Linkwell (LWLL) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly report ended March 31, 2009

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT

For the transition period from ________ to __________

Commission File Number: 000-24977

LINKWELL CORPORATION

(Exact name of small business issuer as specified in charter)

FLORIDA	65-1053546
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1104 Jiatong Road, Jiading District, Shanghai, China 201807

(Address of principal executive offices)

(86) 21-5566-6258

(Issuer's telephone number)

not applicable

(Former name, former address and former fiscal year,

if changed since last report)

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

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

Large accelerated filer  ¨	accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)		Smaller reporting company  x

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: at May 14, 2009 there were 77,955,475 shares of common stock issued and outstanding.

LINKWELL CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 31, 2009

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements.	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	30
Item 4T.	Controls and Procedures.	30
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	31
Item 1A.	Risk Factors.	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	31
Item 3.	Default Upon Senior Securities.	31
Item 4.	Submission of Matters to a Vote of Security Holders.	31
Item 5.	Other Information.	31
Item 6.	Exhibits.	31
Signature		33

2

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, the risk of doing business in the People's Republic of China, or the PRC, our ability to implement our strategic initiatives, our access to sufficient capital, the effective integration of our subsidiaries in the PRC into a U.S. public company structure, economic, political and market conditions and fluctuations, government and industry regulation, Chinese and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

When used in this quarterly report, the terms:

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

a Florida corporation, our subsidiaries,

  “Linkwell Tech” refers to our formerly wholly-owned subsidiary Linkwell Tech Group, Inc.,

a Florida corporation, but only 90% owned after May 31, 2008

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

a wholly-owned subsidiary of LinkwellTech, and

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

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

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

  “Shanhai” refers to Shanghai Shanhai Group,

a Chinese company which used to be the minority owner of LiKang Disinfectant,

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

a company of which Shanhai is a majority shareholder,

  “ZhongYou” refers to Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd.,

a company owned by Shanghai Jiuqing Pharmaceuticals Company, Ltd., whose 100% owner is Shanghai Ajiao Shiye Co. Ltd. Our officer Xuelian Bia is a 60% shareholder of Shanghai Ajiao Shiye Co. Ltd.

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

a company owned by our officer Xuelian Bian (60%) and ZhongYou (40%).

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

3

PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

LINKWELL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2009		December 31, 2008
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	1,712,915	$	2,072,687
Accounts receivable (net of allowance for doubtful accounts of $1,055,178 and $801,895 at March 31, 2009 and  December 31, 2008 respectively)		3,137,107		3,526,440
Accounts receivable-related parties (net of allowance for doubtful accounts of $141,053 and $376,437 at March 31, 2009 and December 31, 2008 respectively)		3,606,074		3,470,553
Other receivable		385,014		204,480
Inventories (net of reserve for obsolete inventory of $145,213 and $145,031 at March 31, 2009 and December 31, 2008 respectively)		1,508,286		1,027,352
Prepaid expenses and other current assets		1,016,394		339,378
Due from related parties		1,379,230		2,158,077
		0
Total Current Assets		12,745,020		12,978,967
GOODWILL		468,501
PROPERTY AND EQUIPMENT - Net		1,886,230		703,935
Total Assets	$	15,099,751		13,682,902
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:	$	745,004	$	744,069
Loans payable		1,590,740		1,508,271
Accounts payable and accrued expenses		178,383		220,103
Tax payable		611,549		368,690
Other payable		1,159,027		94,583
Due to related parties		125,553		91,326
Advances from customers		0
Total Current Liabilities		4,410,256		3,027,042
Derivative Payable		222,194		281,030
MINORITY INTEREST		2,177,806		2,118,970
STOCKHOLDERS' EQUITY:
Preferred stock (No Par Value; 10,000,000 Shares Authorized;  No shares issued and outstanding)		-		-
Common Stock ($0.0005 Par Value; 150,000,000 Shares Authorized;  77,955,475  shares issued and outstanding at March 31, 2009 and December 31, 2008 respectively)		38,978		38,978
Common stock  issuable		250
Additional paid-in capital		6,537,096		6,512,346

4

LINKWELL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

Accumulated profit (deficit)		1,436,315			992,071
Deferred compensation		(240,349	)		(318,556	)
Other comprehensive gain - foreign currency		517,206			1,031,021
Total Stockholders' Equity		8,289,496			8,255,860
Total Liabilities and Stockholders' Equity	$	15,099,751		$	13,682,902

See notes to unaudited consolidated financial statements

5

LINKWELL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months
	Ended March 31,
	2009			2008
NET REVENUES
Non-affiliated companies	$	2,358,022		$	4,604,117
Affiliated companies		1,139,054			128,821
Total Net Revenues		3,551,076			4,732,938
COST OF SALES		(2,037,628	)		(3,502,958	)
		1,513,448			1,229,980
GROSS PROFIT
OPERATING EXPENSES:
Selling expenses		466,289			328,428
General and administrative		507,463			477,812
Total Operating Expenses		973,752			806,240
INCOME FROM OPERATIONS		539,696			423,740
OTHER INCOME (EXPENSE):
Other income/(expense)		15,602			152
Derivative expenses		58,836
Interest income		100			1,577
Interest expense - related party					(4,822	)
Interest expense		(14,310	)		(15,696	)
Total Other Income/(Expense)		60,288			(18,789	)
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST		599,924			404,951
INCOME TAXES		(96,845	)		(46,109	)
INCOME BEFORE MINORITY INTEREST		503,079			358,842
MINORITY INTEREST		(58,836	)		(30,535	)
NET INCOME	$	444,243		$	328,307
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
Basic	$	0.01		$	0.00
Diluted	$	0.01		$	0.00
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		77,955,475		$	75,339,667
Diluted		77.955,475			75,549,558

See notes to unaudited consolidated financial statements

6

LINKWELL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months
	Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	444,243		$	328,307
Derivative liabilities		(58,836	)
Adjustments to reconcile net income from operations to net cash provided by (used in) operating activities:
Depreciation and amortization		51,346			45,561
Minority interest		58,836			30,535
Allowance for doubtful accounts		253,283			173,490
Allowance for doubtful accounts-related party		(235,384	)		39,294
Stock-based compensation		78,207			20,168
Changes in assets and liabilities:
Accounts receivable		4,549			(174,761	)
Accounts receivable - related party		99,863			(290,183	)
Other receivable		(59,154	)		(226,656	)
Inventories		683,543			(203,664	)
Prepaid and other current assets		(677,016	)		125,042
Goodwill		(468,501	)
Other  payable		(1,232,740	)
Accounts payable, accrued expenses and other payables		(886,224	)		534,331
Tax payable		(41,720	)		27,328
Advances from customers		34,227			(529,526	)
NET CASH USED IN OPERATING ACTIVITIES		(1,951,478	)		(100,734	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(61,322	)		(48,140	)
Cash assumed from acquisition		145,517
Cash paid for minority interest					(395,800	)
NET CASH  PROVIDED BY (USED IN) INVESTING ACTIVITIES		84,195			(443,940	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable					404,822
Increase in due from related parties		486,689			(117,008	)
Proceed from due to related party		1,064,444			125,669
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,551,133			413,483
EFFECT OF EXCHANGE RATE ON CASH		(43,622	)		240,066
NET INCREASE(DECREASE) IN CASH		(359,772	)		108,875
					1,222,128
CASH  - beginning of period		2,072,687
CASH - end of period	$	1,712,915		$	1,331,003
Cash paid for:
Interest	$	14,310		$	20,518
Income taxes	$	96,845		$	46,109

See notes to unaudited consolidated financial statements

7

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Linkwell Corporation (formerly Kirshner Entertainment & Technologies, Inc.) (the “Company”) was incorporated in the state of Colorado on December 11, 1996. On May 31, 2000, the Company acquired 100% of HBOA.Com, Inc. The Company focused on development of an Internet portal through which home based business owners, as well as commercial private label businesses, could obtain the products, services, and information necessary to start, expand and profitably run their businesses. On December 28, 2000, the Company formed a new subsidiary, Aerisys Incorporated (“Aerisys”), a Florida corporation, to handle commercial private business. In June 2003, the Company formed its entertainment division and changed its name to reflect this new division. Effective as of March 31, 2003, we discontinued our entertainment division and our technology division, except for the Aerisys operations that continue on a limited basis.

