GBLP Global Pharmatech Inc (PK)

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

FORM 10-KSB
(MARK ONE)

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

For the annual period ended December 31, 2007

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

For the transition period from _______________ to _______________

Commission file number: 333-67884

GLOBAL PHARMATECH, INC.
(Name of Small Business Issuer in Its Charter)

 DELAWARE 33-0976805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
 incorporation or organization)

+86 431 85541826
(Issuer's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: NONE.

Title of Each Class Name of Each Exchange on Which Registered

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $.0001 par value
(Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [ ]

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

The issuer's revenues for the fiscal year ended December 31, 2007 were $2,819,090

The aggregate market value of the registrant's common stock held by non-affiliates as of March 15, 2007 was $7,084,225.5 million.

State the number of shares outstanding of each of the issuer's classes of equity securities, as of the latest practicable date:

 Number of Shares Outstanding
Title of Each Class of Equity Securities as of March 31, 2008
---------------------------------------- --------------------
Common Stock, par value $0.0001 per share 23,614,085
Preferred Stock, par value $0.0001 per share None

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

TABLE OF CONTENTS

 Page
 ----
PART I.

ITEM 1. Description of Business ......................................... 1
ITEM 2. Description of Properties ....................................... 4
ITEM 3. Legal Proceedings ............................................... 4
ITEM 4. Submission Of Matters To A Vote Of Security Holders ............. 4

PART II

ITEM 5. Market For Common Equity and Related Stockholder Matters
 and Small Business Issuer Purchases of Equity Securities ....... 4
ITEM 6. Management Discussion and Analysis .............................. 6
ITEM 7. Financial Statements ............................................ 14
ITEM 8. Changes In And Disagreements With Accountants on Accounting
 and Financial Disclosure ....................................... 14
ITEM 8A(T). Controls and Procedure .......................................... 14
ITEM 8B. Other Information ............................................... 15

PART III

ITEM 9. Directors, Executive Officers, Promoters And Control Persons
 and Corporate Governance, Compliance With Section 16(a)
 of The Exchange Act ............................................ 15
ITEM 10. Executive Compensation .......................................... 16
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
 and Related Stockholder Matters ................................ 18
ITEM 12. Certain Relationships and Related Transactions, and
 Director Independence .......................................... 18
ITEM 13. Exhibits ........................................................ 19
ITEM 14. Principal Accountant Fees and Services .......................... 20

This annual report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under Item 1, "Description of Business" and Item 6, "Management's Discussion and Analysis", including under the heading "- Risk Factors" under Item 6. Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance.

Certain financial information included in this annual report has been derived from data originally prepared in Renminbi (RMB), the currency of the People's Republic of China ("China" or "PRC"). For purposes of this annual report, a conversion rate of approximately US$1.00 to RMB 7.8 was utilized. There is no assurance that RMB amounts could have been or could be converted into US dollars at that rate.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

HISTORY

Global Pharmatech, Inc. ("Global" or the "Company") was incorporated in Delaware on June 26, 2001 under the name Autocarbon.com, Inc. After engaging, under prior management, in several businesses unrelated to its current one, on February 9, 2005, Global acquired Jilin Tian Yao Science and Technology Limited Company ("JTY"), by acquiring JTY's parent, Natural Pharmatech, Inc. ("Natural"), through the issuance to Natural's shareholders of 13,703,125 of its common shares for all of the outstanding common shares of Natural. Located in Changchun, China, JTY is a Chinese limited liability company, organized on February 7, 2001, which, together with its subsidiaries, is principally engaged in the research and development of modernized traditional Chinese medicine and bio-pharmacy, the sale of this technology, and the manufacture and sale of Chinese medicine and vitamins throughout China. Natural was incorporated in the British Virgin Islands on February 2, 2004, and acquired JTY on June 15, 2004 by issuing 43,800,000 of its common shares for all of the outstanding common shares of JTY.

Under generally accepted accounting principles, these acquisitions are considered in substance to be capital transactions rather than business combinations. In each case, for accounting purposes, the acquired company is deemed to have issued its stock for the net monetary assets of the acquiring company. Each transaction is accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded. Under reverse takeover accounting, the comparative historical financial statements are primarily those of JTY and its subsidiaries.

On March 15, 2007, JTY acquired a 75% equity interest in Jilin Biotech, Inc. ("JBI") with RMB3,000,000. JBI is engaged in the manufacturing and sales of dietary supplements.

On May 11, 2007, JTY entered into an Equity and Claim Transfer Agreement with Mr. Daojun Wang pursuant to which JTY agreed to sell to Mr. Wang (i) JTY's 95% equity interest in Jilin Yicaotang Pharmaceutical Co., Ltd ("YCT"), consisting of 9,500,000 shares of YCT and (ii) the RMB9,780,000 debt owed to JTY by YCT. YCT is in the business of liquid dose medicine manufacturing and sales.

On September 7, 2007, Changchun Xiandai Technology Inc., a subsidiary of the Company, changed its name to Jilin Tianyao Xiandai TCM Technology Limited ("JLXD").

BUSINESS OVERVIEW

We are a leader in China in the research, production and development of herbal medicine, bio-medicine, chemical medicine, Traditional Chinese Medicine ("TCM") and dietary supplements using internationally-accepted scientific standards. China's TCM annual sales reached US$25 billion in 2007. We market our expertise in three major ways: sales of medicine and dietary supplements in convenient dosage forms such as capsules and pills, revenues from technology transfer, and revenues derived from conducting experiments and research for other companies. TCM accounts for approximately 30% of all medicines sold in China.

THE EMPLOYEES

The Company currently has 217 full-time employees and no part-time employees. None of our employees is covered by a collective bargaining agreement. We consider relations with our employees to be good.

THE PRODUCTS

Our product line consists of 20 drugs and 2 dietary supplements. These are primarily TCM-based prescription drugs, over-the-counter drugs and dietary supplements, including 2 western medicines. We sell our products through distributors and directly to consumers through our own sales team. The following is a list of some of our major products:

The XS CAPSULE (XIN-SHU) is a State Food and Drug Administration (SFDA)-approved prescription drug indicated for the treatment of angina and other coronary disease. It has been developed by using modern biotechnologies. Based on clinical experience, we believe our product formulation could improve the efficacy of this drug. The drug substances of XS were extracted from six Chinese medical herbal materials. The safety and efficacy of these drug substances and their combination were tested in previous clinical trials conducted in China.

The JUTAI SOFT CAPSULE is an SFDA-approved dietary supplement with 3 patents including 1 innovation patent. Substances of this product are extracted from American ginseng and ECHINACEA PURPUREA, a plant originally grown in North America. This dietary supplement and energy provider was developed by us. As shown in our own study, ECHINACEA PURPUREA may increase the concentration of blood leukocyte and enhance general human immunity. In addition, Jutai is approved for sale to combat fatigue and to enhance general human immunity.

QINGXUAN ANTI-HYPERTENSION TABLET is an SFDA-approved over-the-counter drug product indicated for the treatment of hypertension and high serum cholesterol level. The drug substance of Qingxuan is extracted from a single Chinese medical herb, radish seed. The extract contains methyl mercaptan, erucic acid, octadecatrienoic acid, nC13, Glycerol sinapate, raphanin, cyanidin and coumarin. Pharmacology experiments showed that Qingxuan may reduce blood pressure in several animal models. In a three-month toxicity study, after Qingxuan was orally given to mice at ten to 40 times greater than a human clinical dose (based on body surface areas), no mortality or organ toxicity was observed in the animal tested. As an over-the-counter drug product, these tablets can be marketed in China without prescription.

YANREQING TABLET is an SFDA-approved prescription drug to treat inflammation; it is based on TCM which is aceepted by Chinese consumers to have less side-effects compared to its western medicine counterparts.

In addition to these patented products, we manufacture and sell other proprietary drugs, generics and dietary supplements used to treat symptoms ranging from headaches, coughing and dry mouth to infections and numbness of limbs.

PRODUCTION FACILITIES AND EQUIPMENT

The Company's approximately 5,502 sq.m. manufacturing plant contains manufacturing capacity for over 300 million capsules, 200 million pills and tablets and 50 million bags of granules annually. Its facilities are certified as compliant with Chinese Current Good Manufacturing Practices, which are governmentally-established current, scientifically sound methods, practices and principles that are implemented and documented during product development and production to ensure consistent and uniform manufacture of safe products. Current Good Manufacturing Practices require the design and implementation of standard operating procedures for each step in the manufacturing process, beginning with the selection of raw materials suppliers and ending with storage and shipment.

Our principal capsule supplier is Kanghua Medicine Supply Co., Ltd. and Yaofeng Capsule Co., Ltd. Changchun Xinhai Wrapping Supply Co., Ltd. is our principal source for medicine wrappers. Changchun Shenrong TCM Co., Ltd. is our primary supplier of herbal raw materials. We have a number of other smaller suppliers of raw materials and other materials. We believe that a loss of any of these suppliers could be compensated for through arrangements with alternative sources of supply.

DISTRIBUTION CHANNELS

The Company has historically generated revenue from transferring technology during various stages of development to other pharmaceutical companies, in which it retains no ownership interest and for which it receives lump-sum payments based on pre-established milestones rather than royalties or other compensation. We plan to continue to do so with certain drugs, primarily in cases where products are requested and selected by pharmaceutical companies that do not have their own research facilities. For example, we currently provides services to medium-sized pharmaceutical companies in northern China that have mature manufacturing capacities and sales channels, but do not have similar research and development capabilities. We have very good and steady relationships with our customers.

We also plan to increase our focus in the future on manufacturing in-house developed medicines in our own production facilities. We intend to target the urban consumer market in China. Currently, sales are mainly through distributors, such as wholesale companies and chain store representatives. We also target the sale of our products to medical institutions, such as hospitals and clinics.

Geographically, we focuses its sales efforts in Jilin, Heilongjiang, Liaoning, Inner Mongolia, Hebei, Shandong, Zhejiang, Guangdong and other provinces in China. The Company also sells to parts of Southeast Asia.

Our Chinese operating subsidiaries have received more than thirty commendations since 2001 from various governmental agencies, including several commendations related to the Company's technology and intellectual property.

We have many state-level and provincial-level research qualifications, some are very rare in China, with these qualifications, the state and provincial government will fund us for some of our researches.

COMPETITION

The Chinese pharmaceuticals market is highly fragmented and competitive. Market entry is controlled, significant start-up costs and limited available facilities may deter non-quarlified, inexperienced or undercapitalized entrants. We anticipate that competition in this market will continue to intensify. Our competitors include national and regional pharmaceutical promotion companies, independent pharmaceutical research and development companies and pharmaceutical distributors. We anticipate substantial new competition from foreign and domestic competitors entering the Chinese pharmaceutical marketing and distribution market.

Some of our competitors are more established, and have significantly greater financial, technical, marketing and other resources than we do. Many also have greater name recognition and a larger customer base. Our competitors may be better able than we are to respond to new or changing opportunities and customer requirements, undertake more extensive research and development, manufacturing and distribution activities, offer more attractive terms to customers, and adopt more aggressive pricing policies.

We believe we best compete with other pharmaceutical companies in China on the basis of our modern facilities, talented research and development professionals and comprehensive research and development and production resources. We believe our facilities approach or meet Western standards and have sufficient capacity to meet our research and development and production needs for the foreseeable future. In contrast, we believe many Chinese pharmaceutical companies rely on less stringent quality control measures, and do not have sufficient research and development capabilities.

GOVERNMENT REGULATION

The law of China on the Administration of Pharmaceuticals was promulgated on September 20, 1984 by the Executive Committee of the National People's Congress and amended effective December 1, 2001. This law sets out the basic legal framework for administration of pharmaceutical production and sale in China, covering manufacture, distribution, packaging, pricing and advertising. The Implementation Rules on the Administration of Pharmaceuticals were promulgated effective September 15, 2002 to set out detailed implementation rules.

The State Drug Administration was established in 1998 as the Chinese pharmaceutical regulatory authority, to assume supervisory and administrative functions previously carried out by the Ministry of Health, the State Administration Bureau for Pharmaceuticals and the State Administration Bureau for Traditional Chinese Medicine. In March 2003, China's SFDA was established to assume the functions previously carried out by the SDA. The SFDA's primary responsibilities include:

* formulating and supervising the implementation of regulations and policies concerning drug administration;
* promulgating standards for pharmaceutical products and medical appliances;
* categorizing drugs and medical appliances for regulatory purposes;
* registering and approving new drugs, generic drugs and imported and Chinese medicines;
* granting approvals for the production of pharmaceutical products and medical appliances; and
* approving the manufacture and distribution of pharmaceutical products.

