharmaceutical products.




Further,
      no geographical segment analysis is provided for the year ended October 31,
      2007, as no revenue and no income from operations is attributable to the segment
      other than the Mainland China.




**S.
      EARNINGS PER SHARE**




The
      Company reports earnings per share in accordance with SFAS No. 128, “Earnings
      per Share.” Basic earnings per share are computed by dividing income available
      to common shareholders by the weighted average number of common shares
      available. Diluted earnings per share is computed using the treasury stock
      method whereby the denominator is increased by the net dilution on the exercise
      of the warrants and if the additional common shares were dilutive.




**T.
      COMPREHENSIVE INCOME**




The
      Company has adopted the provisions of Statement of Financial Accounting
      Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS
      No.
      130 establishes standards for the reporting and display of comprehensive income,
      its components and accumulated balances in a full set of general-purpose
      financial statements. SFAS No. 130 defines comprehensive income to include
      all
      changes in equity except those resulting from investments by owners and
      distributions to owners, including adjustments to minimum pension liabilities,
      accumulated foreign currency translation, and unrealized gains or losses on
      marketable securities. In the current period, the only component of other
      comprehensive income is foreign translation gain of $855,719 ($53,739 in 2006),
      which has been recorded as the accumulative other comprehensive income in the
      balance sheet. Consequently, the comprehensive income for the period ended
      October 31, 2007 and 2006 were $10,452,351 and $4,278,953, respectively.




**U.
      RECENT PRONOUNCEMENTS**




In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 155, "Accounting for
      Certain Hybrid Financial Instruments - an amendment of FASB Statement No. 133
      and 140" (“SFAS 155”). SFAS 155 resolves issues addressed in Statement 133
      Implementation Issue No. D1, “Application of Statement 133 to Beneficial
      Interests in Securitized Financial Assets.” SFAS 155 is effective for all
      financial instruments acquired or issued after the beginning of the first fiscal
      year that begins after September 15, 2006. As such, the Company is required
      to
      adopt these provisions at the beginning of the fiscal year ended October 31,
      2007. The adoption of this standard had no material impact on the financial
      statements.




In
      March
      2006, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standard (“SFAS”) No. 156, "Accounting for Servicing of
      Financial Assets - an amendment of FASB Statement No. 140" (“SFAS 156”). SFAS
      156 amends FASB Statement No. 140 with respect to the accounting for separately
      recognized servicing assets and servicing liabilities. SFAS 156 requires all
      separately recognized servicing assets and servicing liabilities to be initially
      measured at fair value, if practical. SFAS 156 is effective as of the beginning
      of the first fiscal year that begins after September 15, 2006. As such, the
      Company is required to adopt these provisions at the beginning of the fiscal
      year ended October 31, 2007. The adoption of this standard had no material
      impact on the financial statements.




In
      September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
      157,
“Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework
      for measuring fair value under generally accepted accounting principles, and
      expands disclosures about fair value measurements. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company is currently
      evaluating the impact the adoption of this statement could have on is financial
      condition, results of operations or cash flows.


F-15


In
      September 2006, the FASB issued Statement No. 158, "Employers' Accounting for
      Defined Benefit Pension and Other Postretirement Plans - An amendment of FASB
      Statements No. 87, 88, 106, and 132(R)" ("SFAS 158"). This Statement enhances
      disclosure regarding the funded status of an employer's defined benefit
      postretirement plan by (a) requiring companies to include the funding status
      in
      comprehensive income, (b) recognize transactions and events that affect the
      funded status in the financial statements in the year in which they occur,
      and
      (c) at a measurement date of the employer's fiscal year-end. Statement No.
      158
      effective for fiscal years ending after December 15, 2008, and is not expected
      to apply to the Company.




In
      February 2007, FASB issued SFAS No. 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 values. SFAS 159 is effective for
      fiscal years after November 15, 2007. The Company is currently evaluating the
      impact of adopting SFAS 159 on our financial statements.