On May 2, 2005, the Company entered into and consummated a share exchange with all of the shareholders of Linkwell Tech Group, Inc. (“Linkwell Tech”). Linkwell Tech was founded on June 22, 2004, as a Florida corporation. Pursuant to the share exchange, the Company acquired 100% of the issued and outstanding shares of Linkwell Tech's common stock, in exchange for 36,273,470 shares of our common stock, which at closing represented approximately 87.5% of the issued and outstanding shares of our common stock. As a result of the transaction, Linkwell Tech became our wholly owned subsidiary. For financial accounting purposes, the exchange of stock was treated as a recapitalization of Kirshner with the former shareholders of the Company retaining 7,030,669 or approximately 12.5% of the outstanding stock. The consolidated financials statements reflect the change in the capital structure of the Company due to the recapitalization and the consolidated financial statements reflect the operations of the Company and its subsidiaries for the periods presented.

On June 30, 2004, Linkwell Tech acquired 90% of Shanghai LiKang Disinfectant High-Tech Company, Ltd. (“LiKang Disinfectant”), a company incorporated in the People’s Republic of China (the “PRC”) through a stock exchange. The transaction through which Linkwell Tech acquired its 90% interest in LiKang Disinfectant resulted in the formation of a U.S. holding company by the shareholders of LiKang as it did not result in a change in the underlying ownership interest of LiKang Disinfectant. LiKang Disinfectant is a science and technology enterprise founded in 1988. LiKang Disinfectant is involved in the development, production, marketing, sales, and distribution of disinfectant health care products.

LiKang Disinfectant has developed a line of disinfectant product offerings which are utilized by the hospital and medical industry in China. LiKang Disinfectant regards the hospital disinfecting products as the primary segment of its business. LiKang Disinfectant has developed and manufactured several series products in the field of skin mucous disinfection, hand disinfection, surrounding articles disinfection, medical instruments disinfection and air disinfection.

On June 30, 2005, the Company's Board of Directors approved an amendment of its Articles of Incorporation to change the name of the Company to Linkwell Corporation. The effective date of the name change was after close of business on August 16, 2005.

In August 2006, LiKang Disinfectant incorporated a new subsidiary, Shanghai LiKang International Trade Co., Ltd (“LiKang International”), a PRC company. The primary business of LiKang International involves import and export activities relating to computer, computer components, instruments and meters, electromechanical devices, constructional materials, metallic material, hardware, handiwork, knitting textile, furniture, chemical raw materials, and business consulting service, investment consulting, graphics design, conference services, exhibition services, equipment lease and the import and export of technology.

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

- Linkwell Tech entered into an agreement (the “Biological Stock Purchase Agreement”) to acquire a 100% equity interest in Shanghai LiKang Biological High-Tech Company, Ltd. (“LiKang Biological”), a Chinese company, in a related party transaction with Mr. Xuelian Bian, the Company’s Chief Executive Officer, Mr. Wei Guan, the Company’s Vice-President and Secretary, and Shanghai Likang Pharmaceuticals Technology Co., Ltd. (“LiKang Pharmaceutical”). Before the Biological Stock Purchase Agreement, Mr. Bian and Mr. Guan owned 90% and 10% of

8

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LiKang Pharmaceutical, respectively. Mr. Bian and LiKang Pharmaceutical owned 60% and 40% of LiKang Biological, respectively. Pursuant to the terms of the Biological Stock Purchase Agreement, Mr. Bian and LiKang Pharmaceutical were to receive 1,000,000 shares of Linkwell Corporation restricted common stock.

Due to restrictions under PRC law that prohibited the consideration contemplated by the Biological Stock Purchase Agreement, the agreement did not close. As a result, on March 25, 2008, the parties agreed to enter into an amendment to the Biological Stock Purchase Agreement (“Biological Amendment”) in an effort to complete the stock purchase transaction. Pursuant to the terms of the Biological Amendment, the only material change to the Biological Stock Purchase Agreement related to the consideration paid by Linkwell Tech to Xuelian Bian and LiKang Pharmaceutical, which was changed from 1,000,000 shares of the Company’s common stock to $200,000 and 500,000 shares of common stock. As of December 31, 2008, the Biological Stock Purchase Agreement was pending and required further approval from the PRC Ministry of Commerce. Due to the time consuming and complicated nature of the approval procedure, the parties agreed to enter into a second amendmentto the Biological Stock Purchase Agreement in order to complete the purchase transactions timely and properly. Pursuant to the terms of the Biological Amendment, the purchaser was changed from Linkwell Tech to LiKang Disinfectant, in addition, the consideration changed to RMB2,000,000, approximately $291,792 and 500,000 shares of common stock. Approval from Ministry of Commerce, in the People’s Republic of China will not be necessary if LiKang Disinfectant acquires 100% of the equity interest in LiKang Biological, because both companies are companies regiested in PRC. This transaction closed on March 5, 2009.

- Linkwell Tech, which already owned a 90% equity interest in LiKang Disinfectant, was to purchase the remaining 10% equity interest of LiKang Disinfectant from Shanghai Shanhai Group, a non-affiliated Chinese entity (the “Disinfectant Stock Purchase Agreement”). Pursuant to the terms of the Disinfectant Stock Purchase Agreement, Shanghai Shanhai Group was to receive 3,000,000 shares of Linkwell Corporation restricted common stock.

Due to restrictions under PRC law that prohibited the consideration then contemplated by the Disinfectant Stock Purchase Agreement, the agreement did not close. As a result of this, on March 25, 2008, the parties agreed to enter into an amendment to the Disinfectant Stock Purchase Agreement (“Disinfectant Amendment”) in an effort to complete the stock purchase transaction. Pursuant to the terms of the Disinfectant Amendment, the only material change to the Disinfectant Stock Purchase Agreement related to the consideration paid by Linkwell Tech to the Shanghai Shanhai Group for the remaining 10% equity interest, which was changed from 3,000,000 shares of Common Stock, to $380,000 and 1,500,000 shares of Common Stock. Due to the fluctuation of the applicable exchange rate, the cash consideration was increased to $399,057. The other terms of the Disinfectant Stock Purchase Agreement remained in full force and effective.

Linkwell Tech paid $395,800 to the Shanghai Shanhai Group on February 21, 2008 and paid $3,257 on April 18, 2008. A total of 1,500,000 shares were expected to be issued before the end of May, 2008. The parties agreed to extend the share issuance date until October 20, 2008. The Company valued the acquisition using the fair value of common shares at $0.19 per share and recorded an investment of $285,000. Including the cash payment of $399,057, the total investment for acquiring 10% equity interest in LiKang Disinfectant was $684,057. The cumulative minority interest of 10% equity interest in LiKang Disinfectant at March 25, 2008, was approximately $557,779. The difference between the total investment and the cumulative minority interest of $126,278 was deducted from retained earnings as dividends to the 10% minority shareholder, Shanghai Shanhai Group. As a result of the closing of the Disinfectant Stock Purchase Agreement, as amended, as of March 25, 2008, our 90% owned subsidiary Linkwell Tech owns 100% of the equity interest in LiKang Disinfectant.