Before any pharmaceutical distribution enterprise, including any wholesaler or retailer, can distribute pharmaceutical products in China, it must obtain a Pharmaceutical Distribution Permit issued by the relevant provincial or county-level SFDA where the enterprise is located. Issuance of a permit is subject to inspection of the facilities, warehouse, hygiene environment, quality control systems, personnel and equipment of the enterprise and, when granted, the permit is valid for five years. Enterprises must apply for permit renewals no later than six months prior to expiration, subject to reassessment by the relevant authority. Pharmaceutical distribution enterprises must also obtain a business license from the relevant administration bureau for industry and commerce to commence business.

Good Supply Practice standards have been established in China regulating pharmaceutical wholesale and retail enterprises to ensure quality distribution of pharmaceutical products. Currently applicable GSP standards, passed by the SDA effective July 1, 2000, require wholesale and retail enterprises to implement strict control of staff qualifications, distribution premises, warehouses, inspection equipment and facilities, management and quality control in order to obtain a GSP certificate to conduct business. GSP certificates are valid for five years, after a one-year certification for newly established enterprises. Renewal applications must be made no later than three months prior to expiration, subject to reassessment by the relevant authority.

Pursuant to the Decision of the State Council on the Establishment of the State Basic Medical Insurance System for Urban Employees and relevant Implementation Measures, the Chinese Ministry of Labor and Social Security established a Catalogue listing medicines covered by social insurance (the "Insurance Catalogue"). The Insurance Catalogue is divided into Parts A and B. Part A medicines are qualified for general application, and their content may not be changed by local authorities. Provincial level authorities may make limited changes to Part B medicines, resulting in some regional variations. Patients purchasing Part A medicines are entitled to reimbursement of their costs from the social medical fund in accordance with relevant regulations. Patients purchasing Part B medicines are required to pay a predetermined proportion of their costs.

Medicines included in the Insurance Catalogue are selected by the Chinese government authorities based on factors including treatment requirements, frequency of use, effectiveness and price, and are subject to government price control. The Insurance Catalogue is revised every two years. In connection with each revision, relevant provincial drug authorities collect proposals from relevant enterprises, and the SFDA makes final revisions based on the preliminary opinions suggested by the provincial drug administrations.

Medicine products included in the Insurance Catalogue and those whose production or trading will constitute monopolies are also subject to government price control. Maximum prices for these products are periodically revised by state and provincial administration authorities. Prices for medicines not subject to price control are determined by the pharmaceutical manufacturers, subject in some cases to providing notice to provincial pricing authorities. Price controls are set to create reasonable profit margins for pharmaceutical enterprises after taking into account the type and quality of the products, their production costs, prices of substitute products and other similar factors.

RESEARCH AND DEVELOPMENT (R&D)

Our own R&D efforts result in new drug patents which form the basis for some of our products. We sell patented technology to other drug manufacturers when we are unable to manufacture the products ourselves due to lack of appropriate manufacturing facilities or choose not to because certain products are incompatible with or duplicative of our current product mix or lack required profitability criteria. We also provide research services, primarily through contracts with other drug manufacturers which lack their own R&D capabilities.

Our R&D capabilities conduct almost all our pre-clinical trial research and develop products according to consumer requirements, distinguishing us from many of our competitors. R&D expenditures were US$714,152 for 2007 and US$693,786 for 2006.

We currently have a total of 33 patents applied, with 20 of them being granted. Among these 20 granted patents, 15 are innovation patents. We have 10 trademarks, and are not a party to any license, royalty or franchise contracts.

We are currently focusing our development efforts on 32 drugs and 6 dietary supplements.

Additionally, we have at least 14 drugs that have been approved for clinical trial, and 10 drugs that have been approved for production.

ITEM 2. DESCRIPTION OF PROPERTIES

The Company through its subsidiaries, operates under 50-year ground leases acquired from the Chinese government for lump-sum payments, an office building and factory located at 509 Maoxiang St., Changchun (approximately 9,333.12 and 5,502.12 sq.m., respectively), including the 20,836 sq.m. of land on which they are situated. The ground leases expire in 2050. The Company owns the buildings and improvements on the properties, which will revert to the Chinese government at the end of the relevant lease term in the absence of extensions.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to, nor is any of our property currently the subject of, any pending legal proceeding.

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

No matter was submitted to the security holders for a vote during the period covered by this report.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASERS OF EQUITY SECURITIES

MARKET INFORMATION

Our common stock is quoted on the over the counter bulletin board (OTCBB) under the symbol "GBLP". The following table sets forth, for the calendar quarters indicated, the range of high and low bid prices of common stock reported by the Pink Sheets since February 9, 2005, the date of its acquisition of the business of its predecessor, Natural Pharmatech. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Prior to February 9, 2005, the Company, under different management and a different name, was either in other lines of business or was dormant, and Natural Pharmatech was a privately-held British Virgin Islands company based in the People's Republic of China.

 High Low
 ---- ---
FISCAL 2006
First Quarter $2.50 $1.45
Second Quarter $1.80 $1.25
Third Quarter No trade No trade
Fourth Quarter $1.17 $0.75

FISCAL 2007
First Quarter $1.25 $0.61
Second Quarter $0.80 $0.61
Third Quarter $0.80 $0.60
Fourth Quarter $0.70 $0.60

FISCAL 2008
First Quarter $0.75 $0.30

HOLDERS

As of February 1, 2008, there were 197 record holders of our common stock. The total number of beneficial holders is unknown as they hold our common stock in street name, and such number is not provided to us by our Transfer Agent and Registrar.

DIVIDENDS

We have not paid any cash dividends on our common stock, and we currently intend to retain any future earnings to fund the development and growth of our business.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

None.

RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-KSB. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations, including but not limited to the following:

* our ability to raise funds in the future through public or private financings;
* our ability to develop marketable products through our research and development efforts;
* our ability to protect our patents and technologies and related intellectual properties;
* customers' acceptance of our products;
* our ability to compete against new companies entering the Chinese pharmaceutical market and larger, more established companies which have more resources than our company;
* our business expenses being greater than anticipated due to competitive factors or unanticipated developments;
* changes in political and economic conditions in China;
* changes in Chinese laws and regulations applicable to our business, including the Administration of Pharmaceuticals, the rules and regulations of the State Food and Drug Administration, the Good Supply Practice standards, and the inclusion of our products in the insurance catalogue of the Ministry of Industry and Social Security;
* our ability to retain management and key personnel; and
* our ability to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results could differ materially from those anticipated in these statements as a result of a number of factors, including our good faith assumptions being incorrect, our business expenses being greater than anticipated due to competitive factors or unanticipated development or sales costs, revenues not resulting in the manner anticipated due to a slowdown in technology spending, particularly in the telecommunications market and/or our failure to generate investor interest or to sell certain of our assets or business segments. The forward-looking statements may also be affected by the additional risks faced by us as described in this Report and in our filings with the Securities and Exchange Commission (the "SEC"). All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward- looking statements.

BACKGROUND

Global Pharmatech, Inc. ("Global Pharmatech," the "Company", "we", "us" or "ours") was incorporated under the laws of the State of Delaware in 2001 under the name Autocarbon.com, Inc. On November 1, 2002, we filed a Certificate of Ownership with the Secretary of State of the State of Delaware whereby we merged with our wholly-owned subsidiary and amended our Certificate of Incorporation, changing our name to Autocarbon, Inc.

On January 24, 2005, our company entered into a Share Purchase Agreement with Natural, a British Virgin Islands corporation, and the shareholders of Natural. Under the terms of the Share Purchase Agreement, we agreed to acquire 100% of Natural's shares in exchange for 80% of our common stock, to be issued to the Natural shareholders. Our acquisition of Natural was completed on February 9, 2005. In connection with this transaction, we amended our Certificate of Incorporation on January 31, 2005, changing our name to Global Pharmatech, Inc.

Through our subsidiaries, we develop, manufacture and market proprietary drugs and nutritional supplements that are based on traditional Chinese medicine.We also offer a full range of "start to finish" biotechnology services, including research and development, testing, manufacturing drugs in liquid and solid dose forms, sales and marketing. We utilize unique extraction methods and innovative techniques that have been developed by our research and development team. Our core business is to leverage our patents and scientific expertise for botanical/biological drug and nutritional supplements and to manufacture and market the products to China and the globe. Our operations are currently conducted in the People's Republic of China with sales distribution in China and other areas in South East Asia. Sales outside China are made either directly to foreign distributors by our subsidiary, Jilin Bencaotang Pharmaceuticals Co., Ltd. ("BCT"), or through China BCT Global Development Ltd. ("BCT HK"), which sells on to those areas indicated above.

Natural was formed on February 2, 2004 under the laws of the British Virgin Islands. Natural was formed as a holding company to own the five subsidiaries that made up Natural's business operations. JTY is a wholly owned subsidiary of Natural located in Changchun in Jilin Province of China. JTY originated as a research department within the Affiliated Hospital of Changchun Traditional Chinese Medicine College. It was organized as a separate private for-profit entity in February 2001.

JTY has four subsidiaries: BCT, Jilin Tian Yao Drug Safety Evaluation Co., Ltd. ("JDE"), JDE and JLXD. JTY owns 75% of the shares of BCT, which was established in September 2002 as a Sino-foreign joint venture with BCT HK, a Hong Kong distributor of natural drugs. BCT is principally engaged in the manufacture and sale of Chinese medicine of the solid dose type, and is capable of manufacturing

20 drugs in three forms. Our solid dose and capsule manufacturing, pre-manufacturing and extraction plants received a national GMP (Good Manufacturing Practice) certificate in April 2004.

JTY owns 99.5% of the shares of JDE, which was established in April 2003. It is engaged in pharmacology, safety pharmacology, and short- and long-term toxicology studies. JDE obtained a national GLP (Good Laboratory Practice) certificate in December 2004.

During the first quarter of 2007, JTY and Natural purchased 50% and 25%, respectively, of the equity interest in JBI, a Chinese company, for 3,000,000 Hong Kong dollars (approximately $385,000). The 25% owner invested 1,000,000 Hong Kong dollars. The US$ equivalent of approximately $125,880 is included with contributions from minority interest in financing activities in the December 31, 2007 statement of cash flows.

Since inception, most of our revenue are derived from transfer of technology, however, more and more revenue are derived from product sales in recent years; this is consistent with our current strategy. We plan to shift more percentage of revenue to product sales by increasing our product sales in the future years.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007

REVENUE. Sales for the current year were $2,819,090, an increase of $443,579 compared with revenue of $2,375,511 in the same period of 2006. These revenues were derived as follows: revenue from goods sold was $2,317,185, contract revenue earned from the transfer of technology was $290,295and revenue derived from experiments, research and related ancillary services was $211,610.

Contract revenue earned from the transfer of technology decreased $941,483, or 76%, compared with contract revenue in the same period of 2006, which totaled $1,231,778. The decrease was due to the stringent policies on new drug approval imposed in 2007 by the SFDA; which suspended new drug approval for a period in 2007. This had a significant impact on our revenue from technology transfer. Another reason is that we had a large contract in 2006 which generated a large portion of revenue, however, such contract did not exist in 2007.

Although the stringent policies impacted our revenue from technology transfer, as noted above, sales at the Company's BCT subsidiary were particular strong in 2007, recording a sales increase of more than 80%, from$1,011,553 in 2006 to $1,863,291 in 2007. This sales increase was due to the strong sales of Xinshu Capsule and Jinlianhua Capsule, which had total sales of approximately $1,030,000 and $270,000 in 2007, respectively. Their revenue accounts for 37% and 10%, respectively, of consolidated total revenue, with gross profit accounting for 28% and 8%,respectively, of consolidated total gross profit.

Revenue from experiment services increased $195,010 in 2007 compared to 2006, from $16,557 to $211,567. This was due to the Company's continuous development in this market.

In late 2006, the Chinese government made it mandatory that Chinese companies that conduct pre-clinical trials for SFDA approval must use a GLP-certified lab. The Company is one of only 22 labs in China that is qualified to provide pre-clinical testing services for drugs that are to be approved by the Chinese SFDA.

Although the Company has already been recognized for at least two years as having one of the only GLP-certified labs to conduct clinical trials in China, the fact that the Chinese government will now enforce mandatory compliance by forcing companies to use GLP-certified trials effective January 1, 2007 gives the Company a clear competitive advantage.

COST OF SALES. Cost of sales for the year ended December 31, 2007 was $1,502,841 compared to $788,560 for the same period of 2006. The increase is directly associated with the increase of product sales.

GROSS PROFIT. Gross profit for the year ended December 31, 2007 was $1,316,249, compared to $1,586,951 for the corresponding period of 2006. The reason for the decrease is that more of our revenue is derived from product sales for 2007, and the gross profit margin for product sales is significantly less than that of technology transfer.

ADVERTISING EXPENSES. Advertising expenses increased substantially, to $295,001 for the year ended December 31, 2007, compared to $67,869 for 2006. The increase was due to the spending of JBI on the dietary supplements.

