RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2011

RELATED PARTY TRANSACTIONS

NOTE 9 – RELATED PARTY TRANSACTIONS

Linkwell Tech's wholly-owned subsidiary, LiKang Disinfectant, is engaged in business activities with three related parties: Shanghai ZhongYou Pharmaceutical High-Tech Co., Ltd., (“ZhongYou”), Shanghai Jiuqing Pharmaceuticals Company, Ltd. (“Shanghai Jiuqing”) and Linkwell International Trading Co., Ltd. (“Linkwell Trading”).

The Company’s Chairman and Chief Executive Officer, Xuelian Bian, and Vice President and Director, Wei Guan, own 90% and 10% respectively, of the capital stock of ZhongYou. In March 2007, Wei Guan sold his 10% ownership to Bing Chen, the President of LiKang Disinfectant. In August 2007, Xuelian Bian sold his 90% ownership 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 ZhongYou to Shanghai Jiuqing, whose 100% owner is Shanghai Ajiao Shiye Co. Ltd. Mr. Bian is currently a 60% shareholder of Shanghai Ajiao Shiye Co. Ltd.

For the nine months ended September 30, 2011 and 2010, the Company recorded sales of $5,857,573 and $4,657,289 to ZhongYou, respectively.  For the three months ended September 30, 2011 and 2010, the Company recorded sales of $2,290,577 and $1,835,257 to ZhongYou, respectively.  At September 30, 2011 and December 31, 2010, accounts receivables from sales to ZhongYou (net of bad debt allowance) were $8,463,722 and $7,288,088, respectively.

 During the nine months ended September 30, 2011 and 2010, the Company recorded sales of $0 and $1,801 to Shanghai Jiuqing, respectively.  During the three months ended September 30, 2011 and 2010, the Company recorded sales of $0 and $300 to Shanghai Jiuqing, respectively.  At September 30, 2011 and December 31, 2010, accounts receivable from sales to Shanghai Jiuqing were $91,938 and $88,278, respectively. 

As of September 30, 2011 and December 31, 2010, $689,007 and $2,100,204 were due from related parties such as Shanghai Zhongyou Delivery Co., Ltd, Shanghai Likang Pharmaceutical Co., Ltd., and Shanghai Likang International Trading Co., Ltd (“Likang Trading”), respectively, representing short-term advances and other receivables not including the receivables from sales. As of September 30, 2011, the Company owed its management $54,000 and other related parties such as Likang Trading, Zhongyou, and Shanghai Jiuqing, $1,322,678.  As of December 31, 2010, the Company owed its management $54,000 and other related parties $1,326,628. Wuhai Likang was a related party of the Company at December 31, 2010 due to being in the process of acquiring a controlling position in Wuhai Likang (see Note 7).