9

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

On February 15, 2008, we entered into a stock purchase agreement with Ecolab Inc., a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed to purchase 888,889 of shares of Linkwell Tech, or 10% of the issued and outstanding capital stock of Linkwell Tech, for $2,000,000. On March 28, 2008 and June 4, 2008, Linkwell Tech received $200,000 and $1,388,559, respectively from Ecolab. Including a $400,000 loan that Linkwell Tech received from Ecolab and accrued interest thereon of $11,441, Linkwell Tech received a total investment of $2,000,000 from Ecolab. On May 31, 2008, the Company, Linkwell Tech and Ecolab entered into a Linkwell Tech Group Inc. Stockholders Agreement (“Stockholders Agreement”), whereby both the Company and Ecolab are subject to, and beneficiaries of, certain pre-emptive rights, transfer restrictions and take along rights relating to the shares of Linkwell Tech that the Company and Ecolab each hold. As of May 31, 2008, the principal and accrued interest of $11,441 on the short-term $400,000 loan became part of Ecolab’s investment and does not need to be repaid.

On May 31, 2008, LiKang Disinfectant entered into a stock purchase agreement under which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang International, to Linkwell International Trading Co., Ltd, a company registered in Hong Kong which is 100% owned by Mr. Wei Guan, the Company’s Vice President, Secretary and Director.  Pursuant to the terms of the agreement, LiKang Disinfectant received $291,754 (RMB 2,000,000) once the agreement was approved by the PRC Ministry of Commerce with such approval occurring on March 27, 2008.

BASIS OF PRESENTATION

Our unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2008 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008. These interim financial statements should be read in conjunction with our Form 10-K for the year ended December 31, 2008. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The interium consolidated financial statements of the Company include the accounts of its 90% owned subsidiary, Linkwell Tech Group, Inc., and Linkwell Tech 100%-owned subsidiary, LiKang Disinfectant. The financial statements include consolidated financial information for LiKang Biological since the date of acquisition. All significant inter-company balances and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates. Significant estimates include the allowance for doubtful accounts of accounts receivable, certain assumptions underlying the calculation of stock-based compensation, the useful life of property, plant and equipment, the inventory reserve, and option value.

10

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

CASH AND CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.

Substantially all of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

ACCOUNTS RECEIVABLE

The Company has a policy of reserving for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. At March 31, 2009 and December 31, 2008, the Company had established, based on a review of its non-related party accounts receivable outstanding balances, allowances for doubtful accounts in the amounts of $1,055,178 and $801,895, respectively. At March 31, 2009 and December 31, 2008, the Company had established, based on a review of its related party accounts receivable outstanding balances, allowances for doubtful accounts in the amounts of $141,053 and $376,437, respectively.

INVENTORIES

Inventories, consisting of raw materials, work in process and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method. The valuation of inventory requires the Company to estimate obsolete or excess inventory based on analysis of future demand for our products. Due to the nature of the Company’s business and our target market, levels of inventory in the distribution channel, changes in demand due to price changes from competitors and introduction of new products are not significant factors when estimating the Company’s excess or obsolete inventory. If inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs may be recorded as deemed necessary by management for the difference between the cost and the market value in the period that impairment is first recognized. As of March 31, 2009 and December 31, 2008, the reserve for obsolete inventory amounted to $145,213 and $145,031, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets, which are from five to twenty years. The cost of repairs and maintenance are expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition

11

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges during the three months ended March 31, 2009 and 2008.

ADVANCES FROM CUSTOMERS

Advances from customers at March 31, 2009 and December 31, 2008 was $125,553 and $91,326, respectively, which consist of prepayments from third party customers to the Company for merchandise that had not yet been shipped by the Company. The Company will recognize the deposits as revenue as customers take delivery of the goods, in compliance with its revenue recognition policy.

DISCONTINUED OPERATIONS

The Company records discontinued operations if both of the following conditions are met: (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the Company as a result of the disposal transaction and (b) the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. During a period in which a component of the Company either has been disposed of or is classified as held for sale, the income statement of the Company for current and prior periods shall report the results of operations of the component, including any gain or loss recognized in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” in discontinued operations. The results of operations of a component classified as held for sale shall be reported in discontinued operations in the period(s) in which they occur. The results of discontinued operations, less applicable income taxes (benefit), shall be reported as a separate component of income before extraordinary items and the cumulative effect of accounting changes (if applicable).

On May 31, 2008, LiKang Disinfectant entered into a stock sale agreement under which it sold 100% of the shares of its wholly-owned subsidiary, LiKang International to Linkwell International Trading Co., Ltd., a related party company registered in Hong Kong owned by Mr. Wei Guan, the Company’s Vice President, Secretary and Director. Since May 31, 2008, all financial statements of the Company, reported the results of operations of LiKang International as discontinued operations for all periods presented.

INCOME TAXES

The Company files federal and state income tax returns in the United States for its corporate operations, and files separate foreign tax returns for their Company's Chinese subsidiaries. Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns.

12

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME (LOSS) PER COMMON SHARE

The Company presents net income (loss) per share (“EPS”) in accordance with SFAS No. 128, “Earnings per Share”. Accordingly, basic income (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding, without consideration for common stock equivalents. Diluted net income per share is computed by dividing the net income by the weighted-average number of common shares outstanding as well as common share equivalents outstanding for the period determined using the treasury-stock method for stock options and warrants and the if-converted method for convertible notes. The Company has made an accounting policy election to use the if-converted method for convertible securities that are eligible to participate in common stock dividends, if declared; If the converted method was anti-dilutive (that is, the if-converted method resulted in a higher net income per common share amount than basic net income per share calculated under the two-class method), then the two-class method was used to compute diluted net income per common share, including the effect of common share equivalents. Diluted earnings per share reflects the potential dilution that could occur based on the exercise of stock options or warrants, unless such exercise would be anti-dilutive, with an exercise price of less than the average market price of the Company’s common stock.

The Company’ outstanding warrants at March 31, 2009 and December 31, 2008 included the following:

	March 31, 2009		December 31, 2008
Warrants		33,469,795		33,469,795

REVENUE RECOGNITION

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin 104 for revenue recognition. In general, the Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met. Provisions for discounts and returns are provided for at the time the related sales are recorded, and are reflected as a reduction of sales. The Company bases its estimates on historical experience taking into consideration the type of products sold, the type of customer, and the type of specific transaction in each arrangement. Revenues represent the invoiced value of goods, net of value added tax (“VAT”).

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Deposits or advance payments from customers prior to delivery of goods and passage of title of goods are recorded as advances from customers.

In general, the related party does not hold the Company’s inventory. If the related party has inventory on hand at the end of a reporting period, the sale is reversed and the inventory is included on the Company’s balance sheet.

13

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RELATED PARTIES

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company shall disclose all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related party. The recognition of sales to related parties has no difference to sales to unrelated parties, i.e. revenue is not recognized until title and risk of loss is transferred to ultimate customer which, occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met.

CONCENTRATION OF CREDIT RISK

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The largest related party, ZhongYou Pharmaceutical and its branches (see note 5) purchased $853,999 and $451,709of products (about 36% and 10% of net revenue), from the Company during the three months ended March 31, 2009 and 2008, respectively. This related party customer accounted for 34% and 17% of accounts receivable-related parties as of March 31, 2009 and 2008, respectively. The largest non-related third party customer, Guangzhou LianJian Disinfectant Co., Ltd., purchased $383,947 and $473,664 of products (about 16% and 10% of net revenue) from the Company during the three months ended March 31, 2009 and 2008 respectively. This non-related customer accounted for 20% and 25% of accounts receivable as of March 31, 2009 and 2008, respectively. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. The afore-mentioned related party customer and non-related party customer represented the largest customers, in excess of 10%, of total accounts receivable and accounts receivable-related parties and total net revenue, as of March 31, 2009 and 2008, and the related quarters then ended, respectively.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. At March 31, 2009 and December 31, 2008, the Company’s bank deposits by geographic area were as follows:

	March 31, 2009				December 31, 2008
United States	$	905	0.1	%	$	905	0.1	%
China		1,712,010	99.9	%		2,071,782	99.9	%
Total cash and cash equivalents	$	1,712,915	100.0	%	$	2,072,687	100.0	%

14

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPREHENSIVE INCOME

The Company uses Statement of Financial Accounting Standards No.130 (SFAS 130) “Reporting Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. For the three months ended March 31, 2009 and 2008 comprehensive income included net income and unrealized gain from foreign currency translation adjustments.