SELLING EXPENSES. Selling expenses increased to $106,784 for the year ended December 31, 2007, as compared to $89,042 for the corresponding period of 2006. The increase was due to the increase of product sales.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the year ended December 31, 2007 decreased to $1,390,164, compared to 1,759,989 for the same period in 2006. The principal reason for the decrease is that the Company increased operating efficiency by means such as better control and use of assets and reducing staff by redefining and merging job responsibilities.

BAD DEBTS. In 2007, the Company had a bad debts provision of $1,302,024. $1,099,061 is for the receivables from the sale of YCT and $202,963 is for other receivables that are more than 1 year old. The Company intends to increase its effort on collecting the receivables.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development (R&D) expenses for 2007 were $714,152, as compared to expenses of $693,786 for 2006, as the Company continued to invest heavily in its product pipeline. The Company currently has projects in various stages of completion, some in early stages and some that are close to gaining approval to market.

In 2007, the Company completed 23 different research products.

MISCELANNEOUS INCOME. Miscellaneous income consists principally of government grants.

Each year, the Chinese government provides allowances to help companies doing business in medical pharmaceuticals research and development. These payments vary according to the projects we are engaged in and the priorities of the government in funding particular efforts. Accordingly, grants are opportunistically granted and will fluctuate widely from period to period. In 2007, government grants totaled $211,715, compared to 2006's total of $167,318.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's applications of accounting policies. Critical accounting policies for Global Pharmatech include the useful lives of property and equipment, the allowance for doubtful receivables and revenue recognition.

We review the carrying value of property and equipment for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by the comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

The Company recognizes an allowance for doubtful accounts to ensure accounts receivable, other receivables and related party receivables that are not overstated due to uncollectibility. Bad debt reserves are maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of a customer's inability to meet its financial obligation, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

Contract revenues earned from the transfer of technology (licensing arrangements) are recognized in accordance with contract terms. Revenue derived from experiments, research and related ancillary services is recognized when the customer accepts the service. Revenue from goods sold is recognized when title has passed to the purchaser, which generally is at the time of delivery. Government grants are recognized as other income upon receipt.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2007, we had cash of $5,419,167 and working capital of $3,887,459, and for the year we incurred a net loss of $3,298,906. During 2007 we used cash in operations of $383,938. The significant reasons for the use of cash are:

* the loss from continuing operations for the year of $2,445,204;
* bad debts provision of $1,302,024;
* depreciation provision of $388,153;
* a decrease in other receivable of $401,741;

During the year ended December 31, 2007, we used cash of $153,275 towards the purchase of fixed assets, with most of the money being used for office equipments and transportation tools. In 2007, the Company obtained financing cash of $125,880 from minority interest holders.

In 2008, the Company expects to spend $1,000,000 on the marketing of drug products and dietary supplements and $500,000 on research and development. The cash needed for such activities will be from regular operations.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance arrangements.

RISK FACTORS

Our business, financial condition, operating results and prospects are subject to the following risks. Additional risks and uncertainties not presently foreseeable to us may also impair our business operations. If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our common stock could decline, and our stockholders may lose all or part of their investment in the shares of our common stock.

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY. We were founded and commenced operations in 2001. Our operating history may be insufficient for you to evaluate our business and future prospects. We have sustained losses in the past and cannot assure you that we will become profitable or that we will not incur more losses in the future. We expect that our operating expenses will increase as we expand. We will have significant operating losses if we fail to realize anticipated revenue growth. We will continue to encounter risks and difficulties frequently experienced by companies at a similar stage of development, including that we may fail to implement successfully our business model and strategy, or prudently adapt and modify them as needed; increase awareness of our brands, protect our reputation and develop customer loyalty; competently manage our expanding operations and service offerings, including integration of any future acquisitions; maintain adequate control of our expenses; and anticipate and adapt to changing conditions in our markets, government regulation, our competition and relevant technology.

If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected.

WE HAVE HAD LOSSES IN THE PAST AND MAY HAVE FUTURE LOSSES. WE MAKE NO ASSURANCES THAT WE WILL BE ABLE TO ACHIEVE SUSTAINABLE PROFITABILITY. We have had operating losses since completing our reverse merger in 2005. We will not be profitable unless we materially increase our sales. The burden of our debt and current interest liabilities makes it prudent to attract equity investment rather than further debt to help us grow. Our new product development and management's ability to successfully manage the business will be essential to achieving consistent profitability. Although our revenues have grown in recent quarters, this growth may not be sustained and we may never become consistently profitable. As sales of goods grow and become a larger part of our total revenues, we may experience smaller overall margins, as sales of our products have higher costs of sales than our other revenue streams.

WE HAVE NEVER PAID CASH DIVIDENDS AND ARE NOT LIKELY TO DO SO IN THE FORESEEABLE FUTURE. We currently intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate.

THE MARKET IN WHICH WE COMPETE IS HIGHLY COMPETITIVE, FAST-PACED AND FRAGMENTED, AND WE MAY NOT BE ABLE TO MAINTAIN MARKET SHARE. We expect competition to persist and intensify in the future. Our principal competitors are Tongrentang and Guangzhou Pharmaceutical, and we also compete with a number of other, smaller firms. Both Tongrentang and Guangzhou Pharmaceutical are publicly-traded companies that are substantially larger and have greater resources than Global. We face the risk that new competitors with greater resources than ours will enter our market, and that increasing competition will result in lower prices. If we must significantly reduce our prices, the decrease in revenues could adversely affect our profitability.

Our products must keep pace with developments in our industry or they may be displaced by competitors' products. Our industry is characterized by rapid product development, with significant competitive advantages gained by companies that introduce products that are first to market, deliver constant innovation in products and techniques, offer frequent new product introductions and have competitive prices. Our future growth partially depends on our ability to develop products that are more effective in meeting consumer needs. In addition, we must be able to manufacture and effectively market those products. The sales of our existing products may decline if a competing product is introduced by other companies.

The success of our new product offerings depends upon a number of factors, including our ability to accurately anticipate consumer needs, innovate and develop new products, successfully commercialize new products in a timely manner, price our products competitively, manufacture and deliver our products in sufficient volumes and in a timely manner and differentiate our product offerings from those of our competitors. If we fail to make sufficient investments in research and pay close attention to consumer needs or we focus on technologies that do not lead to more effective products, our current and future products could be surpassed by more effective or advanced products of others.

We have limited control over the activities of our distributors, which generally are not employed or otherwise controlled by us, are free to conduct their business at their own discretion and may be dedicated more to establishing their own reputations and business relationships than to promoting our products. By the same token, the simultaneous loss of a number of our distributors could have a material adverse effect on our business, financial condition and results of operations.

KEY EMPLOYEES ARE ESSENTIAL TO OUR BUSINESS. Our senior management is essential to executing our strategy. We will need to retain these people and attract others to succeed. We require specialized professionals in a variety of areas, some of which are addressed by relatively few companies. As a result, depending upon how our business grows, we may experience difficulty in hiring and retaining highly skilled employees.

We compete for qualified professionals with a number of Chinese research institutions, some of which are more established than we are and have the ability to pay more cash and other compensation than we do. Competition for qualified individuals is intense, and we cannot be certain that our search for them will be successful. If we are unable to hire and retain skilled professionals, our business, financial condition, operating results and future prospects could be materially adversely affected. We do not have key-person insurance for any of our senior managers or employees.

ESTABLISHING AND EXPANDING INTERNATIONAL OPERATIONS REQUIRES SIGNIFICANT MANAGEMENT ATTENTION. Substantially all of our current revenues are derived from China. We intend to expand our international operations in Southeast Asia and the United States, which, if not planned and managed properly, could materially

adversely affect our business, financial condition and operating results. Expanding internationally exposes us to legal uncertainties, new regulatory requirements, liability, export and import restrictions, tariffs and other trade barriers, difficulties in managing operations across disparate geographic areas, foreign currency fluctuations, dependence on local distributors and potential disruptions in sales or manufacturing due to military or terrorist acts, as well as longer customer payment cycles and greater difficulties in collecting accounts receivable. We may also face challenges in protecting our intellectual property or avoiding infringement of others' rights, and in complying with potentially uncertain or adverse tax laws.

We do not currently enter into forward exchange rate contracts to hedge some of the financial risks of international operations, but expect to do so in the future.

FLUCTUATIONS IN THE VALUE OF THE RMB RELATIVE TO FOREIGN CURRENCIES COULD AFFECT OUR OPERATING RESULTS. Most of our operations are conducted in Hong Kong dollars and Chinese Renminbi. To the extent future revenue is denominated in foreign currencies, such as the U.S. dollar, we would be subject to increased risks of foreign currency exchange rate fluctuations that could have a material adverse affect on our business, financial condition and operating results. The value of Hong Kong dollars and Chinese Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. As our operations are primarily in Asia, any significant revaluation of Hong Kong dollars or the Chinese Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars into Hong Kong dollars or Chinese Renminbi for our operations, appreciation of either currency against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our Hong Kong dollars or Chinese Renminbi into U.S. dollars for other business purposes and the U.S. dollar appreciates against either currency, the U.S. dollar equivalent of the currency we convert would be reduced. To date, we have not engaged in any hedging transactions in connection with our international operations.

CHINESE FOREIGN EXCHANGE CONTROLS MAY LIMIT OUR ABILITY TO UTILIZE REVENUES EFFECTIVELY AND RECEIVE DIVIDENDS AND OTHER PAYMENTS FROM OUR CHINESE SUBSIDIARIES. Our Chinese subsidiaries are subject to Chinese rules and regulations on currency conversion. The Chinese government regulates the conversion of the Chinese RMB into foreign currencies. Currently, foreign investment enterprises are required to apply for authority (renewed annually) to open foreign currency accounts governing conversion for payment of dividends, limited capital items such as direct investments, loans, and issuances of securities, some of which may be effected with governmental approval, while others require authorization.

Our subsidiaries' ability to remit funds to us may be limited by these restrictions. There can be no assurance that the relevant regulations in China will not be amended so as to adversely affect our ability to obtain funds from our subsidiaries.

OUR OPERATIONS COULD BE CURTAILED IF WE ARE UNABLE TO OBTAIN REQUIRED ADDITIONAL FINANCING. ADDITIONAL FINANCING COULD ALSO RESULT IN DILUTION TO OUR EXISTING STOCKHOLDERS OR RESTRICTIONS ON OUR FINANCIAL DISCRETION. Since inception our investments and operations primarily have been financed through sales of our common stock and proceeds from our current sales. In the future we may need to raise additional funds through public or private financing, which may include the sale of equity securities or equity or debt securities convertible into or exchangeable for our common stock. The issuance of these securities could result in dilution to our stockholders. To the extent that we raise additional capital by issuing debt securities, we would incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Debt financing would also be superior to your interest in bankruptcy or liquidation. To the extent we raise additional funds through licensing or other arrangements, it may be necessary to relinquish some rights to our technologies or products, or grant licenses on unfavorable terms.

If we are unable to raise capital when needed, our business growth strategy may slow, which could severely limit our ability to increase revenue, and we may be unable to take advantage of business opportunities or respond to competition.

OUR COMPLIANCE WITH THE SARBANES-OXLEY ACT AND SECURITIES AND EXCHANGE COMMISSION ("SEC") RULES CONCERNING INTERNAL CONTROLS MAY BE TIME CONSUMING, DIFFICULT AND COSTLY. Although individual members of our management team have experience as officers of publicly-traded companies, much of that experience came prior to the adoption of the Sarbanes-Oxley Act of 2002. We have only recently become a publicly-traded company. It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley's internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.

RISKS OF DOING BUSINESS IN CHINA

OUR OPERATIONS AND ASSETS ARE SUBJECT TO SIGNIFICANT POLITICAL AND ECONOMIC UNCERTAINTIES. Changes in laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

As China changes its economy from planned to more market-oriented, uncertainties arise regarding governmental policies and measures. Although, in recent years, the Chinese government has implemented measures emphasizing the use of market forces for economic reform, reduction of state ownership of productive assets, and establishment of sound corporate governance practices, a substantial portion of productive assets in China are still owned by the Chinese government. For example, all lands are state owned and leased to business entities or individuals through governmental grants of state-owned land use rights. The grant process is typically based on government policies at the time of grant, which can be lengthy and complex and may adversely affect any expansion of our operations. The Chinese government also exercises significant control over China's economic growth through allocation of resources, foreign currency control and providing preferential treatment to particular industries or companies.

Products distributed outside China are subject to government regulations of different jurisdictions, which could be stricter than in China. In some developed countries, the government regulations for product approval could be stricter than in China, while in developing countries, government regulation could be uncertain.

WE ARE REQUIRED TO OBTAIN LICENSES TO EXPAND OUR BUSINESS IN MAINLAND CHINA. Our activities must be reviewed and approved by various national and local agencies of the Chinese government before they will issue business licenses to us. There can be no assurance that Chinese authorities will continue to approve and renew our licenses. If we are unable to obtain licenses or renewals we will not be able to continue our business operations in China, which would have a material adverse effect on our business, financial condition and results of operations.