In
      December 2007, the Financial Accounting Standards Board issued FASB Statement
      No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R
      provides additional guidance on improving the relevance, representational
      faithfulness, and comparability of the financial information that a reporting
      entity provides in its financial reports about a business combination and its
      effects. This Statement applies prospectively to business combinations for
      which the acquisition date is on or after the beginning of the first annual
      reporting period beginning on or after December 15, 2008. The Company
      believes there will be no material impact on its financial statements upon
      adoption of this standard.






In
      December 2007, the Financial Accounting Standards Board issued FASB Statement
      No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No. 51* (“SFAS
      160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting
      standards for the noncontrolling interest in a subsidiary and for the
      deconsolidation of a subsidiary. This Statement is effective for fiscal
      years and interim periods within those fiscal years, beginning on or after
      December 15, 2008. The Company believes there will be no material impact on
      its financial statements upon adoption of this standard.




**5.
      CASH AND CASH EQUIVALENTS**





Cash
      and
      cash equivalents as of October 31, 2007 and 2006 consist of the
      following:





**2007**
            
            **2006**Cash
                on hand
            
            $
            28,657
            
            $
            21,864Cash
                in banks
            
            
            10,124,946
            
            
            999,403$
            10,153,603
            
            $
            1,021,267




F-16





**6.
      ACCOUNTS RECEIVABLE, NET**





The
      Company's accounts receivable as at October 31, 2007 and 2006 are summarized
      as
      follows:





**2007**
            
            **2006**Accounts
                receivable
            
            $
            10,614,844
            
            $
            7,566,096Less:
                Allowance for doubtful accounts
            
            
            (134,295
            )
            
            (-
            )Accounts
                receivable, net
            
            $
            10,480,549
            
            $
            7,566,096





The
      customers who owed over 10% in value of the total accounts receivable balance
      as
      at October 31, 2007 and 2006 are listed as:





2007
            
            2006Customer
                A:
            
            $
            1,372,964
            
            
            13
            %
            $
            792,617
            
            
            10
            %Customer
                B:
            
            $
            1,347,250
            
            
            13
            %
            $
            814,114
            
            
            11
            %Customer
                C:
            
            $
            942,082
            
            
            9
            %
            $
            683,433
            
            
            9
            %





**7.
      OTHER RECEIVABLES**





Other
      receivables as of October 31, 2007 and 2006 consist of the
      following:





**2007**
            
            **2006**Due
                from third parties
            
            $
            233,268
            
            $
            1,143,834Due
                from related parties
            
            
            482,365
            
            
            —Less:
                allowance for doubtful accounts
            
            
            (46,188
            )
            
            (-
            )$
            669,445
            
            $
            1,143,834





**8.
      INVENTORIES**




The
      Company's inventories at October 31, 2007 and 2006 are summarized as follows:





**2007**
            
            **2006**Raw
                materials
            
            $
            905,227
            
            $
            569,349Finished
                goods
            
            
            64,445
            
            
            52,795$
            969,672
            
            $
            622,144




F-17


The
      Company did not have obsolete inventories as of October 31, 2007 and
      2006.




**9.
      PROPERTY, PLANT AND EQUIPMENT, NET**




**2007**
            
            **2006****Cost:-**Plant
                and machinery
            
            $
            2,959,892
            
            $
            2,718,407Office
                equipment and furnishings
            
            
            38,649
            
            
            3,966Motor
                vehicles
            
            
            48,364
            
            
            19,6723,046,905
            
            
            2,742,045**Less:
                Accumulated depreciation:-**Plant
                and machinery
            
            
            435,791
            
            
            131,405Office
                equipment and furnishings
            
            
            1,713
            
            
            44Motor
                vehicles
            
            
            3,116
            
            
            311440,620
            
            
            131,760**Net
                book value**
            
            $
            2,606,285
            
            
            2,610,285




Depreciation
      expenses relating to property, plant and equipment were $293,637 and $131,760
      for the year ended October 31, 2007 and for the six months ended October 31,
      2006, respectively.




**10.
      CONSTRUCTION IN PROGRESS**




The
      construction in progress in 2006 was completed in the year ended October 31,
      2007.