SHIPPING COSTS

Shipping costs are included in selling expenses and totaled $82,008 and $66,683 for the fiscal year ended March 31, 2009 and 2008 respectively.

ADVERTISING

Advertising is expensed as incurred. For the three months ended March 31, 2009 and 2008, advertising expenses amounted to $2,941 and $Nil, respectively and were included in selling expenses.

STOCK-BASED COMPENSATION

Effective October 1, 2005, the Company adopted Statement of Financial Accounting Standards No.123 (revised 2004), Share Based Payment (“SFAS No. 123R”). SFAS No.123R establishes the financial accounting and reporting standards for stock-based compensation plans. As required by SFAS No. 123R, the Company recognizes the cost resulting from all stock-based payment transactions including shares issued under its stock option plans in the financial statements. There were no options or warrants granted for services during the three months ended March 31, 2009 and 2008.

NON-EMPLOYEE STOCK BASED COMPENSATION

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

REGISTRATION RIGHTS AGREEMENTS

The Company has adopted View C of EITF 05-4 “Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF 00-19” (“EITF 05-4”). Accordingly, the Company classifies as liability instruments, the fair value of registration rights agreements when such agreements (i) require it to file, and cause to be declared effective under the Securities Act, a registration statement with the SEC within contractually fixed time periods, and (ii) provide for the payment of liquidating damages in the event of its failure to comply with such agreements. Under View C of EITF 05-4, (i) registration rights with these characteristics are accounted for as derivative financial instruments at fair value and (ii) contracts that are (a) indexed to and potentially settled in an issuer's own stock and (b) permit gross physical or net share settlement with no net cash settlement alternative are classified as equity instruments.

15

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION

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

The functional and reporting currency is the U.S. dollar. The functional currency of the Company's Chinese subsidiaries is the

Renminbi, the local currency, or sometimes referred to as the Chinese Yuan (“RMB”). The financial statements of the subsidiary are translated into United States dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations and were not material during the periods presented. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. The cumulative translation adjustment was $517,206 and $1,031,021 as of March 31, 2009 and December 31, 2008, respectively. On March 31, 2009 and December 31, 2008, the exchange rate was 1 USD=6.8456 RMB and 1 USD = 6.85 RMB, respectively. The average exchange rate used for the three months ended March 31, 2009 and 2008 was 1 USD=6.8485 RMB and 1 USD = 7.1756 RMB, respectively.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred and are included in general and administrative expenses. These costs primarily consist of cost of material used and salaries paid for the development of the Company’s products and fees paid to third parties. Research and development costs for the three months ended March 31, 2009 and 2008 were approximately $31,151 and $790, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on financial statements.

In December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

16

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In May 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles. This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission (“SEC”) of the Public Company Accounting Oversight Board’s amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect SFAS No. 162 to have a material impact on the preparation of its consolidated financial statements.

On April 9, 2009 the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Values of Financial Instruments, which amends SFAS 107, Disclosures about Fair Values of Financial Instruments, and requires that companies alsodisclose the fair valueof financial instruments during interim reporting similar to those that are currently provided annually. FSP No.FAS 107-1 and APB 28-1 is effective for interim reporting periods endingafter June 15, 2009 and it will have no impact on theCompany’s statement of financial position or results of operations.

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

NOTE 2 – INVENTORIES

A summary of inventories by major category at March 31, 2009 and December 31, 2008 are as follows:

	March 31, 2009			December 31, 2008
Raw materials	$	724,277		$	592,380
Work-in-process		58,224			47,621
Finished goods		870,998			712,382
		1,653,499			1,352,383
Less: Reserve for obsolescence		(145,213	)		(145,031	)
Net inventories	$	1,508,286		$	1,207,352

17

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 3 – PROPERTY AND EQUIPMENT

At March 31, 2009 and December 31, 2008, property and equipment consist of the following:

	Estimated Useful Life (In years)		March 31, 2009			December 31, 2008
Office equipment and furniture		3-7	$	230,857		$	158,187
Autos and trucks		5		285,154			201,723
Manufacturing equipment		2-10		1,310,917			346,420
Building		5-20		459,329			458,752
Construction in progress				112,466			-
				2,398,723			1,165,082
Less: Accumulated depreciation				(512,493	)		(461,147	)
Total property and equipment, net			$	1,886,230		$	703,935

For the three months ended March 31, 2009 and 2008, depreciation expense amounted to $51,346 and $45,561, respectively.

NOTE 4 – LOANS PAYABLE

Loans payable consisted of the following at March 31, 2009 and December 31, 2008:

	March 31, 2009		December 31,  2008
Loan from De Chang Credit Union due on June 16, 2009 and June 2, 2008 with interest at 8.96% and 7.88% per annum. Guaranteed by Shanghai Shanhai.	$	379,806	$	379,329
Loan from De Chang Credit Union due on December 10, 2009 and December 10, 2008 with interest 6.70% and 7.29% per annum. Guaranteed by Shanghai Shanhai and Chairman Bian.	365,198			364,740
Total Loans Payable	$	745,004	$	744,069

On February 15, 2008, the Company entered into issued a Promissory Note with Ecolab Inc., a Delaware corporation (“Ecolab”), whereby Ecolab agreed to loan the Company $400,000. This short-term loan was due on April 5, 2008 with an interest rate of 8% per annum. On April 14, 2008, the Company and Ecolab Inc. agreed to extend the maturity date of this loan from April 5, 2008 to June 5, 2008 with the same interest rate. On March 27, 2008, Ecolab loaned the Company an additional $200,000 with an interest rate of 8% per annum. This short-term loan was due on June 5, 2008. These two short-term loans of $600,000 were not repaid to Ecolab but became partial payments of a $2,000,000 investment from Ecolab as described below.

18

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 4 – LOANS PAYABLE(CONTINUED)

On February 15, 2008, the Company entered into a stock purchase agreement with Ecolab Inc., a Delaware corporation (“Ecolab”), pursuant to which Ecolab agreed to purchase 888,889 of shares of Linkwell Tech, or 10% of the issued and outstanding capital stock of Linkwell Tech, for $2,000,000. As part of this transaction, $400,000 and $200,000 were paid to Linkwell Tech on February 15, 2008 and March 27, 2008, respectively, in the form of a short-term loan payable as described above. On May 31, 2008, the Company, Linkwell Tech and Ecolab signed a “Stockholders Agreement” and the principal and accrued interest on the short-term loans were retained by the Company as partial proceeds of Ecolab’s $2,000,000 investment in Linkwell Tech. Deducting the accrued accumulated interest of $11,441 on the two short-term loans of $600,000 at an interest rate of 8% as of June 30, 2008, Linkwell received the rest of the investment amount of $1,388,559 from Ecolab and the total accrued interest of $11,441, and the notes payable totaling $600,000, were forgiven.

NOTE 5 – RELATED PARTY TRANSACTIONS

Linkwell Tech's 90% owned subsidiary, LiKang Disinfectant, is engaged in business activities with four related parties: Shanghai LiKang Meirui Pharmaceuticals High-Tech Co., Ltd (“Meirui”), Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd., (“ZhongYou” or “LiKang pharmaceutical”), Shanghai Jiuqing Pharmaceuticals Company, Ltd (“Shanghai Jiuqing”) and Shanghai LiKang Biological High-Tech Co., Ltd. (“Biological”).