WEAKENED POLITICAL RELATIONS BETWEEN THE U.S. AND CHINA COULD MAKE US LESS ATTRACTIVE. Sino-U.S. relations are subject to sudden fluctuation and periodic tension. Changes in political conditions in China and the U.S. are difficult to predict and could adversely affect our operations, and its future business plans and profitability.

OUR OPERATIONS MAY NOT DEVELOP IN THE SAME WAY OR AT THE SAME RATE AS MIGHT BE EXPECTED IF THE PRC ECONOMY WERE SIMILAR TO THE MARKET-ORIENTED ECONOMIES OF OECD MEMBER COUNTRIES. The economy of the PRC has historically been a nationalistic, "planned economy," meaning it functions and produces according to governmental plans and pre-set targets or quotas. In certain aspects, the PRC's economy has been transitioning to a more market-oriented economy. However, there can be no assurance of the future direction of these economic reforms or the effects these measures may have. The PRC economy also differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, an international group of member countries sharing a commitment to democratic government and market economy. For instance:

* the number and importance of state-owned enterprises in the PRC is greater than in most OECD countries;
* the level of capital reinvestment is lower in the PRC than in most OECD countries; and
* Chinese policies make it more difficult for foreign firms to obtain local currency in China than in OECD jurisdictions.

As a result of these differences, the combined company's operations may not develop in the same way or at the same rate as might be expected if the PRC economy were similar to those of OECD member countries.

THE ECONOMY OF CHINA HAS BEEN EXPERIENCING UNPRECEDENTED GROWTH, WHICH COULD BE CURTAILED IF THE GOVERNMENT TRIES TO CONTROL INFLATION BY TRADITIONAL MEANS OF MONETARY POLICY OR ITS RETURN TO PLANNED-ECONOMY POLICIES, ANY OF WHICH WOULD HAVE AN ADVERSE EFFECT ON US. The Chinese economy's rapid growth has led to higher levels of inflation. Government attempts to control inflation may adversely affect the business climate and growth of private enterprise in China, and may create a more challenging revenue and expense environment for our business, which could have an adverse effect on our profitability.

CHINESE BUSINESS AND COMMERCIAL LAW IS RELATIVELY RECENT AND REMAINS IN FLUX, AND WE MAY HAVE LIMITED LEGAL RECOURSE UNDER CHINESE LAW IF DISPUTES ARISE UNDER OUR CONTRACTS WITH THIRD PARTIES. The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. Its experience in implementing, interpreting and enforcing these laws and regulations, however, is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our business is unsuccessful, or other adverse circumstances arise from our business transactions, we face the risk that our counterparties may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding their financial and business operations. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under Chinese law, may be limited. Without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

YOU MAY EXPERIENCE DIFFICULTIES IN EFFECTING SERVICE OF LEGAL PROCESS, ENFORCING FOREIGN JUDGMENTS OR BRINGING ORIGINAL ACTIONS IN CHINA BASED ON UNITED STATES JUDGMENTS AGAINST US, OUR SUBSIDIARIES, OFFICERS AND DIRECTORS AND OTHERS. Substantially all of our assets are located in the PRC, and our management principally reside and have their assets there. As a result, it may not be possible for U.S. investors to effect service of process within the U.S. or elsewhere outside the PRC on our directors or executive officers, including with respect to matters arising under U.S. federal or state securities laws. The PRC does not have treaties providing for reciprocal recognition and enforcement of judgments of courts with the U.S. or many other countries. As a result, recognition and enforcement in the PRC of such judgments in relation to any matter, including U.S. securities laws, may be difficult or impossible. An

original action may be brought in the PRC against our subsidiaries' assets, directors and executive officers only if the actions are not required to be arbitrated by PRC law and the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with such an original action, a PRC court may award civil liability, including monetary damages.

WE MUST COMPLY WITH U.S. LAWS PROHIBITING CORRUPT BUSINESS PRACTICES OUTSIDE THE UNITED STATES, WHICH MAY PUT US AT A COMPETITIVE DISADVANTAGE. We are required to comply with the U.S. Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business, or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we can not assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

RISKS RELATED TO OUR PRODUCTS

WE MAY INCUR SUBSTANTIAL UNINSURED LIABILITIES AND BE REQUIRED TO LIMIT COMMERCIALIZATION OF OUR PRODUCTS IN RESPONSE TO PRODUCT LIABILITY LAWSUITS. The manufacture, marketing and sale of our products entail inherent risks of product liability. As a manufacturer of products designed for human consumption, we are subject to product liability claims that use of our products has resulted in injury. Some of our products contain vitamins, minerals, herbs and other ingredients that are not subject to pre-market regulatory approval. Our products could contain contaminated substances, and some of our products contain innovative ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur.

We may be held liable if serious adverse reactions from the use of our products occur. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities and damage to our commercial reputation, or be required to limit commercialization of our products.

Our inability to obtain sufficient product liability insurance at acceptable cost against claims could prevent or inhibit commercialization of our products. We currently do not carry product liability insurance. We may not be able to obtain insurance at reasonable cost, if at all. If we obtain insurance in the future, it may not adequately compensate us for all losses that we may incur, which could have a material adverse effect on our business.

CONSUMERS MAY NOT ACCEPT AND USE OUR PRODUCTS. Even if regulatory bodies approve our products, consumers may not accept and use them. Acceptance and use will depend upon a number of factors, including perceptions by the health and nutrition community about their safety and effectiveness, changing consumer preferences and trends, our products' cost-effectiveness relative to competing products and the effectiveness of marketing and distribution efforts by us, our licensees and distributors, if any. Reimbursement for our products from government or other healthcare payors is generally minimal, and any such reimbursement is problematic, in that payors routinely challenge prices charged, limit coverage and provide inadequate reimbursement, which would diminish market acceptance of our products.

Our success depends in part on our ability to anticipate and respond to changes in consumer trends, and we may not respond in a timely or commercially appropriate manner to them. Because markets for our products differentiate geographically, we must accurately assess demand in each specific market into which we wish to make sales. If we fail to invest in extensive market research on consumer health needs in each market we target, we may face limited market acceptance of our products, which could have a material adverse effect on our sales and earnings. If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient product revenues, and our business will suffer.

OBTAINING AND MAINTAINING NECESSARY REGULATORY APPROVALS FOR OUR PRODUCTS MAY BE TIME CONSUMING, DIFFICULT AND COSTLY. IF WE FAIL TO DO SO, WE WILL BE UNABLE TO SELL OUR PRODUCTS IN SOME AREAS. Our current products require and have obtained regulatory review and approval for sale. We anticipate that future product candidates we develop will also require such review and approval. Government regulation includes inspection of and controls over testing, manufacturing, safety and environmental standards, efficacy, labeling, advertising, promotion, record keeping and sale and distribution generally. The required effort to achieve approval may be time consuming, difficult and costly, and we cannot predict whether such approvals would be obtained in particular cases. Regulators have substantial discretion in approving products such as ours, and may either decline to do so or require us to spend considerable effort to achieve a different result. That process may also be delayed by changes in government regulation, future legislation, administrative action or changes in policy that occur prior to or during regulatory review. Delays in obtaining regulatory approvals may delay commercialization of, and our ability to derive product revenues from, the affected products, impose costly procedures on us, and diminish any competitive advantages we may otherwise enjoy.

In addition, even after approval, regulated products are subject to continuing review, reporting requirements and other compliance obligations. The discovery of previously unknown problems with our products, our own manufacturing or manufacturing by third parties, may result in restrictions on our products or in their manufacture, including withdrawal of the product from the market.

Internationally, our products are subject to regulatory requirements that vary by country. Obtaining approval to sell our products internationally involves complexities of dealing with a variety of governmental regulations. We have limited experience in dealing with the specific regulations that may be required

to sell our products in certain international markets, which could delay our ability to obtain relevant regulatory approval for our products. In addition, our product sales in other countries are subject to product regulatory regimes of various degrees and direct marketing or distribution regulations. There can be no assurance that our current operations will not be adversely affected by compliance issues and changes in applicable laws and regulations in relevant jurisdictions.

WE RELY ON A LIMITED NUMBER OF VENDORS TO SUPPLY RAW MATERIALS AND FINISHED GOODS FOR OUR PRODUCTS. Regulatory authorities also periodically inspect manufacturing facilities, including third parties who manufacture our products or our active ingredients for us, and may challenge their qualifications or competence. Pharmaceutical manufacturing facilities must comply with applicable good manufacturing practice standards, and manufacturers usually must invest substantial funds, time and effort to ensure full compliance with these standards and make quality products. We do not have control over our contract manufacturers' compliance with these requirements. Failure to comply with regulatory requirements can result in sanctions, fines, delays, suspension of approvals, seizures or recalls of products, operating restrictions, manufacturing interruptions, costly corrective actions, injunctions, adverse publicity against us and our products and criminal prosecutions.

If we are unable to obtain sufficient supplies of raw materials, if climatic or environmental conditions adversely affect them or if they increase significantly in price, our business would be seriously harmed. If any of our current or future third-party suppliers cease to supply products in the quantity and quality we need to manufacture our products, or if they are unable to comply with applicable regulations, the qualification of other suppliers could be a lengthy process, and there may not be adequate alternatives to meet our needs. As a result, we may not be able to obtain the necessary ingredients used in our products in the future on a timely basis, if at all. This would negatively affect our business.

MANUFACTURING RISKS. There are risks associated with ingredients mixing and production processes and techniques. Our manufacturing process requires a significant degree of technical expertise. If we fail to manufacture our products to specifications or inadvertently use defective materials in the manufacturing process, the reliability and performance of our products will be compromised.

Any significant disruption in our manufacturing operations for any reason, such as regulatory requirements and loss of certifications, power interruptions, fires, hurricanes, war or other force majeure, could adversely affect our sales and customer relationships.

IF WE FAIL TO PROTECT ADEQUATELY OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, OR TO SECURE RIGHTS TO PATENTS OF OTHERS, THE VALUE OF OUR INTELLECTUAL PROPERTY RIGHTS COULD DIMINISH. Our success, competitive position and revenues will depend in part on our ability, and the ability of our licensors, to obtain and maintain patent or other intellectual property 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 patents, trade secrets, trademarks, service marks and similar intellectual property are critical to our success. We rely on patent, trademark and trade secret law, as well as confidentiality and license agreements with our employees, customers, partners and others, to protect our proprietary rights. We have received patent protection for certain of our products in the People's Republic of China. We have not applied for any patent or other protection in countries other than China. We cannot predict the degree and range of protection patents or other intellectual property rights will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents, if and when patents will issue, whether or not others will obtain patents claiming aspects similar to ours, or if we will need to initiate litigation or administrative proceedings, which may be costly whether we win or lose.

Our success also depends on the skills, knowledge and experience of our employees, consultants, advisors, licensors and contractors. To help protect our proprietary know-how and inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all of our employees, consultants, advisors and contractors to enter into confidentiality and, where applicable, grant-back agreements. These agreements may not provide adequate protection in the event of unauthorized use or disclosure or the lawful development by others of such information. If any of our intellectual property is disclosed, its value would be significantly impaired, and our business and competitive position would suffer.

IF WE INFRINGE THE RIGHTS OF THIRD PARTIES, WE COULD BE PREVENTED FROM SELLING PRODUCTS, FORCED TO PAY DAMAGES, AND COMPELLED TO DEFEND AGAINST LITIGATION. We could also incur substantial costs, and have to obtain licenses, which may not be available on commercially reasonable terms (if at all), redesign our products or processes, stop using the subject matter claimed in the asserted patents, pay damages or defend litigation or administrative proceedings. All these may be costly, whether we win or lose, and could result in a substantial diversion of valuable management resources.

We believe we do not infringe others' proprietary rights. However, we cannot guarantee that no third party will claim infringement in the future. Resolving such issues traditionally has resulted, and could in our case result, in lengthy and costly legal proceedings, the outcome of which cannot be predicted accurately.

RISK RELATED TO MANAGEMENT

THE CONCENTRATED OWNERSHIP OF OUR CAPITAL STOCK MAY BE AT ODDS WITH YOUR INTERESTS, AND HAVE THE EFFECT OF DELAYING OR PREVENTING A CHANGE IN CONTROL OF OUR COMPANY. Our directors, officers, key personnel and their affiliates as a group beneficially own or control the vote of approximately 69% of our outstanding capital stock, and control the Company. They will be able to continue to exercise significant influence over all matters affecting the Company, including the election of directors, formation and execution of

business strategy and approval of mergers, acquisitions and other significant corporate transactions, which may have an adverse effect on the stock price. They may have conflicts of interest and interests that are not aligned with yours in all respects.

MANAGEMENT IS INEXPERIENCED IN RUNNING A U.S. PUBLIC COMPANY. We are managed by a management team that is relatively unfamiliar with the capital market and the processes by which a U.S. public company should be managed and operated. Management is currently making efforts to familiarize itself with the relevant laws, rules and regulations and market practice, but there can be no assurance that it can master the relevant knowledge and skills and set up the required systems in time to prevent mistakes and to meet shareholder and market expectations.