F-18




**11.
      ACCOUNTS PAYABLES**




Accounts
      payables as of October 31, 2007 and 2006 consist of the following:




**2007**
            
            **2006**Due
                to related parties
            
            $
            -
            
            $
            419,910Due
                to third parties
            
            
            188,600
            
            
            366,805$
            188,600
            
            $
            786,715





The
      amount of $nil ($419,910 in 2006) is payable to a related party on the purchase
      of plant raw materials. The price is equal to the cost when the related party
      purchases the above plant raw materials.





The
      suppliers from whom the purchased amounts are over 10% of the total purchases
      for the year ended October 31, 2007 and for the six months ended October 31,
      2006 are listed as:





2007
            
            2006Supplier
                A:
            
            $
            2,330,232
            
            
            25
            %
            $
            1,327,211
            
            
            30
            %Supplier
                B:
            
            $
            1,189,098
            
            
            13
            %
            $
            691,232
            
            
            12
            %Supplier
                C:
            
            $
            992,851
            
            
            11
            %
            $
            586,537
            
            
            10
            %





**12.
      OTHER PAYABLES**




The
      balance as at October 31, 2007 mainly includes professional fee payable
      $332,500, sales rebate payable of $1,591,138, VAT payable of $589,410, social
      insurance payable of $343,046.




As
      at
      October 31, 2006, the balance includes sales rebate payable of $1,031,101,
      VAT
      payable of $419,121, professional fee payable of $302,500 and payroll payable
      of
      $124,320.




F-19




**13.
      RESERVES**




The
      reserve funds are comprised of the following:





**2007**
            
            **2006**Statutory
                surplus reserve fund
            
            $
            1,559,357
            
            $
            564,756Public
                welfare fund
            
            
            282,377
            
            
            282,377$
            1,841,734
            
            $
            847,133







Pursuant
      to the relevant laws and regulations of the PRC, the Company is required each
      year to transfer 10% of the profit after tax as reported under the PRC statutory
      financial statements to the statutory surplus reserve fund until the balance
      reaches 50% of the registered share capital.  This reserve can be used
      to make up any loss incurred or to increase share capital.  Except for
      the reduction of losses incurred, any other application should not result in
      this reserve balance falling below 25% of the registered capital.




Prior
      to
      January 1, 2007, the Company was required each year to transfer 5% of the profit
      after tax as reported under the PRC statutory financial statements to the public
      welfare funds.  This reserve was restricted to capital expenditure for
      employees’ collective welfare facilities that are owned by the
      Company.  The public welfare funds are not available for distribution
      to the stockholders (except on liquidation).  Once capital expenditure
      for staff welfare facilities has been made, an equivalent amount must be
      transferred from the public welfare funds to the discretionary common reserve
      funds.  Due to a change in the PRC Company Law, appropriation of
      profit to the public welfare funds is no longer required.




**14.
      INCOME TAXES**




The
      Company is subject to state and local income taxes within the PRC at the
      applicable tax rate as reported in their PRC statutory financial statements
      in
      accordance with the relevant income tax laws.




For
      the
      year of 2006 and 2007, the Company was granted tax holiday and concession and
      is
      entitled to full exemption from corporation income taxes up to December 2007.
      From 2008 onwards, the Company also receives a special income tax rate of 15%
      as
      it is wholly foreign owned company where there is tax exemption for certain
      enterprises.




Had
      the
      company not been granted the tax holiday, the income tax provision at 33% would
      have been approximately US$3,167,000 and US$1,394,000 for the year ended October
      31, 2007 and for the six months ended October 31, 2006, respectively.




**15.
      COMMON STOCK**




During
      the year ended October 31, 2007, 96,500 common stocks were issued as S8 shares
      for financing services fee of $284,675.




**16.
      WARRANTS**




The
      Company entered into a Director appointment agreement with Mr. Magnus Moliteus
      dated April 16, 2007, pursuant to which the Company issued Mr. Magnus Moliteus
      15,000 warrants, which terminates on April 16, 2010, to purchase 15,000 shares
      of Renhuang’s common stock at $3.02 per share. On July 31, 2007, 10,000 warrants
      were issued to Mr. Magnus Moliteus. The Company valued the warrants using the
      Black-Scholes calculation model, and the warrants were deemed to have a value
      of
      $22,442 and $9,257 respectively. These amounts were charged to expense on the
      Company’s financial statements for the year ended October 31,
      2007.