Meirui is a company in which the Shanghai Shanhai Group, the former minority shareholder LiKang Disinfectant, owns a 68% interest. Meirui used to manufacture two products for LiKang Disinfectant. Specifically, Meirui provided LiKang Disinfectant with ozone producing equipment and ultraviolet radiation lamp lights. In January 2005, LiKang Disinfectant signed a two year business corporation agreement with Meirui to market its products to the retail consumer market using Meirui's proprietary sales network which caters to the retail consumer market in China. In addition, under the terms of a two year agreement entered into in January 2005, Meirui produced the Lvshaxing Air Disinfectant Machine and LiKang Surgery hand-washing table for LiKang Disinfectant. The agreement above was mutually terminated in December 2006. For the three months ended March 31, 2009 and 2008, the Company recorded net revenues on sales to affiliated companies to Meirui of $1,120 and $5,628, such sales are included in net revenues to affiliated companies. As of March 31, 2009 and December 31, 2008, Meirui owed us $103,766 and $47,104, respectively, recorded in accounts receivable-related parties. In general, accounts receivable-related parties due from Meirui are payable in cash and are due within 4 to 6 months, which approximate normal business terms with independent third parties.

ZhongYou (or “LiKang Pharmaceuticals”) sells the Company’s products to third parties. LiKang Pharmaceuticals was formerly owned 90% by Mr. Xuelian Bian, the Company’s Chief Executive Officer and 10% Mr. Wei Gu by, the Company’s Vice-President and Secretary. In March 2007, Mr. Wei Guan sold his 10% share to Bing Chen, President of the Company’s LiKang Disinfectant subsidiary. In August 2007, Mr. Xuelian Bian sold his 90% shares to his mother, Xiuyue Xing. In October, 2007, the two new shareholders, Bing Chen (10%) and Xiuyue Xing (90%) sold all of their shares in LiKang Pharmaceuticals to Shanghai Jiuqing, whose 100% owner is Shanghai Ajiao Shiye Co. Ltd. (“Shanghai Ajiao”), of which Mr. Bian is a 60% shareholder. For the three months ended March 31, 2009 and 2008, the Company recorded net revenues from affiliated companies of $853,999 and $451,709 from LiKang Pharmaceuticals, respectively, and made purchases of $6,224and $1,670, respectively, from LiKang Pharmaceuticals. At March 31, 2009 and December 31, 2008, accounts receivable-related parties from LiKang Pharmaceuticals were $3,193,929 and $3,457,165, respectively, and accounts payable included in due to related party were $6,224 and $1,670 respectively. In general, accounts receivable-related parties due from LiKang Pharmaceuticals are payable in cash and are due within 4 to 6 months, which approximate normal business terms with independent third parties.

19

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 5 – RELATED PARTY TRANSACTIONS(CONTINUED)

Shanghai Jiuqing is 100% owned by Shanghai Ajiao, of which Mr. Xuelian Bian owns 60% of shares. For the three months ended March 31, 2009 and 2008, respectively, the Company recorded revenue of $18,255 and $13,388 to Shanghai Jiuqing. At March 31, 2009 and December 31, 2008, accounts receivable-related parties from Shanghai Jiuqing were $81,112 and $61,840, respectively. There are no amounts due to Shanghai Jiuqing as of March 31, 2009 and December 31, 2008, respectively. In general, accounts receivable-related parties due from Shanghai Jiuqing are payable in cash and are due within 4 to 6 months, which approximate normal business terms with independent third parties.

On May 31, 2008, LiKang Disinfectant entered into a stock purchase agreement under which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang International to Linkwell International Trading Co., Ltd (“Linkwell Trading”), a company registered in Hong Kong and 100% owned by Wei Guan, our Vice President, Secretary and Director. Pursuant to the terms of the agreement, LiKang Disinfectant will receive $291,792 (RMB 2,000,000) once the agreement was approved by the Ministry of Commerce, the People’s Republic of China, such approval occurred on March 27, 2008. The Company expects to receive the sales proceeds in July, 2009. In addition, LiKang International owed Likang Disinfectant a total of $102,128 (RMB 700,000). Linkwell Trading assumed all the debts of LiKang International after it acquired LiKang International. Therefore, as of March 31, 2009, the total balance due from Linkwell Trading was $393,920 included in the accounts receivable-related parties.

NOTE 6 – DERIVATIVE PAYABLE

On February 15, 2008, we entered into a stock purchase agreement with Ecolab pursuant to which Ecolab agreed to purchase and Linkwell Tech agreed to sell 888,889 of its shares, or 10% of the issued and outstanding capital stock of Linkwell Tech, for $2,000,000. On May 31, 2008, the Company, Linkwell Tech and Ecolab entered into a Stockholders Agreement (the “Stockholders Agreement”), whereby both the Company and Ecolab are subject to, and the beneficiaries of, certain pre-emptive rights, transfer restrictions and take along rights relating to the shares of Linkwell Tech held by the Company and Ecolab.

Pursuant to the terms of the Stockholders Agreement, Ecolab has an option (“Put Option”) to sell the 888,889 shares (“Shares”) of common stock, par value $0.001, of Linkwell Tech that Ecolab purchased under the Stock Purchase Agreement, back to Linkwell Tech in exchange for, as determined by Linkwell Corp., cash in the amount of $2,400,000 or the lesser of (a) 10,000,000 shares of Linkwell Corp. common stock, or (b) such number of shares of Linkwell Corp. common stock as is determined by dividing (i) 3,500,000 by (ii) the average daily closing price of Linkwell Corp. common stock for the twenty days on which Linkwell Corp. shares of common stock were traded on the OTC Bulletin Board prior to the date the Put Option is exercised (“Put Shares”). The Put Option is exercisable during the period between the second and fourth anniversaries of May 30, 2008, or upon the occurrence of certain events including material breach by Linkwell Tech or its subsidiaries of the Consulting Agreement, the Distributor Agreements or the Sales Representative Agreement entered into in connection with the Stock Purchase Agreement.

Under the Stockholders Agreement, Ecolab also has a call option (“Call Option”), exercisable if Linkwell Corp. is subject to a change of control transaction, to require Linkwell Corp. to sell to Ecolab all of their equity interests in Linkwell Tech, or any of Linkwell Tech’s subsidiaries, then owned by Linkwell Corp.

The Company recognized the maximum expenses of the put option and the call option, described above, as $400,000. During the three months ended March 31, 2009, the Company allocated the minority interest of Linkwell Tech of $58,836, as of March 31, 2009, against the maximum expense and recorded a, long term liability of derivative payable of $222,194.

20

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 7 – SHAREHOLDER’ EQUITY

Common Stock

In July 2007, the Company terminated a business consulting service contact with China Direct Investments, Inc. The contract, originally effective as of January 1, 2006 for a three year term, called for the issuance of 4,700,000 shares of the Company’s common stock valued on the date of grant at $0.18 per share, or $846,000. The Company amortized this contract over the years ended December 31, 2007 and 2006, at an expense of $564,000 and $282,000, respectively.

In September, 2006, the Company entered into a three-year agreement with a consultant to provide business development and management services. In connection with this agreement, the Company issued 500,000 shares of the Company’s common stock. The Company valued these services using the fair value of common shares on the grant date of approximately $0.185 per share and recorded deferred consulting expenses of approximately $92,000 to be amortized over the service period. For the three months ended March 31, 2009 and 2008, amortization of consulting compensation amounted to $7,708and $7,531, respectively.

On December 3, 2007, the Company issued 200,000 shares of its restricted common stock to Mr. Ye Wenhu, an individual and Ms. Xu Xinfang, an individual. They provided business development and management services to the Company. The Company valued the service using the fair value of common shares on grant date at $0.17 per share and recorded consulting expense of $34,000.

On June 6, 2007, the Company entered into a six months agreement with FirsTrust Group Inc. to provide business development and management services. In connection with this agreement, on July 12, 2007, the Company issued 450,000 shares of its restricted common stock. The Company valued the service using the fair value of common shares on the grant date of $0.17 per share and recorded consulting expense of $76,500 in the year ended December 31, 2007. On October 6, 2008, the Company issued another 450,000 shares of its restricted common stock to FirsTrust Group, Inc. for additional services to be provided. The Company valued the service using the fair value of common shares on grant date at $0.08 per share and recorded deferred consulting expenses of $36,000 to be amortized over six months of the service period.  For the three month ended March 31, 2009, amortization of consulting compensation amount to $9,000.