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 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.

ITEM 7. FINANCIAL STATEMENTS

Our Financial Statements together with the independent auditor's report thereon are included on pages F-1 through F-14 hereof.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There have been no disagreements with our independent auditors on accounting and financial disclosure matters.

ITEM 8A(T). CONTROLS AND PROCEDURES

We maintain "disclosure controls and procedures," as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective, and in reaching a reasonable level of assurance our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2007, our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that material information relating to us is made known to the Chief Executive Officer and Chief Financial Officer by others within our company during the period in which this report was being prepared.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in INTERNAL CONTROL - INTEGRATED FRAMEWORK issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, our internal controls over financial reporting were effective.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurances with respect to financial statement preparation and presentation. In addition, any evaluation of effectiveness for future periods is subject to the risk that controls may become inadequate because of changes in conditions in the future.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 8B. OTHER INFORMATION

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND, CONTROL PERSONS, AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth the names and ages of our current directors and executive officers, their principal offices and positions and the date each such person became a director or executive officer of our company. Our executive officers are elected annually by the Board of Directors. Our 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. There are no family relationships between any of the directors and executive officers. In addition, there were no arrangements or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer.

Set forth below are the names of the directors, executive officers and key employees of the Company, during the fiscal year ended December 31, 2007:

 Name Age Position
 ---- --- --------
 Lianqin Qu 52 Chairwoman of the Board of Directors,
 President and Chief Executive Officer
 Zhenyou Zhang 49 Director
 Tom Du (1) 52 Director and Chief Technology Officer
 Joseph J. Levinson (2) 31 Director and Chief Financial Officer
 Zongsheng Zhang (3) 36 Chief Financial Officer

----------

(1) Dr. Tom Du resigned as Director and Chief Technology Officer on February 23, 2008.
(2) Mr. Joseph J. Levinson resigned as Director and Chief Financial Officer on April 28, 2007.
(3) Mr. Zongsheng Zhang was appointed as Chief Financial Officer on April 28, 2007.

Pursuant to the Company's bylaws, directors are elected at the annual meeting of stockholders and each director holds office until his successor is elected and qualified. Officers are elected by the Board of Directors and hold office until an officer's successor has been duly appointed and qualified unless an officer sooner dies, resigns or is removed by the Board.

BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS

LIANQIN QU is currently the Chairwoman and General Manager at Dongyuan Investment Consultancy, H.K. Limited in Hong Kong. She has held her current position since August 9, 2001. From December 12, 1999 to December 30, 2003, she was Chairwoman and General Manager of Jilin Dongyuan Strategy Consulting Co., Ltd., located in Jilin province, Northeast part of China. Ms. Qu has many years of experience in financial research, financing practice and corporate management, having advised more than 30 companies with restructuring transactions. She received her MBA degree from Asia International Open University (Macau).

ZHENYOU ZHANG has been active in the Chinese pharmaceutical industry for more than 20 years. He currently serves as the Chairman of the Board of several companies, including Guangdong Baiyi Pharmaceutical, Guangzhou Youcheng Industrial, and Guangzhou Tianhe Zhenkai Trading Company. He also serves as the director of Tianjin Tianshili Pharmaceutical, a publicly-traded company in China. He graduated from Guangxi Chinese Medicine Institute and is a professional pharmacologist.

ZONGSHENG ZHANG has been the managing partner of Jilin Hua An CPA firm since 2004. He also serves as the independent director of Daxing Pharmaceutical Company Ltd., a Hong Kong listed company, and China Oil Jilin Engineering Limited, a China listed Company. From 1999 to 2003, Mr. Zhang was the managing partner in Shenzhen Tian Qing CPA firm and Jilin Lian Da CPA firm. Between 1994 and 1999, Mr. Zhang was a project manager, and eventually was promoted to department manager and then a managing partner in Changchun China CPA firm. In the past ten years, Mr. Zhang has provided auditing services for over 1000 companies and organizations including China Merchant Bank in North East provinces of China, Chang Chun Ou Ya Group, Chang Chun Oriental First Transmission Corporation and many other China public listed enterprises. He has also provided financial advisory services to Natural Pharmatech (Jilin China) Co., Ltd, a wholly owned subsidiary of Global Pharmatech.

The Board of Directors does not have any committees. All members of the Board participate in the consideration of all matters, including the nomination of directors, the consideration of executive officer and director compensation, the retention of the Company's independent public accountants and the review of the Company's financial statements. Joseph J. Levinson, the former Chief Financial Officer and a director of the Company, is a financial expert as defined in the Exchange Act.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by applicable law, our Bylaws provide that we will indemnify our officers, directors, employees, consultants and agents. This includes indemnification against attorneys' fees and other expenses and liabilities they incur to defend, settle or satisfy any civil or criminal action brought against them arising out of their association with or activities on behalf of our company. However, they will not be indemnified if they are adjudged to have acted with gross negligence, engaged in willful misconduct, knowingly violated the law, breached their duty of loyalty or received improper personal benefit. We will bear the expenses of such litigation for any such persons upon their promise to repay such sums if it is ultimately determined that they are not entitled to indemnification.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act") may be permitted to our directors, officers and controlling persons (within the meaning of the Securities Exchange Act) pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

CODE OF ETHICS

The Company has not adopted a formal Code of Ethics for its executive officers. However, the Company believes that the employment and service contracts that the Company has entered into with each of its executive officers and directors contain provisions which promote the ethical conduct of such persons in their performance of duties or services for the Company and deter unethical behaviors in the performance of such duties or services.

CHANCES IN DIRECTOR NOMINATION PROCESS FOR STOCKHOLDERS

None.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934 during our most recent fiscal year and Forms 5 and amendments thereto furnished to us with respect to our most recent fiscal year, none of our current officers, directors and owners of 10% or more of our outstanding shares have not filed Forms 3, 4 and 5 on a timely basis as required by Section 16(a) of the Securities Exchange Act of 1934, as amended.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all cash compensation paid or to be paid by the Company, as well as certain other compensation paid or accrued, during each of the Company's last two fiscal years to each of the following named executive officers (the "Named Executive Officers").

 Non-Equity Nonqualified
 Option Incentive Plan Compensation All Other
 Position Year Salary($) Bonus($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
 -------- ---- --------- -------- --------- --------------- ----------- --------------- --------
Lianqin Qu CEO 2006 36,000 36,000
 2007 24,000 24,000

Zongsheng Zhang CFO 2007 11,000 11,000

Joseph Levinson CFO 2006 54,000 54,000
 2007 16,000 16,000

Tom Du CTO 2006 48,000 48,000
 2007 36,000 36,000

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

None.

PENSION BENEFITS

We do not sponsor any qualified or non-qualified defined benefit plans.

NONQUALIFIED DEFERRED COMPENSATION

We do not maintain any non-qualified defined contribution or deferred compensation plans.

DIRECTOR COMPENSATION

The following table summarizes compensation that our directors earned during 2007 for services as members of our Board.

 Fees Earned or Options All Other
 Name Paid in Cash($) Awards($) Compensation($)(1) Total($)
 ---- --------------- --------- ------------------ --------
Lianqin Qu 36,000 0 36,000
Zhenyou Zhang 24,000 0 24,000

----------

(1) Our directors receive monthly cash compensation for their services as members of the Board of Directors. The aggregate amounts of perquisites and other personal benefits paid to the Company's directors in the year ended December 31, 2007 did not exceed $10,000.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

On February 8, 2005, the Company entered into an Executive Services Contract with Lianqin Qu, pursuant to which Lianqin Qu has agreed to act as a Director and Chairperson of the Company's Board of Directors. Lianqin Qu's salary under the Executive Services Contract is US$3,000 per month. In addition, the Company agreed to grant Lianqin Qu an option to purchase 100,000 shares of the Company's common stock upon the achievement of working goals as determined by the Board. During the term of Madam Qu's appointment, unless the relevant competition is made known to the public and (if required) approved by relevant regulatory authorities, she has agreed not to engage in any business in competition with the Company, or seek any position from any company or individual who competes in business with the Company or any subsidiary or branch of the Company. Lianqin Qu has also agreed to certain confidentiality covenants regarding information obtained from the Company and any of its subsidiaries and branches. The Executive Services Contract may be terminated upon any of the following events, unless otherwise determined by the Board of Directors: (a) Lianqin Qu is prohibited by any laws, regulations or rules from acting in any of her positions or she is no longer qualified to act in any position; (b) Lianqin Qu is unable to perform her duties for a period of three months due to health reasons; (c) Lianqin Qu commits a material breach and/or repeated and/or continual breach of her obligations under the Executive Services Contract; (d) Lianqin Qu is guilty of any serious misconduct or serious neglect in the discharge of her duties; (e) Lianqin Qu's actions or omissions bring the name or reputation of the Company or any subsidiary or branch of the Company into serious disrepute or prejudice; (f) Lianqin Qu is or becomes of unsound mind or becomes a patient for the purpose of any laws relating to mental health; (g) Lianqin Qu is sued for criminal liability or convicted of any criminal offense other than an offense which in the reasonable opinion of the Board of Directors does not affect her position with the Company; (h) Lianqin Qu is removed from her position by the Board of Directors; (i) Lianqin Qu leaves the service of the Company in accordance with the Company's Certificate of Incorporation; or (j) Lianqin Qu fails to attend three consecutive meetings of the Board of Directors. There is no expiration date of the Executive Services Agreement.

On October 9, 2006, the Company entered into a Director service contract with Mr. Zhenyou Zhang, pursuant to which Mr. Zhang has agreed to serve as the Company's director. Under the Director service contract, Mr. Zhang shall be paid a fee of $2,000 per month. In addition, Mr. Zhang shall be granted 80,000 shares of the Company's common stock, pending the completion of certain goals. During his term as a director of the Company, Mr. Zhang has agreed not to engage in any business in direct competition with the Company, or seek any position from any company or individual who competes in business with the Company or any subsidiary or branch of the Company. Mr. Zhang has also agreed to certain confidentiality covenants regarding information obtained of the Company and any of its subsidiaries and branches. The Director and Chief Financial Officer service contract may be terminated upon any of the following events, unless otherwise determined by the Board of Directors: (a) Mr. Zhang is prohibited by any laws, regulations or rules from acting in any of his positions or he is no longer qualified to act in any position; (b) Mr. Zhang is unable to perform his duties for a period of three months due to health reasons; (c) Mr. Zhang commits material breach and/or repeated and/or continual breach of his obligations under the Executive Employment Contract; (d) Mr. Zhang is guilty of any serious misconduct or serious neglect in the discharge of his duties; (e) Mr. Zhang's actions or omissions bring the name or reputation of the Company or any subsidiary or branch of the Company into serious disrepute or prejudice; (f) Mr. Zhang is or becomes of unsound mind or becomes a patient for the purpose of any laws relating to mental health; (g) Mr. Zhang is sued for criminal liability or convicted of any criminal offense other than an offense which in the reasonable opinion of the Board of Directors does not affect his position with the Company;
(h) Mr. Zhang is removed from his position by the Board of Directors; (i) Mr. Zhang leaves the service of the Company in accordance with the Company's Certificate of Incorporation; or (j) Mr. Zhang fails to attend three consecutive meetings of the Board of Directors. There is no expiration date of this Director service contract.

On April 28, 2007, the Company entered into a Chief Financial Officer service Contract with Zongsheng Zhang (the "Agreement") pursuant to which Mr. Zhang agreed to act as the Company's Chief Financial Officer. Mr. Zhang's salary under the Agreement is RMB10,000 per month. During his term of employment, Mr. Zhang has agreed not to engage in any business that develops any of the products developed or marketed by the Company, or seek any position from any company or individual who competes in business with the Company or any subsidiary or branch of the Company. Mr. Zhang has also agreed to certain confidentiality covenants regarding information obtained of the Company and any of its subsidiaries and branches. The Agreement may be terminated upon any of the following events, unless otherwise determined by the Board of Directors: (a) Mr. Zhang is prohibited by any laws, regulations or rules from acting in any of his positions or he is no longer qualified to act in any position; (b) Mr. Zhang is unable to perform his duties for a period of three months due to health reasons; (c) Mr. Zhang commits a material breach and/or repeated and/or continual breach of his obligations under the Agreement; (d) Mr. Zhang is guilty of any serious misconduct or serious neglect in the discharge of his duties; (e) Mr. Zhang's actions or omissions bring the name or reputation of the Company or any subsidiary or branch of the Company into serious disrepute or prejudice; (f) Mr. Zhang is or becomes of unsound mind or becomes a patient for the purpose of any laws relating to mental health; (g) Mr. Zhang is sued for criminal liability or convicted of any criminal offense other than an offense which in the reasonable opinion of the Board of Directors does not affect his position with the Company;
(h) Mr. Zhang is removed from his position by the Board of Directors; or (i) Mr. Zhang leaves the service of the Company in accordance with the Company's Certificate of Incorporation.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of December 31, 2007, the number of shares of our common stock beneficially owned by (i) each person who is known by us to be the beneficial owner of more than five percent of the Company's common stock;
(ii) each director; (iii) each of the named executive officers in the Summary Compensation Table; and (iv) all directors and executive officers as a group. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated.