F-20




At
      October 31, 2007, the following table summarizes the changes in warrants
      outstanding and the related prices for the shares of the company’s common stock
      issued to non-employees of the company. These warrants were granted in lieu
      of
      cash for compensation for services performed of a newly appointed director.
      The
      company is obligated to grant 10,000 warrants on July 31 for three consecutive
      years, starting from July 31, 2007.




Warrants Outstanding
            
            Warrants ExercisableExercise Prices
            
            Number
              Outstanding
            
            Weighted Average
              Remaining
              Contractual Life
              (years)
            
            Weighted Average
              Exercise Price
            
            Number
              Exercisable
            
            Weighted Average
              Remaining
              Contractual Life
              (years)$                3.02
            
            
            15,000
            
            
            2.45
            
            $
            3.02
            
            
            15,000
            
            
            2.45$                2.50
            
            
            10,000
            
            
            2.75
            
            $
            2.50
            
            
            10,000
            
            
            2.7525,000
            
            
            
            
            
            
            
            
            25,000





Transactions
      involving warrants are summarized as follows:





Number of
              Shares
            
            Weighted
              Average Price
              Per ShareOutstanding
                at October 31, 2006
            
            
            —
            
            
            —Granted—
                April 16, 2007
            
            
            15,000
            
            $
            3.02—
                July 31, 2007
            
            
            10,000
            
            $
            2.50Exercised
            
            
            —
            
            
            —Cancelled
                or expired
            
            
            —
            
            
            —Outstanding
                at October 31, 2007
            
            
            25,000
            
            $
            2.81




F-21





The
      estimated value of the compensatory warrants granted to Director in exchange
      for
      services was determined using the Black-Scholes pricing model and the following
      assumptions:





15,000 warrants
              granted on April
              16, 2007
            
            10,000 warrants
              granted on July 31,
              2007Significant
                assumptionsRisk-free
                interest rate at grant date
            
            
            4.74
            %
            
            4.78
            %Expected
                stock price volatility
            
            
            70.83
            %
            
            48.59
            %Expected
                dividend payout
            
            
            0
            
            
            0Expected
                option life-years
            
            
            3
            
            
            3





**17.
      RELATED PARTY TRANSACTIONS**




The
      Company had the following significant related party transactions during the
      years:




n
            The
                Company rented property and plant from Harbin Renhuang Pharmaceutical
                Stock Co. Ltd. The lease term is from May 1, 2006 to April 30, 2007,
                with
                monthly rental payment $45,504. The rental is fair value as appraised
                by a
                third party property company.n
            The
                Company rented property and plant from its predecessor Harbin Renhuang
                Pharmaceutical Stock Co. Ltd. The lease term is from May 1, 2007
                to May 1,
                2008, with monthly rental payment of $45,504.




**18.
      COMMITMENTS AND CONTINGENCIES**




**A.
      CAPITAL AND LEASE COMMITMENTS**




As
      of
      October 31, 2007, the Company has the following significant capital and lease
      commitments outstanding: **




l
            The
                Company rented property and plant from Harbin Renhuang Pharmaceutical
                Stock Co. Ltd. The lease term is from May 1, 2007 to April 30, 2008,
                with
                monthly rental payment $46,779. The rental is fair value as appraised
                by a
                third party property company.




l
            The
                Company rented office from Hei Long Jiang Jiu San You Zhi Co.,
                Ltd. The lease term is from May 1, 2007 to April 30, 2010, with
                average monthly rental payment $9,393.




The
      company rented plant from its predecessor Harbin Renhuang Pharmaceutical Stock
      Co. Ltd., see Note 17.




October 31, 2007within
                1 year
            
            $
            334,8041-2
                years
            
            
            114,9432-3
                years
            
            
            57,471Total
            
            $
            507,218




F-22




**B.
      LEGAL PROCEEDINGS**




The
      Company is not currently involved in any litigation. There is no action, suit,
      proceeding, inquiry or investigation before or by any court, public board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the executive officers of the Company.