On November 20, 2007, the Company entered into an agreement with Segue Ventures LLC to provide various informal advisory and consulting services, including U.S. business methods and compliance with SEC disclosure requirements. In connection with this agreement, Segue Ventures LLC received $4,000 in cash and was to have received 16,000 shares of common stock per month. The Contract was effective from November 20, 2007 to June 30, 2008. On February 27, 2008, a total of 70,000 shares of the Company’s common stock were issued to Segue Ventures LLC. The Company valued these 70,000 shares using the fair value of common shares on the contract date of $0.19 per share and recorded consulting expense of $13,311, of which, $3,938 and $9,373, was amortized for the years ended December 31, 2007 and 2008, respectively. With regards to these 70,000 shares the Company recorded 21,280 as common shares issuable at December 31, 2007. On August 13, 2008, a total of 68,800 shares of the Company’s common stock were issued to Segue Ventures LLC. The Company valued these 68,800 shares using the fair value of common shares on the grant date at $0.19 per share and recorded consulting expenses of $13,072 during the year ended December 31, 2008. As of December 31, 2008, zero shares remained unissued as the Company had terminated its services agreement with Segue Ventures LLC on September 11, 2008.

In March 2008, the Company entered into a two month agreement with SmallCapVoice.Com, Inc. to provide the Company with financial public relations services. In connection with this agreement, the Company will pay $3,500 per month and issue a total of 35,000 shares of the Company’s common stock. On March 11, 2008, the Company issued 35,000 shares to SmallCapVoice.Com, Inc. The Company valued these services using the fair value of common shares on the grant date of $0.19 per share and recorded deferred consulting expenses of $6,650 to be amortized over the service period. For the year ended December 31, 2008, amortization of consulting compensation amount to $6,650.

21

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 7 – SHAREHOLDER’ EQUITY (CONTINUED)

On May 1, 2008, the Company entered into a two year agreement with China Health Capital Group, Inc. (“CHC”) to provide the Company with financial and investment services. In connection with this agreement, on June 24, 2008, the Company issued

2,000,000 shares of Common Stock valued at $0.21 per share to CHC and recorded $420,000 as deferred compensation. For the three months ended March 31, 2009, amortization of consulting compensation amounted to $78,207.

Pursuant to the terms of the Disinfectant Stock Purchase Agreement, on October 20, 2008, the Company issued 1,500,000 shares of common Stock valued at $0.19 per share to Shanghai Shanhai Group to purchase 10% equity interest held by Shanhai in Disinfectant for $380,000 and 1,500,000 shares of Common Stock. The Company recorded $750 in Common Stock and $284,250 in Additional Paid-in Capital.

WARRANTS

In January 2007, warrants to purchase 3,213,320 shares of common stock were exercised at $0.10 per share, for proceeds of $321,332

On June 27, 2008, Monarch Capital Fund, Ltd. exercised a warrant to purchase 100,000 shares of Common Stock with price of $0.20 per share. The Company received proceeds from this warrant exercise of $20,000 on June 24, 2008.

During the three months ended March 31, 2009, there are no warrants granted or exercised.

Stock warrant activities during the three months ended March 31, 2009 are summarized as follows:

	Number of			Weighted-Average
	Shares			Exercise Price
Outstanding at January 1, 2008		33,921,545		$	0.26
Grants		-			-
Exercised		(351,750	)		0.20
Expired		-			-
Outstanding at December 31, 2008		33,469,795			0.25
Grants		-			-
Exercised		-			-
Expired		-			-
Outstanding at March 31, 2009		33,469,795		$	0.25

The following table summarizes the Company's stock warrants outstanding at March 31, 2009:

					Warrants Outstanding and Exercisable
Range of			Number		Weighted Average		Weighted Average
Exercise			Of		Remaining		Exercise
Price			Warrants		Exercise Life		Price
	$	0.10		540,130		1.24		$	0.10
	$	0.20		17,055,000		1.49		$	0.20
	$	0.30		15,866,665		1.74		$	0.30
	$	1.00		8,000		3.52		$	1.00
				33,469,795

22

LINKWELL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009 and 2008

NOTE 9 - FOREIGN OPERATIONS

For the three months ended March 31, 2009 and 2008, the Company derived all of its revenue from its subsidiaries located in the People's Republic of China. Identifiable assets by geographic areas as of March 31, 2009 and December 31, 2008 are as follows:

	Identifiable Assets
	March 31, 2009 (unaudited)		December 31, 2008 (audited)
United States	$	905	$	905
People's Republic of China		14,630,345		13,681,997
Total	$	14,631,250	$	13,682,902

NOTE 10 – OPERATING RISK

(a) Country risk

Currently, the Company’s revenues are primarily derived from the sale of a line of disinfectant product offerings to customers in the PRC. The Company hopes to expand its operations to countries outside the PRC, however, such expansion has not been commenced and there are no assurances that the Company will be able to achieve such an expansion successfully. Therefore, a downturn or stagnation in the economic environment of the PRC could have a material adverse effect on the Company’s financial condition.

(b) Products risk

In addition to competing with other manufacturers of disinfectant product offerings, the Company competes with larger U.S. companies who have greater funds available for expansion, marketing, research and development and the ability to attract more qualified personnel. These U.S. companies may be able to offer products at a lower price. There can be no assurance that the Company will remain competitive should this occur.

(c) Exchange risk

The Company cannot guarantee that the current exchange rate will remain steady, therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of a fluctuating exchange rate actually post higher or lower profits depending on exchange rate of Renminbi converted to US dollars on that date. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

(d) Political risk

Currently, the PRC is in a period of growth and is openly promoting business development in order to bring more business into the PRC. Additionally, the PRC currently allows a Chinese corporation to be owned by a United States corporation. If the laws or regulations relating to ownership of a Chinese corporation are changed by the PRC government, the Company's ability to operate the PRC subsidiaries could be affected.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements. Forward looking statements are identified by words and phrases such as “anticipate”, “intend”, “expect” and words and phrases of similar import. We caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements due to risks, uncertainties and assumptions that are difficult to predict, including those set forth in Item 1A below. We encourage you to read those risk factors carefully along with the other information provided in this report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment. We undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law.

You should read this MD&A in conjunction with the Consolidated Financial Statements and related Notes in Item 1.

In August 2006, the Company incorporated a new subsidiary, Shanghai LiKang International Trade Co., Ltd. (“LiKang International”). Since its inception, LiKang International has primarily served as an agent for third parties who desire to export goods from China, including computers, computer components, small medical equipment and instruments, meters and electromechanical devices. In October 2006, LiKang International expanded its business to include light weight construction materials, textile crafts, furniture, and raw chemical materials.

On May 31, 2008, LiKang Disinfectant entered into a stock purchase agreement under which it sold 100% of the capital stock of its wholly-owned subsidiary, LiKang International to Linkwell International Trading Co., Ltd, a company registered in Hong Kong.  Pursuant to the terms of the agreement, LiKang Disinfectant will receive RMB 2,000,000 once the agreement is approved by the Ministry of Commerce, the People’s Republic of China and such approval is expected to occur before the end of December 2008.

On March 5, 2009, LiKang Disinfectant entered into a stock purchase agreement under which it acquired 100% of the equity interest of LiKang Biological with the consideration of RMB 2,000,000 and 500,000 shares of the Company’s common stock Such transaction was completed on March 5, 2009.