 Number of % of Common
 Shares Stock
 Name and Address of Beneficially Beneficially
 Beneficial Owner (1) Owned (2) Owned (3)
 -------------------- --------- ---------
 Lianqin Qu 14,762,951 (4) 62.5
 Tom Du 0 0
 Joseph J. Levinson 0 0
 Zhenyou Zhang 5,000,000 21.2
 Zongsheng Zhang 0 0
 All officers and directors
 as a group (four persons) 19,762,951 83.7

----------

(1) Except as otherwise indicated, the address of each beneficial owner is c/o Global Pharmatech, Inc., 509 Maoxiang Street, High-Technology Industrial Development Zone, Changchun, Jilin, China 130012.
(2) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to the shares shown. Except where indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of voting securities shown as beneficially owned by them.
(3) Based on 23,614,085 shares outstanding.
(4) Includes 13,738,264 shares as to which Ms. Qu holds irrevocable proxies given by stockholders who acquired shares of our common stock in the acquisition of Natural Pharmatech, and as to which Ms. Qu disclaims beneficial ownership and 1,024,687 shares held by Dong Yuan Investment (HK) Limited, of which Ms. Qu may be deemed to be the control person.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS , AND DIRECTOR INDEPENDENCE

As of December 31, 2007, the Company has the following amounts due from and to related parties:

ADVANCES DUE FROM RELATED PARTIES

Yu Ming Li 36,960
STOCKHOLDERS
Yun Peng Min 5,460
Dong Hai Zhang 4,107
 -------
TOTAL $46,527
 =======

These balances have no stated terms for repayment and are not interest bearing.

Yu Ming Li is the brother in law of the Chairwoman of the company.

Min Yun Peng is a shareholder of the Company.

Donghai Zhang is employed by Natural Pharmatech China.

The Company does not currently have any independent directors.

ITEM 13. EXHIBITS

(a) Exhibits

Exhibit
Number Description
------ -----------
 3(i) Certificate of incorporation of the registrant. Incorporated by
 reference to Exhibit 3.1 to the Company's registration statement on
 Form SB-2 filed with the SEC on August 17, 2001.*

 3(ii) By-laws of the registrant. Incorporated by reference to Exhibit 3.2 to
 the Company's registration statement on Form SB-2 filed with the SEC on
 August 17, 2001.*

 10.1 Share Purchase Agreement, dated as of January 24, 2005, by and among
 Autocarbon, Inc., Natural Pharmatech, Inc. and the shareholders of
 Natural Pharmatech, Inc. Incorporated by reference to Exhibit 4.1 to
 the Company's Form 8-K filed with the SEC on January 28, 2005.*

 10.2 Executive Employment Agreement dated February 8, 2005 with Xiaobo Sun.
 Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K
 filed with the SEC on February 15, 2005.*

 10.3 Executive Services Agreement dated February 8, 2005 with Lianqin Qu.
 Incorporated by reference to Exhibit 10.3 to the Company's Form 8-K
 filed with the SEC on February 15, 2005.*

 10.4 Director and Chief Technology Officer service contract dated February
 14, 2005 with Tom Du. Incorporated by reference to Exhibit 10.6 to the
 Company's Form 8-K filed with the SEC on February 15, 2005.*

 10.5 Chief Financial Officer service contract dated January 1, 2006 with
 Joseph J. Levinson. Incorporated by reference to Exhibit 10.1 to the
 Company's Form 8-K filed with the SEC on January 5, 2006.*

 10.6 Executive Employment Agreement dated February 8, 2005 with Zhuojun Li.
 Incorporated by reference to Exhibit 10.4 to the Company's Form 8-K
 filed with the SEC on February 15, 2005.*

 10.7 Director Service Contract by and between the Company and Mr. Zhengyou
 Zhang, dated October 9, 2006. Incorporated by reference to Exhibit 10.1
 to the Company's Form 8-K filed with the SEC on October 11, 2006.*

 10.8 Director and Chief Financial Officer Service Contract by and between
 the Company and Mr. Joseph J. Levinson, dated October 9, 2006.
 Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K
 filed with the SEC on October 11, 2006.*

 10.9 Jilin Yicaotang Pharmaceutical Co., Ltd. Equity and Claim Transfer
 Agreement dated May 11, 2007 by and between Jilin Tian Yao Science and
 Technology Limited Company and Mr. Daojun Wang. Incorporated by
 reference to Exhibit 10.10 to the Company's Form 8-K filed with the SEC
 on May 18, 2007.*

 10.10 Stock Pledge Agreement dated May 11, 2007 by and between Mr. Daojun
 Wang and Jilin Tian Yao Science and Technology Limited Company.
 Incorporated by reference to Exhibit 10.11 to the Company's Form 8-K
 filed with the SEC on May 18, 2007.*

 19

 16.1 Letter of Russell Brennan, dated February 11, 2005. Incorporated by
 reference to Exhibit 16.1 to the Company's Form 8-K filed with the SEC
 on February 28, 2005.*

 16.2 Letter of Aaron Stein, dated April 25, 2005. Incorporated by reference
 to Exhibit 16.1 to the Company's Form 8-K dated April 20, 2005, filed
 with the SEC on April 25, 2005.*

 31.1 Certificate of the Chief Executive Officer pursuant Section 302 of the
 Sarbanes-Oxley Act of 2002. **

 31.2 Certificate of the Chief Financial Officer pursuant Section 302 of the
 Sarbanes-Oxley Act of 2002. **

 32.1 Certificate of the Chief Executive Officer pursuant to Section 906 of
 the Sarbanes-Oxley Act of 2002. **

 32.2 Certificate of the Chief Financial Officer pursuant to Section 906 of
 the Sarbanes-Oxley Act of 2002. **

----------

* Previously filed ** Filed herewith

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Aggregate fees billed to us by Moore Stephens P.C. for the fiscal years ended December 31, 2007 and 2006 were:

 2007 2006
 -------- --------
Audit Fees $ 96,770 $ 76,943
Audit Related Fees $ 0 $ 6,003
Tax Fees $ 5,103 $ 0
All Other Fees $ 5,000 $ 0
 -------- --------
Total $106,873 $ 82,946
 ======== ========

AUDIT FEES

This category includes aggregate fees billed by our independent auditors for the audit of our annual financial statements on Form 10-KSB, audit or management's assessment and effectiveness of internal controls over financial reporting, review of financial statements included in our quarterly reports on Form 10-QSB and services that are normally provided by the auditor in connection with statutory and regulatory filings for those fiscal years.

AUDIT RELATED FEES

This category consists of services by our independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. This category includes accounting consultations on transaction and proposed transaction related matters.

TAX FEES

This category consists of professional services rendered for tax compliance and preparation of our corporate tax returns and other tax advice.

ALL OTHER FEES

There are no other fees to disclose.

APPROVAL OF SERVICES

The Board of Directors reviewed and approved all audit and non-audit services provided by Moore Stephens P.C. during the fiscal year ended December 31, 2007 and concluded that these services were compatible with Moore Stephens P.C. maintaining its independence.

PRE-APPROVAL POLICIES AND PROCEDURES

The prior approval of the Board of Directors is not required for all auditing services and non auditing services.

SIGNATURES

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

GLOBAL PHARMATECH, INC.

Date: April 14, 2008 By: /s/ Lianqin Qu
 --------------------------------------
 Name: Lianqin Qu
 Title: Chief Executive Officer, President
 and Chairwoman


 By: /s/ Zongsheng Zhang
 --------------------------------------
 Name: Zongsheng Zhang
 Title: Chief Financial Officer

In accordance with the Securities and Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.

 Signature Title Date
 --------- ----- ----


/s/ Lianqin Qu Chairwoman, President and April 14, 2008
-------------------------------- Chief Executive Officer
Lianqin Qu


/s/ Zongsheng Zhang Chief Financial Officer April 14, 2008
--------------------------------
Zongsheng Zhang


/s/ Zhenyou Zhang Director April 14, 2008
--------------------------------
Zhenyou Zhang

GLOBAL PHARMATECH, INC AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

 Page No.
 -------

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheet F-3

Consolidated Statements of Operations F-4

Consolidated Statement of Changes in Stockholders' Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GLOBAL PHARMATECH INC.

We have audited the accompanying consolidated balance sheet of Global Pharmatech Inc. and Subsidiaries as of December 31, 2007 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Pharmatech Inc. and Subsidiaries as of December 31, 2007 and the results of their operations and their cash flows for each of the two years in the period then ended in conformity with United States generally accepted accounting principles.

/s/ Moore Stephens, P.C.
--------------------------------
Moore Stephens, P.C.
Certified Public Accountants

New York, New York
April 14, 2008

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31,2007

CURRENT ASSETS

 Cash $ 5,419,167
 Notes Receivable 34,225
 Accounts Receivable, net 1,063,652
 Related Party Receivable 46,527
 Inventories 858,025
 Other Receivables and Prepayments, net 645,399
 Prepaid Expenses 12,255
 ------------
TOTAL CURRENT ASSETS 8,079,250
 ------------

PROPERTY PLANT & EQUIPMENT, NET 4,671,304

LAND LEASE, NET 415,816
CONSTRUCTION IN PROGRESS 37,385
INTANGIBLE ASSETS, NET 129,237
 ------------

TOTAL ASSETS $ 13,332,992
 ============

CURRENT LIABILITIES
 Current Portion of Long Term Debt $ 2,464,200
 Short Term Borrowings 273,800
 Accounts Payable and Accrued Expenses 485,300
 Advance from Customers 207,203
 Other Payables and Accruals 573,270
 Taxes Payable 130,754
 Other Current Liabilities 57,264
 ------------
TOTAL CURRENT LIABILITIES 4,191,791
 ------------

LONG TERM DEBT
 ------------

MINORITY INTEREST 1,104,145
 ------------
STOCKHOLDERS' EQUITY
 Preferred Stock, par value .0001 per Share
 5,000,000 Shares Authorized, No Shares
 Issued and Outstanding
 Common Stock Par Value $0.0001 per Share, 95,000,000 Shares
 Authorized,23,247,935 Issued and Outstanding 2,325
 Additional Paid-in Capital 11,374,300
 Appropriated Retained Earnings (Deficit) 259,331
 Unappropriated Retained Earnings (4,281,848)
 Accumulated Other Comprehensive Income 697,948
 Subscription Receivable (15,000)
 ------------
TOTAL STOCKHOLDERS' EQUITY 8,037,056
 ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,332,992
 ============

See accompanying Notes to Consolidated Financial Statements

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

 2007 2006
 ------------ ------------
Sales $ 2,819,090 $ 2,128,740
Cost of Sales 1,502,841 531,241
 ------------ ------------

Gross Profit 1,316,249 1,597,496
 ------------ ------------
Operating Expenses
 Advertising 295,001 67,869
 Research and Development 714,152 693,786
 Selling Expenses 106,784 56,255
 General and Administrative 1,390,164 1,593,321
 Bad Debts 1,302,024 461,503
 ------------ ------------

Loss from Operations (2,491,876) (1,275,238)
 ------------ ------------
Other Income (Expenses)
Miscellaneous Income 181,578 513,563
Interest Expense (188,636) (139,383)
 ------------ ------------
 (7,058) 374,180
 ------------ ------------
Loss Before Minority Interest and
Discontinued Operations (2,498,934) (901,058)
 ------------ ------------
Minority Interest 53,730 (109,135)
 ------------ ------------
Loss from Continuing Operations (2,445,204) (1,010,193)

Loss from discontinued operations (49,102) (224,198)

Loss on sales of Jilin Yi Cao Tang Pharmacy
CO., Ltd ("YCT") (804,600) 0
 ------------ ------------
Loss from discontinued operations (853,702) (1,234,391)
Provision for Income Taxes
Current 0 0
Deferred 0 0
 ------------ ------------
Net (Loss) $ (3,298,906) $ (1,234,391)
 ============ ============
Earnings(Loss) Per Common Share
Continuing Operations $ (0.10) $ (0.05)
Discontinued operations (0.04) (0.01)
 ------------ ------------
 $ (0.14) $ (0.06)
 ============ ============

Weighted Average Common Shares Outstanding 23,247,935 21,581,268
 ============ ============
Comprehensive Loss:
 Net Loss $ (3,298,906) $ (1,234,391)
 Foreign Currency Translation Adjustment 240,119 457,829
 ------------ ------------
 Comprehensive Income $ (3,058,787) $ (776,562)
 ============ ============