**19.
      CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS**




The
      Company faces a number of risks and challenges since its operations are in
      the
      PRC. The Company's operations in the PRC are subject to special considerations
      and significant risks not typically associated with companies in North America
      and Western Europe. The Company'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 and remittance abroad, and rates and methods
      of
      taxation, among other things.




**20.
      COMPARATIVE FINANCIAL INFORMATION**




As
      discussed in Note 1- Reorganization Transactions, the Company acquired Harbin
      Renhuang Pharmaceutical Company Limited and its wholly owned subsidiary, Harbin
      Renhuang Pharmaceutical Co., Ltd.




For
      information purposes, we present below the results of operations of Harbin
      Renhuang Pharmaceutical Stock Co. Ltd. (“Old Renhuang”) for the six months ended
      April 30, 2006 and the cash flow statement for the six months ended April 30,
      2006.


F-23


**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN CHINA)**





**STATEMENTS
      OF INCOME**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2006**





**(Unaudited)****Six
                Months Ended**
              **April
                30, 2006**SALES
            
            $
            16,427,921COST
                OF SALES
            
            
            8,863,227GROSS
                PROFIT
            
            
            7,564,694SELLING
                AND DISTRIBUTION EXPENSES
            
            
            577,370ADVERTISING
            
            
            2,917,988GENERAL
                AND ADMINISTRATIVE EXPENSES
            
            
            1,632,290PROVISION
                FOR DOUBTFUL ACCOUNTS
            
            
            622,618DEPRECIATION
                AND AMORTIZATION
            
            
            328,051RESEARCH
                AND DEVELOPMENT
            
            
            817,547INCOME
                FROM OPERATIONS
            
            
            668,830FINANCE
                COSTS
            
            
            359,465GOVERNMENT
                SUBSIDIES
            
            
            (155,316
            )OTHER
                EXPENSES
            
            
            6,781INCOME
                BEFORE INCOME TAXES
            
            
            457,900INCOME
                TAXES
            
            
            —NET
                INCOME ATTRIBUTABLE TO SHAREHOLDERS
            
            $
            457,900




F-24





**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN CHINA)**





**STATEMENTS
      OF CASH FLOW**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2006**





**(Unaudited)****2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                income
            
            $
            457,900Adjustments
                to reconcile net income to net cash fromoperating
                activities :Depreciation
                and amortization
            
            
            328,051Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            (1,327,585
            )Inventories
            
            
            1,111,003Prepayments
            
            
            (506,399
            )Other
                receivables, net
            
            
            (116,993
            )Deferred
                expenses
            
            
            (694,211
            )Accounts
                payable and accruals
            
            
            (180,641
            )Advance
                from customers
            
            
            228,219Other
                payables
            
            
            203,108**NET
                CASH USED IN OPERATING ACTIVITIES**
            
            
            (497,548
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                of property, plant and equipment
            
            
            (1,876,244
            )Proceed
                from disposition of property, plant and equipment
            
            
            2,739,663**NET
                CASH PROVIDED BY INVESTING ACTIVITIES**
            
            $
            863,419




F-25


**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN CHINA)**





**STATEMENTS
      OF CASH FLOW (CONTINUED)**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2006**





**(Unaudited)****2006****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Due
                (to)/from a director
            
            $
            (916,165
            )Due
                to related parties, net
            
            
            (278,050
            )Repayment
                of bank loan, net
            
            
            (482,398
            )**NET
                CASH USED IN FINANCING ACTIVITIES**
            
            
            (1,676,613
            )**NET
                CHANGE IN CASH AND CASH EQUIVALENTS**
            
            
            (1,310,742
            )EFFECT
                OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
            
            
            97,235Cash
                and cash equivalents, beginning of period
            
            
            3,439,402Cash
                and cash equivalents, end of period
            
            $
            2,225,895**SUPPLEMENTARY
                CASH FLOW DISCLOSURES**Interest
                paid
            
            $
            245,145Income
                taxes paid
            
            $
            —




F-26