OVERVIEW

Since 1988 we have developed, manufactured and distributed disinfectant health care products primarily to the medical industry in China. In the last few years, China has witnessed a variety of public health crises, such as the outbreak of SARS, which demonstrated the need for increased health standards in China. In response, beginning in 2002, the Chinese government has undertaken various initiatives to improve public health and living standards, including continuing efforts to educate the public about the need for proper sanitation procedures and the establishment of production standards for the disinfectant industry in China. As a result of this heightened license and permit system, all disinfectant manufacturers must comply with “qualified disinfection product manufacturing enterprise requirements” established by the Ministry of Public Health. The requirements include standards for hardware, such as facilities and machinery, and software, including the technology to monitor the facilities, as well as the heightened knowledge and capability of the production staff regarding quality control procedures. Following the adoption of the industry standards in 2002, we have been granted thirty-one hygiene licenses by the Ministry of Public Health.

We believe that the government standards adopted in July 2002 have increased the barriers to entry for competitors in the disinfectant industry in China. The implementation of these improved production standards and license requirements has effectively decreased the competitive landscape as it pertains to small to medium size manufacturers, since the new standards are especially difficult for companies with limited product offerings and inferior technical content. In addition, prior to the adoption of industry standards, disinfectant products were generally marketed and sold based on price as opposed to quality. We believe that as a result of the adoption of industry standards, the marketplace is evolving with a more stringent focus on product quality, which we believe will enable us to increase our base of commercial customers thereby increasing our revenues.

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Historically, our focus has been on the commercial distribution of our products. Our customers include hospitals, medical suppliers and distribution companies throughout China. We have made efforts to expand our distribution reach to the retail market. We have repackaged certain of our commercial disinfectant products for sale to the consumer market and have commenced upon expanding our customer base to include hotels, schools, supermarkets and pharmacies. By virtue of the Chinese government's continuing focus on educating the Chinese population about the benefits of proper sanitation procedures, we believe that another key to increasing our revenues is the continued expansion of the retail distribution of our products.

The disinfectant industry in China is an emerging industry that is populated with small, regional companies. We estimate that there are in excess of 1,000 manufacturers and distributors of disinfectant products in China; however, most domestic competitors offer a limited line of products and there are only a few domestic companies with a nationwide presence. We believe that our national marketing and sales presence throughout all 22 provinces, as well as four autonomous regions, and four municipalities in China, gives us a competitive advantage over many other disinfectant companies in China, and will enable us to leverage the brand awareness for our products with commercial customers to the retail marketplace.

Our present manufacturing facilities and production capacities are sufficient for the foreseeable future, and we believe that we otherwise have the assets and capital available to us necessary to enable us to increase our revenues in future periods as the market for disinfectant products in China continues to increase. During the remaining nine months of 2009, we will continue to focus our efforts on the retail market for our products, as well as expanding our traditional base of commercial customers. In addition, we may also consider the possible acquisition of independent sales networks, which could be used to increase our product distribution capacity and align our company with small, regional companies in the industry.

RESULTS OF OPERATIONS

The table below sets forth the results of operations for the three months ended March 31, 2009 as compared to the same period ended March 31, 2008 accompanied by the change amount and percentage of changes.

The table below sets forth the results of operations for the three months ended March 31, 2008 as compared to the same period ended March 31, 2008 accompanied by the change amount and percentage of changes.

	For the three months						Change
	ended March 31,						2009 vs			Variance
	2009			2008			2008			%
Sales - unaffiliated	$	2,358,022		$	4,604,117		$	(2,246,095	)		49	%
Sales - related parties		1,193,054			128,821			1,064,233			826	%
Total net revenues		3,551,076			4,732,938			(1,181,862	)		25	%
Cost of revenues		2,037,628			3,502,958			(1,465,330	)		42	%
Gross Profit		1,513,448			1,229,980			283,468			23	%
Operating Expenses:
Selling expenses		466,289			328,428			137,861			42	%
General and administrative expenses		507,463			477,812			29,651			6	%
Total Operating Expenses		973,752			806,240			167,512			21	%
Income From Operations		539,696			423,740			115,956			27	%
Other Income (Expenses):
Other income		74,438			152			74,286			489	%
Interest income		100			1,577			(1,477	)		94	%
Interest expense - related party		0			(4,822	)		4,822			100	%
Interest expense		(14,310	)		(15,696	)		1,386			9	%
Net Other Income (Expense)		60,228			(18,789	)		79,017			421	%
Income before income taxes and Minority interest		599,924			404,951			194,973			48	%
Income taxes		(96,845	)		(46,109	)		(50,736	)		110	%
Minority interest		(58,836	)		(30,535	)		(28,301	)		93	%
Net income	$	444,243		$	328,307		$	115,936			35	%

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Other Key Indicators:	Three months ended
	March 31,
(Percent of Net Revenues)	2009			2008			Change
Cost Of Revenues		57	%		74	%		(17	)%
Selling Expenses		13			7	%		6	%
General and Administrative Expenses		14	%		10	%		4	%
Income From Operations		15	%		9	%		6	%

 NET REVENUES

Net revenues for the three months ended March 31, 2009 were $ 3,551,076as compared to net revenues of $4,732,938  for the three months ended March 31, 2008, an decrease of $1,181,862 or approximately 25%. Included in our net revenues for the first three months of 2009 are revenues of $2,546,917 attributable to LiKang Disinfectant and revenues of $1,004,159 attributable to LiKang Biological. Of our total net revenues for the three months ended March 31, 2009, $1,193,054 or approximately 34% were attributable to related parties as compared to net revenues of $128,821, or approximately 2.7%, of our total net revenues for the comparable period in fiscal 2008

Revenues associated with LiKang Disinfectant increased $295,411, or approximately 13%, during the three months of fiscal 2009 compared to the same period of fiscal 2008. We believe this increase in demand was due to an increase in our sales staff and customer recognition of our high-quality, competitively priced disinfectant products.

COST OF REVENUES

Cost of revenues includes raw materials and manufacturing costs, which includes labor, rent and an allocated portion of overhead expenses such as utilities directly related to product production. For the three months ended March 31, 2009, cost of revenues amounted to $2,037,628 or approximately 57% of net revenues as compared to cost of revenues of $3,502,958 or approximately74% of net revenues for the same period in fiscal 2008. The decrease of the percentage is mainly due to the high percentage from the LiKang International.

For the three months ended March 31, 2009, cost of sales related to LiKang Biological was $712,302

, or approximately 71% of revenues. The business of LiKang International mainly includes export of medical equipment, mechanical equipment and chemical products. Since 2007, the Chinese government canceled its tax reimbursement policy for many products that had been in place in 2006.

GROSS PROFIT

Gross profit for the three months ended March 31, 2009 was $1,513,448, or approximately 43% of net revenues, as compared to$1,229,980, or approximately 26% of revenues, for the three months ended March 31, 2008.

OPERATING EXPENSES

Total operating expenses for the three months ended March 31, 2009 were $973,752, an increase of $167,512, or approximately 21%, from total operating expenses for the three months ended March 31, 2008 of $806,240. This increase included the following.

Selling Expenses

For the three months ended March 31, 2009, selling expenses were $466,289 as compared to $328,428 for the same period in 2008, an increase of $137,861, or approximate 42%.

26

General and Administrative Expenses

For the three months ended March 31, 2009, general and administrative expenses were $507,463 as compared to $477,812 for the same period in 2008, an increase of $29,651, or approximate 6.2%.

We incurred non-cash consulting fees during the three months ended March 31, 2009 of $78,207 as compared to $20,168 for the three months ended March 31, 2008, an decrease of $58,039 or approximately 288%. Non-cash consulting fees represents the amortization of fees to consultants under agreements entered into during the three month period ended March 31, 2009, which we pay in shares of our common stock.

OTHER INCOME (EXPENSE)

For the three months ended March 31, 2009 total other income amounted to $60,228 as compared to other expense $18,789 for the three months ended March 31, 2008.

MINORITY INTEREST

For the three months ended March 31, 2009, we reported a minority interest expense of $58,836 as compared to $30,535 for the three months ended March 31, 2008. The minority interest expense is attributable to LiKang Disinfectant’s minority shareholder, and had the effect of reducing our net income. However, on March 5, 2009, our wholly-owned subsidiary Linkwell Tech complete the Biological Stock Purchase Agreement and acquired the remaining 100% equity interest of LiKang Biological . Now the Company owns 90% equity interest in LiKang Biological.