See accompanying Notes to Consolidated Financial Statements

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006

 Common Stock Accumulated
 ------------------------- Paid-in Comprehensive
 Shares Amount Capital Income
 ------ ------ ------- ------
Balance at December 31, 2005 18,247,935 1,825 6,749,800

Common Stock Issued for Cash 5,000,000 500 4,624,500

Net Loss

Reclassification to Appropriated
 Retained Earnings

Foreign Currency Translation Adjustment 457,829
 ----------- ------ ----------- --------

Balance at December 31, 2006 23,247,935 $2,325 $11,374,300 $457,829

Net Loss

Reclassification to Appropriated
 Retained Earnings

Foreign Currency Translation Adjustment 240,119
 ----------- ------ ----------- --------
Balance at December 31, 2007 $23,247,935 $2,325 $11,374,300 $697,948
 =========== ====== =========== ========

 Appropriated Unappropriated Stock
 Retained Retained Subscription Stockholders'
 Earnings Earnings (Deficit) Receivable Equity
 -------- ------------------ ---------- ------

Balance At December 31, 2005 20,642 490,138 (15,000) 7,247,405

Common Stock Issued for Cash 4,625,000

Net Loss (1,234,391) (1,234,391)

Reclassification to Appropriated
 Retained Earnings 216,410 (216,410)

Foreign Currency Translation Adjustment 457,829
 ---------- ----------- -------- -----------
Balance at December 31, 2006 $ 237,052 $ (960,663) $(15,000) $11,095,843

Net Loss (3,298,906) (3,298,906)

Reclassification to Appropriated
 Retained Earnings 22,279 (22,279)

Foreign Currency Translation Adjustment 240,119
 ---------- ----------- -------- -----------
Balance at December 31, 2007 $ 259,331 $(4,281,848) $(15,000) $ 8,037,056
 ========== =========== ======== ===========

See accompanying Notes to Consolidated Financial Statements

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31,2007 AND 2006

 2007 2006
 ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
 Net (Loss) $(3,298,906) $(1,234,391)
 Adjustments to reconcile net income to net
 cash used by operating activities
 Minority Interest 53,730 97,335
 Bad Debt Expense 1,302,024 461,503
 Loss on Disposal 804,600
 Loss from Discontinued Operations 49,102 1,086
 Depreciation 388,163 509,518
 Amortization of Land Lease and Intangible Assets 28,005 28,841

DECREASE (INCREASE) IN OPERATING ASSETS
 Accounts Receivable (504,899) 660,799
 Related Party Receivable 62,961 558,489
 Notes Receivable 10,319 (41,114)
 Inventories 195,929 (342,164)
 Other Receivable and Prepayments 401,741 (487,389)
 Prepaid Expenses 3,613 3,559
 Other Current Assets (24,876)

INCREASE (DECREASE) IN OPERATING LIABILITIES
 Accounts Payable and Accrued Expenses 287,183 (151,603)
 Related Party Payable (69,858)
 Advance from Customers 107,460 38,475
 Other Payables and Accruals (138,944) 148,687
 Taxes Payable 49,569 14,468
 Other Liabilities (8,787) 65,531
 ----------- -----------

Net Cash Provided (Used) by Continuing Operations (339,473) 225,134
Net Cash Provided (Used) by Discontinued Operations (44,465) 36,638
 ----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (383,938) 261,772
 ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceed from Disposal of Fixed Assets -- 25,031
 Purchase of Fixed Assets (153,275) (399,133)
 Purchase of Intangible Assets (2,684) --
 Puchase in Construction in Progress (35,898) (15,818)
 ----------- -----------

Net Cash Used by Continuing Investing Activities (191,858) (404,319)
Net Cash Used by Discontinued Investing Activities,
 Including Proceeds from Sale of Subsidiary (6,691) 14,399
 ----------- -----------
NET CASH (USED) BY INVESTING ACTIVITIES (198,549) (389,920)
 ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net Change in Short Term Borrowing -- 250,313
 Net Change in Long Term Borrowing -- (50,063)
 Contributions from minority interest 125,880 --
 Proceeds from Common Stock -- 4,625,000
 ----------- -----------
Net Cash Used by Continuing Financing Activities 125,880 4,875,636
Net Cash Provided (Used) by Discontinued Finaning Activities 49,779 (50,063)
 ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 175,659 4,825,250
 ----------- -----------
Effect of Exchange Rate Changes on Cash 270,840 167,218
NET INCREASE (DECREASE) IN CASH (135,988) $ 4,697,102

CASH AT BEGINNING OF YEAR 5,555,155 $ 690,835
 ----------- -----------
CASH AT END OF YEAR 5,419,167 $ 5,555,155
 =========== ===========
Supplemental Data: Cash Paid During the Year for:
 Interest 188,636 $ 163,021
 =========== ===========
 Income Taxes 0 $ 21,838
 =========== ===========

See accompanying Notes to Consolidated Financial Statements

GLOBAL PHARMATECH, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

1. THE COMPANY

Global Pharmatech, Inc. ("Global" or the "Company") was incorporated in Delaware on June 26, 2001 under the name Autocarbon.com, Inc. After engaging, under prior management, in several businesses unrelated to its current one, on February 9, 2005, Global acquired Jilin Tian Yao Science and Technology Limited Company ("JTY"), by acquiring JTY's parent, Natural Pharmatech, Inc. ("Natural"), through the issuance to Natural's shareholders of 13,703,125 of its common shares for all of the outstanding common shares of Natural. Located in Changchun, China, JTY is a Chinese limited liability company, organized on February 7, 2001, which, together with its subsidiaries, is principally engaged in the research and development of modernized traditional Chinese medicine and bio-pharmacy, the sale of this technology, and the manufacture and sale of Chinese medicine and vitamins throughout China. Natural was incorporated in the British Virgin Islands on February 2, 2004, and acquired JTY on June 15, 2004 by issuing 43,800,000 of its common shares for all of the outstanding common shares of JTY.

Under generally accepted accounting principles, these acquisitions are considered in substance to be capital transactions rather than business combinations. In each case, for accounting purposes, the acquired company is deemed to have issued its stock for the net monetary assets of the acquiring company. Each transaction is accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition, except that no goodwill is recorded.

During the first quarter of 2007, JTY and Natural purchased 50% and 25%, respectively, of the equity interest in Jilin Biotech Co., Ltd ("BIO"), a Chinese company, for $3,000,000 Hong Kong dollars (approximately $385,000). The 25% owner invested $1,000,000 Hong Kong dollars. The US$ equivalent of approximately $125,880 is included with contributions from minority interest in financing activities in the December 31, 2007 statement of cash flows.

On May 11, 2007, the Company entered into an Equity and Liability Transfer Agreement to sell JTY's 95% equity interest in one of its Chinese subsidiaries, Jilin Yi Cao Tang Pharmacy Co., Ltd ("YCT"), to Mr. Daojun Wang for a price of RMB9,000,000 (approximately $1,197,000) The following table details the payment schedule for the sale:

 Due Date Amount Due (in RMB)
 -------- -------------------
3 days after signing this agreement 500,000 (approximately $66,500)
May 30, 2007 500,000 (approximately $66,500)
November 30, 2007 1,000,000 (approximately $133,000)
May 30, 2008 1,000,000 (approximately $133,000)
November 30, 2008 1,000,000 (approximately $133,000)
May 30, 2009 1,000,000 (approximately $133,000)
November 30, 2009 1,000,000 (approximately $133,000)
May 30, 2010 1,000,000 (approximately $133,000)
November 30, 2010 1,000,000 (approximately $133,000)
May 30, 2011 1,000,000 (approximately $133,000)

The Company has converted the receivable to present value using a 5% discount rate. The total discounted amount is $60,778, and this will be amortized over the life of payment schedule (see Note 2N).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and include the accounts of Global and its majority-owned subsidiaries as of December 31, 2007 and for the two years in the period then ended. All significant inter-company balances and transactions have been eliminated in consolidation.

B. USE OF ESTIMATES

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include depreciation and allowance for doubtful receivable. Actual results could differ from those estimates.

C. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2007 the Company did not have any cash equivalents.

D. INVENTORY

Inventories are stated at the lower of cost or market. Substantially all inventory costs are determined using the first-in, first-out (FIFO) method. Overhead has been allocated to inventory.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

E. PROPERTY AND EQUIPMENT, NET

Property and equipment is stated at cost. Depreciation and amortization is provided principally by use of the straight-line method over the useful lives of the related assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful life of the assets, are expensed to operations while major repairs are capitalized. The Company uses a residual value when computing depreciation.

F. INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting Standards (`SFAS") No. 109, "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

G. REVENUE RECOGNITION

Contract revenues earned from the transfer of technology (licensing arrangements) are recognized in accordance with contract terms. Such revenues were approximately $290,295 and $1,232,000 for the years ended December 31, 2007 and 2006, respectively.

Revenue derived from experiments, research and related ancillary services is recognized when the customer accepts the service. Such revenues were approximately $211,610 and $16,600 for the years ended December 31, 2007 and 2006, respectively.

Revenue from goods sold is recognized when title has passed to the purchaser, which generally is at the time of delivery. Such revenues were approximately $2,317,185 and $1,220,000 for the years ended December 31, 2007 and 2006, respectively.

Government grants are recognized as other income upon receipt. Such revenues were approximately $211,715 and $167,000 for the years ended 2007 and 2006, respectively.

H. IMPAIRMENT

In accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets" the Company evaluates its long-lived assets to determine whether later events and circumstances warrant revised estimates of useful lives or a reduction in carrying value due to impairment. If indicators of impairment exist and if the value of an asset is impaired, an impairment loss would be recognized for the difference between the fair value of the asset and its carrying value.

I. FOREIGN CURRENCY TRANSLATION

The functional currency of JTY and its subsidiaries is the Chinese Yuan (RMB) and their reporting currency is the US dollar. JTY's consolidated balance sheet accounts are translated into US dollars at the period-end exchange rate and revenue and expenses are translated into US dollars at the average exchange rate prevailing during the period in which these items arise. Translation gains and losses are deferred and accumulated as a component of other comprehensive income in shareholders' equity. Transaction gains and losses that arise from exchange rate fluctuations affecting transactions denominated in a currency other than the functional currency are included in the statement of operations as incurred. The transaction gains and losses were immaterial for the years ended December 31, 2007 and 2006.

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

J. ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments.

K. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Values of Financial Instruments", requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

For certain financial instruments, including cash, accounts, related party and other receivables, accounts payable, other payables and accrued expenses and short term debt, it was assumed that the carrying amounts approximate fair value because of the near term maturities of such obligations. For long-term debt, the carrying amount is assumed to approximate fair value based on the current rates at which the Company could borrow funds with similar remaining maturities.

L. ADVERTISING COSTS

Advertising costs are charged to operations when incurred. Advertising costs for each of the years ended December 31, 2007 and 2006 are approximately $295,001 and $68,000, respectively.

M. EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing the earnings (loss) for the year by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potential common stock, including stock options and warrants, in the weighted average number of common shares outstanding for a period, if dilutive.

At December 31, 2007 and 2006, there were no common stock equivalents.

N. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company recognizes an allowance for doubtful accounts to ensure accounts receivable, related party receivables and other receivables that are not overstated due to uncollectibility. Bad debt reserves are maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. An additional reserve for individual accounts is recorded when the Company becomes aware of a customer's or debtor's inability to meet its financial obligation, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to customers or debtors change, estimates of the recoverability of receivables would be further adjusted. As of December 31, 2007, the allowance for doubtful accounts are approximately $46,789 for accounts receivable, $1,553,771 for related party receivable and $41,133 for other receivables. The 2007 bad-debt provision is mainly for the $1,140,000 accounts receivable of sales of YCT, which represents the full balance of this receivable at December 31, 2007.

O. APPROPRIATED RETAINED EARNINGS

In accordance with Chinese regulations, the Company's Chinese subsidiaries must appropriate 15% of their annual profits as computed under Chinese generally accepted accounting principles, which is reflected in the consolidated financial statements as appropriated retaining earnings and which, at December 31, 2007, had a $237,502 balance.

3. INVENTORY

Inventory is comprised of the following:

 December 31, 2007
 -----------------
Raw materials $298,403
Work in progress 401,145
Finished goods 158,477
 --------

Total $858,025
 ========

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

4. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

 December 31, 2007
 -----------------
Office equipment $ 157,622
Machinery and equipment 2,451,611
Furniture and fixtures 5,216
Computer equipment 58,612
Vehicles 151,830
Buildings and improvements 1,579,340
Buildings pledged as security to creditor 2,040,486
TOTAL AT COST 6,444,718
 ----------
Accumulated depreciation and amortization 1,773,414
 ----------

Net $4,671,304
 ==========

Depreciation and amortization expense for the years ended December 31, 2007 and 2006 was approximately $388,200 and $341,800 respectively.

Depreciation and amortization expenses included in research and development, and general and administrative expenses were approximately $321,900, and $66,300, respectively, for 2007. For 2006, such expenses were approximately $183,400 and $158,400, respectively.

5. INCOME TAXES

The deferred tax liability as of December 31, 2007 is immaterial and is included with other liabilities.

A reconciliation between taxes computed at the Chinese statutory rate of 15% and the Company's effective tax rate is as follows:

 2007 2006
 --------- ---------
Income tax(benefit) on pretax income (loss)
 at statutory rate $(494,836) $(185,159)
Effect of income tax exemption $(494,836) $(185,159)
Income tax at effective rate $ 0 $ 0

As at December 31, 2007, the Company had accumulated net operating loss carryforwards for United States federal tax purposes of approximately $1,123,000 that are available to offset future taxable income. Realization of the net operating loss carryforwards is dependent upon future profitable operations. In addition, the carryforwards may be limited upon a change of control in accordance with Internal Revenue Code Section 382, as amended. Accordingly, management has increased the valuation allowance by $96,200 in current year to reduce the deferred tax asset of approximately $393,000 associated with the net operating loss carryforwards to zero at December 31, 2007.

Additionally, as of December 31, 2007 and 2006, the Company had accumulated net operating loss carryforwards for Chinese tax purposes of approximately $1,321,000 and $848,000, respectively. Realization of the Chinese tax net operating loss carryforwards is dependent on future profitable operations, as well as a maximum five-year carryforward period. Accordingly, management has

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

recorded a valuation allowance to reduce the deferred tax associated with the net operating loss carryforwards to zero at December 31, 2007. These tax losses yield deferred tax assets of approximately $198,000 and $67,000, respectively, as of December 31, 2007 and 2006. Valuation allowance of an equal amount has been recorded as of December 31, 2007.The valuation allowance has increased approximately $131,000 from 2006 to 2007.

The Company and each of its subsidiaries file separate income tax returns. JTY qualifies as a "high-technology foreign joint venture" which entitles it to an exemption from PRC income tax for two years beginning with its first profitable year. Since its first profitable year was 2005, JTY is entitled to an exemption from PRC tax for the years 2005 and 2006. Because JTY qualifies as a "high-technology joint venture" and is located in an economic development zone, it is entitled to a reduced tax rate of 10% for the three years beginning in 2007 through 2009. Thereafter, it will be taxed at the standard income tax rate of 15%.

Jilin BCT Pharmacy Company, Ltd ("BCT") is a "wholly-owned foreign venture" which entitles it to an exemption from PRC income tax for two years beginning with its first profitable year. After these two years, it is entitled to a reduced income tax rate of 10% for three additional years. After these three years, it will be taxed at the standard income tax rate for a "wholly-owned foreign venture" of 15%.

Jilin Tian Yao Drug Safety Evaluation Co., Ltd ("JDE") is a "high technology joint venture" and is exempt from income taxes for two years beginning with its first profitable year. It is thereafter taxed at a standard income tax rate of 15%.

XD is considered a "high technology joint venture" and so is entitled to full exemptions from income tax for two years, beginning with its first profitable year. Thereafter, it is assessed at the standard income tax rate for joint ventures of 15%.

BIO is a "foreign joint venture" which entitles it to an exemption from PRC income tax for two years beginning with its first profitable year. After these two years, it is entitled to a tax rate of 15% for three additional years.

The Company is also subject to value added tax (VAT), business tax and surtax totaling 5.5 percent of gross sales.

The Company is still in the full-tax-exemption period for the Chinese subsidiaries which reported positive net income for the year ended December 31, 2007, and therefore no tax was due for the period.

6. CONCENTRATIONS AND CREDIT RISK

The Company operates principally in China and grants credit to customers located there. Although China is considered economically stable, it is possible that unanticipated events there or in foreign countries could disrupt the Company's operations.

At December 31, 2007, the Company has a credit risk exposure of uninsured cash in banks of approximately $5,419,167. The Company does not require collateral or other securities to support financial instruments that are subject to credit risk.

For the year ended December 31, 2007, one customer accounted for more than 10% of sales at $ 281,909 (10%). For 2006, one customer accounted for $250,000 of sales (10%).

7. LONG-TERM DEBT

The Company has one long-term loan from one financial institution totaling approximately $2,464,200 at December 31, 2007. The weighted interest rate of the loan at December 31, 2007 was approximately 9.13 percent. The loan is secured by JTY's office building and matures in one lump sum payment on November 15, 2008.

 Amounts Due
 -----------

2008 $2,464,200
 ----------
Total $2,464,200
 ==========

As of December 31, 2007, the Company has one short-term borrowing of $273,800 with an APR of 8.54%. The term of the borrowing is from June 2, 2007 to June 3, 2008, and the lender is Bank of Jilin, Tongguang Branch.

Interest expense and related service charges were $188,636 and $162,415 for the years ended December 31, 2007 and 2006, respectively.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

8. RELATED PARTY TRANSACTIONS

As of December 31, 2007, the Company has the following amounts due from and to related parties:

ADVANCES DUE FROM RELATED PARTIES

Yu Ming Li 36,960

STOCKHOLDERS
Yun Peng Min 5,460
Dong Hai Zhang 4,107
 -------
TOTAL $46,527
 =======

These balances have no stated terms for repayment and are not interest bearing.

Yu Ming Li is the brother in law of the chairman of the company.

Yun Peng Min is a shareholder of the Company.

Donghai Zhang is employed by JTY.

9. INTANGIBLE ASSETS

The Company's intangible assets of approximately $227,440 consist primarily of purchased technology and self-developed patents. No patent has any significant residual value. Each patent has an estimated useful life of twenty years but the legal rights are limited to ten years by the Chinese government, therefore, the Company uses five to ten years as its amortization period. Amortization expense was approximately $28,005 and $18,700 for 2007 and 2006, respectively.

The accumulated amortization was approximately $98,203 and $67,700 as of December 31, 2007 and 2006, respectively. Amortization for each of the next five years is estimated to be $22,744 each year.

10. EMPLOYEE BENEFITS

The Company is required by statutory Chinese employment laws to fund certain government sponsored employee benefits. The expense incurred by the Company for the years ended December 31, 2007and 2006 was approximately $13,508 and $41,000, respectively.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

11. INCENTIVE STOCK OPTION PLAN

On December 26, 2006, the Company's stockholders adopted and approved the Company's 2006 Equity Incentive Plan (the "Plan"). The purpose of the Plan is to attract and retain qualified individuals for positions of substantial responsibility with the Company and to provide incentives to such individuals to promote the success of the Company's business. The Plan will initially be administered by the Board of Directors of the Company. A maximum of 2,000,000 shares of Common Stock will be available for issuance pursuant to options, restricted stock, stock appreciation rights and/or performance stock (collectively, "Awards") under the Plan. Awards may be granted to all employees, officers and directors of and consultants or advisor to the Company and its subsidiaries. To date, no Awards have been granted under the Plan.

12. INVESTMENT IN LAND LEASE

As of December 31, 2007 the Company had a parcel of land leased from the Chinese government. The term of the lease is fifty years. The consideration under the agreement amounts to approximately $485,000. The Company classifies the lease as operating and therefore amortizes the cost using the straight-line method over the life of the lease. Rent expense was approximately $10,000 for the year ended December 31, 2006 and $13,500 for the year ended December 31, 2007. Accumulated amortization at December 31, 2007 was approximately $69,100. The estimated amount of amortization expense for each of the five succeeding fiscal years is $13,500 annually.

13. NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("SFAS 157"), which provides enhanced guidance for using fair value to measure assets and liabilities. This standard also responds to investors' requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 12, 2007, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating whether the adoption of SFAS157 will have a material effect on our consolidated results of operations and financial condition.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, "Employer's Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
132(R)" ("SFAS 158"). SFAS 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. The standard also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. We do not expect the adoption of SFAS 158 to have a material impact on our consolidated results of operations and financial condition.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

SFAS NO. 159, THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES - INCLUDING AN AMENDMENT OF FASB STATEMENT NO. 115. This Statement provides all entities with an option to report selected financial assets and liabilities at fair value. The Statement is effective as of the beginning of an entity's first fiscal year beginning after November 15, 2007, with early adoption available in certain circumstances.

SFAS NO. 141 (REVISED), BUSINESS COMBINATIONS. SFAS No. 141R broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS No. 141R expands on required disclosures to improve the statement users' abilities to evaluate the nature and financial effects of business combinations.

SFAS NO. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS - AN AMENDMENT OF ARB NO. 51. SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent are to be included in the equity section of the balance sheet, but apart from the parent's equity. All changes in the parent's ownerhsip interest in a subsidiary are to be accounted for as equity transactions. Any retained noncontrolling equity interest in a deconsolidated subsidiary is to be initially measured at fair value, with any gain or loss on consolidation measured using this fair value.

SFAS NO. 161,DISCLOSURES ABOUT DERIVIATIVE INSTRUMENTS AND HEDGING ACTIVITIES - AN AMENDMENT OF FASB STATEMENT NO. 133. SFAS No. 161 requires enhanced disclosures for all derivative instruments and hedging activities covered by SFAS No. 133.

SFAS NOSOP NO. 07-01, CLARIFICATION OF THE SCOPE OF THE AUDIT AND ACCOUNTING GUIDE "INVESTMENT COMPANIES" AND ACCOUNTING BY PARENT COMPANIES AND EQUITY METHOD INVESTORS FOR INVESTMENTS IN INVESTMENT COMPANIES. SOP 07-01 provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies. The provisions of the SOP are effective for fiscal years beginning on or after December 15, 2007, with earlier application encouraged. As of December 1, 2007 the FASB has proposed an indefinite deferral of this SOP.

EITF ISSUE NO. 06-11, ACCOUNTING FOR INCOME TAX BENEFITS OF DIVIDENDS ON SHARE-BASED PAYMENT AWARDS. In this Issue, a consensus was reached that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity-classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase in additional paid-in capital. This Issue should be applied prospectively to the income tax benefits that result from dividends on equity-classified employee share-based payment awards that are declared in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. Early application is permitted.

FSP NO. FAS 158-1, CONFORMING AMENDMENTS TO THE ILLUSTRATIONS IN FASB STATEMENTS NO. 87, NO. 88, AND NO. 106 AND TO THE RELATED STAFF IMPLEMENTATION GUIDES. This FSP provides conforming amendments to the illustrations in FASB Statements No. 87, 88, and 106 and to related staff implementation guides as a result of the issuance of FASB Statement No. 158. The conforming amendments made by this FSP are effective as of the effective dates of Statement No. 158. The unaffected guidance that this FSP codifies into Statements No. 87, 88, and 106 does not contain new requirements and therefore does not require a separate effective date or transition method.

FSP NO. FIN 46(R)-7, APPLICATION OF FASB INTERPRETATION NO. 46(R) TO INVESTMENT COMPANIES. This FSP addresses the application of FASB Interpretation (FIN) No.
46 (revised December 2003), Consolidation of Variable Interest Entities, by an entity that accounts for its investments in accordance with the specialized accounting guidance in the AICPA Audit and Accounting Guide, Investment Companies. The provisions of the FSP are effective when the entity adopts SOP 07-01.

SEC STAFF ACCOUNTING BULLETIN NO. 109, WRITTEN LOAN COMMITMENTS RECORDED AT FAIR VALUE THROUGH EARNINGS. SAB 109 expresses the current view of the staff that the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. SEC registrants are expected to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007.

14. OTHER RECEIVABLE AND PREPAYMENT

Other receivables and prepayment of approximately $645,000 at December 31, 2007 consists largely of short term advances made to customers, suppliers and other entities which the Company has or expects to conduct business.

GLOBAL PHARMATECH, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

15. DISCOUNTINUED OPERATIONS

Due to consistent operating losses at its YCT subsidiary, in March 2007, the Company's Board of Directors approved a plan to sell Natural Pharmatech China's 95% equity interest in YCT to Mr. Daojun Wang for a price of RMB9,000,000 (approximately $1,197,000). On May 11, 2007, the Company and Mr. Wang signed the Equity and Liability Transfer Agreement. As of December 31, 2007, the above transfer has been executed, and YCT's ownership has been transferred to Mr. Wang. The Company has recorded a loss of $804,600 on the sale.

The following table represents the results of the discontinued operations and net of minority interest:

 2007 2006
 --------- ---------
Sales - YCT $ 138,606 $ 246,771
 ========= =========
Loss from operations - YCT $ (51,960) $(235,998)
 ========= =========
Net loss from discontinued
 Operations - YCT $ (49,102) $(224,198)
 ========= =========
Loss on sale of YCT $(804,600) $ 0
 ========= =========

As of December 31, 2007, the Company has received RMB 600,000 (approximately $78,870) from Mr. Daojun Wang as payment for YCT. According to the contract, the Company should have received RMB 2,000,000 (approximately $266,000) by that date, however, as of that date, the receivable is RMB 8,400,000 (approximately 1,140,000). The Company made a bad debt provision for this receivable. The Company intends to increase its effort on collecting the receivables.

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