LIQUIDITY AND CAPITAL RESOURCES

As shown in the accompanying financial statements, our working capital decreased $1,617,161 or approximately 16% from $9,951,925 on December 31, 2008 to $8,334,764 on March 31 2009. With the expansion of our businesses, we anticipate a strong demand on our capital resource in the near future. In addition to our working capital on hand, we intend to obtain required capital through a combination of bank loans and the sale of our equity securities. Although there are no commitments or agreements on the part of anyone at this time to provide us with additional bank financing or purchase of securities, we are optimistic to obtain additional capital resources to fund our business expansions.

We currently have no material commitments for capital expenditures. At March 31, 2009, we had $745,004 in short term loans which will mature before June, 2009. Other than our working capital and loans, we presently have no other alternative capital resources available to us. We plan to build additional product lines and upgrade our manufacturing facilities, in order to expand our production capacity and improve the quality of our products. Based on our preliminary estimates, upgrades and expansion will require additional capital of approximate $1 million.

We need to raise additional capital resources to meet the demands described above. We may raise additional capital through the sale of equity securities. There can be no assurances that any additional debt or equity financing will be available to us on acceptable terms, if at all. The inability to obtain debt or equity financing could have a material adverse effect on our operating results, and as a result we could be required to cease or significantly reduce our operations, seek a merger partner or sell additional securities on terms that may be disadvantageous to shareholders.

NET CASH FROM OPERATING ACTIVITES

Net cash used in operating activities for the three months ended March 31, 2009 was $1,951,478 as compared to net cash used in operating activities of $100,734 for the same period ended March 31, 2008, a decrease of $1,850,744 or approximately 1,873%. For the three months ended March 31, 2009.

During the three months ended March 31, 2009, we used cash to fund a increase in prepaid expenses and other assets of $677,016, an decrease in accounts payable of $886,224 and an decrease of $1,232,740 in other payable. These increases were offset by our net income, a decrease of $99,863 in accounts receivable and an increase of $34,227 in advance from customers.During the three months ended March 31, 2008, we used cash to fund a net decrease in accounts receivable of $464,944, including a decrease of $290,183 in accounts receivables from related parties, an increase of $203,664 in inventories, an increase in advance from customers of $529,526 and a decrease of $226,656 in other receivables. These increases were offset by our net income, a decrease of $125,042 in prepaid expenses and other current assets and an increase of $534,331 in accounts payable, accrued expenses and other payables and increase of $27,328 in taxes payable.

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NET CASH FROM INVESTING ACTIVITIES

Net cash provided by investing activities for the three months ended March 31, 2009 was $84,159 as compared to net cash used in investing activities of $443,940 for the same period in 2008, an increase of $528,135 or approximately 111%. This change is attributable to an increase of $145,517 cash assumed from acquisition of LiKang Biological, and payment of $61,322 in purchases of property, plant and equipment.

NET CASH FROM FINANCING ACTIVITIES:

Net cash provided by financing activities was $1,551,133 for the three months ended March 31, 2009, as compared to net cash provided by financing activities of $413,483 for the three months ended March 31, 2008, an increase of $1,137,650 or approximately 275%. The increased cash flow from financing activities is chiefly resulted from an  increase of due to related parties of $1,064,444 and an decrease of due from related parties of $486,689.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.

We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments: allowance for doubtful accounts; income taxes; stock-based compensation; asset impairment and option value.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain an allowance for doubtful accounts to reduce amounts to their estimated realizable value. A considerable amount of judgment is required when we assess the realization of accounts receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts could be required. We initially record a provision for doubtful accounts based on our historical experience, and then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. In estimating the provision for doubtful accounts, we consider: (i) the aging of the accounts receivable; (ii) trends within and ratios involving the age of the accounts receivable; (iii) the customer mix in each of the aging categories and the nature of the receivable; (iv) our historical provision for doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic conditions of the customer's industry as well as general economic conditions, among other factors.

INCOME TAXES

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes.  SFAS 109 prescribes the use of the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we establish a valuation allowance. To the extent we establish a valuation allowance, or increase or decrease this allowance in a period, we increase or decrease our income tax provision in our statement of operations. If any of our estimates of our prior period taxable income or loss prove to be incorrect, material differences could impact the amount and timing of income tax benefits or payments for any period. In addition, as a result of the significant change in the Company's ownership, the Company's future use of its existing net operating losses may be limited.

28

The Company currently operates in the PRC, however, our operations could change in the near future and we could be subject to tax liability involving a consideration of uncertainties in the application and interpretation of complex tax regulations in a multitude of jurisdictions across operations in other countries.

We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. The tax liabilities are reflected net of realized tax loss carry forwards. We adjust these reserves upon specific events; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the contingency has been resolved and the liabilities are no longer necessary.

Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of income taxes that we provide during any given year.

STOCK- BASED COMPENSATION

We account for share-based payments in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating expected volatility. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

ASSET IMPAIRMENT

We periodically evaluate the carrying value of other long-lived assets, including, but not limited to, property and equipment and intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Significant estimates are utilized to calculate expected future cash flows utilized in impairment analyses. We also utilize judgment to determine other factors within fair value analyses, including the applicable discount rate

OFF-BALANCE SHEET ARRANGEMENTS

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of September 30, 2008, the end of the period covered by this quarterly report, our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this quarterly report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our Chief Executive Officer who also serves as our principal financial and accounting officer, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

All of our employees and accounting staff are located in the PRC and we do not presently have a Chief Financial Officer, comptroller or similarly titled senior financial officer who is bilingual and experienced in the application of U.S. GAAP. Currently, we are searching for an appropriate candidate who can fill such a position; however, we are unable to predict when such a person will be hired. We have also begun providing additional training to our accounting staff in the application of U.S. GAAP. As a result of these matters, our management believes that a deficiency in our internal controls continues to exist. Based upon historical accounting errors and lack of a Chief Financial Officer and sufficient trained accounting staff, our management has determined that there is a deficiency in our internal controls over financial reporting and that our disclosure controls and procedures were ineffective at September 30, 2008. Until we expand our staff to include a bilingual senior financial officer who has the requisite experience necessary, as well as supplement the accounting knowledge of our staff, it is likely that we will continue to have material weaknesses in our disclosure controls.

There have been no changes in our internal control over financial reporting during our first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

            None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

Exhibit No.	Description
3.1	Articles of Incorporation (1)
3.2	Articles of Amendment to Articles of Incorporation (2)
3.3	Articles of Amendment to Articles of Incorporation (3)
3.4	Articles of Amendment to Articles of Incorporation (4)
3.5	Articles of Amendment to the Articles of Incorporation (5)
3.6	Bylaws (1)
3.7	Articles of Amendment to the Articles of Incorporation (6)
31.1	Section 302 Certificate of Chief Executive Officer *
31.2	Section 302 Certificate of principal financial and accounting officer *
32.1	Section 906 Certificate of Chief Executive Officer *

* filed herewith

(1)  Incorporated by reference to the Report on Form 8-K as filed on December 8, 1999.

(2)  Incorporated by reference to the Report on Form 8-K as filed on December 27, 2001.

(3)  Incorporated by reference to the annual report on Form 10-KSB for the fiscal year ended December 31, 2002.

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(4)  Incorporated by reference to the Report on Form 8-K as filed on March 17, 2005.

(5)  Incorporated by reference to the Report on Form 8-K as filed on August 22, 2006.

(6)  Incorporated by reference to the Report on Form 8-K as filed on September 15, 2006.

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LINKWELL CORPORATION

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Linkwell Corporation

Date: May 15, 2009	By: /s/ Xuelian Bian
	Xuelian Bian,
	Chief Executive Officer
	President and Principal
	Executive Officer

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