UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

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

For the fiscal year ended December 31, ~~2009~~2010

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

For the transition period from _____ to_____

Commission File Number: 001-32477

TIENS BIOTECH GROUP (USA), INC.

(Exact name of registrant as specified in its charter)

Delaware	75-2926439
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

No. 617, ~~Yuanquan~~ Xinyuan Rd.

Wuqing New Tech Industrial Park

Tianjin, China 301700

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, including area code: (011) 86-22-8213-7914

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

Title of Each Class		Name of Each Exchange on which Registered
Common Stock, par value $0.001		NYSE Amex

Securities registered pursuant to Section 12(g) of the Exchange Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

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

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 ¨ Accelerated ~~Filer~~ filer ¨ Non-~~Accelerated Filer~~ accelerated filer ¨ (Do not check if a smaller reporting company) Smaller ~~Reporting~~ ~~Company~~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

Based upon the closing sale price of $21.2184 per share of Common Stock on NYSE Amex on June 30, ~~2009~~2010, the aggregate market value of the 3,503,586 shares of voting stock held by non-affiliates of the registrant was approximately $76,~~742~~446,~~925~~598.

There were 71,333,586 shares of the registrant’s common stock outstanding on ~~April~~March 129, ~~2010~~ 2011.

DOCUMENTS INCORPORATED BY REFERENCE – None.

TABLE OF CONTENTS

PART I 2 ITEM 1. BUSINESS 2 ITEM 1A. RISK FACTORS 8 ITEM 1B. UNRESOLVED STAFF COMMENTS 8 ITEM 2. PROPERTIES 8 ITEM 3. LEGAL PROCEEDINGS 9 ITEM 4. (REMOVED AND RESERVED) 9 PART II 9 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASERS OF EQUITY SECURITIES 9 ITEM 6. SELECTED FINANCIAL DATA 1110 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1110 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 1615 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 1615 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 1615 ITEM 9A (T). CONTROLS AND PROCEDURES 1615 ITEM 9B. OTHER INFORMATION 1716 PART III 1716 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 1716 ITEM 11. EXECUTIVE COMPENSATION 20 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 23 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 2423 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 3028 PART IV 3129 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 3129 SIGNATURES 3533

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FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the date this Annual Report on Form 10-K is filed to confirm these statements to actual results, unless required by law.

PART I

ITEM 1. BUSINESS.

In this Annual Report on Form 10-K, references to “dollars” and “$” are to United States Dollars and references to “RMB” and “renminbi” are to Chinese Renminbi (RMB). References to “we”, “us”, “our”, the “Company” or “Tiens USA” include Tiens Biotech Group (USA), Inc. and its subsidiaries.

Overview

Tiens USA researches, develops, manufactures, and markets nutrition supplement products, including wellness products and dietary supplement products. Our operations are conducted from our headquarters in Tianjin, People’s Republic of China (“China” or the “PRC”) through our 80% owned subsidiary, Tianjin Tianshi Biological Development Co., Ltd. (“Biological”), and our wholly-owned subsidiary, Tianjin Tiens Life Resources Co., Ltd. (“Life Resources”). We sell our products for distribution in China to an affiliated company that in turn sells the products to consumers through its chain store and its Chinese affiliated companies. Outside of China, we sell our products to overseas affiliated companies located in 5445 countries that in turn sell them to independent direct sales distributors.

Corporate History and Organization

Tiens USA is a Delaware corporation. We own 100% of Tianshi International Holdings Group Ltd., a British Virgin Islands company (“Tianshi Holdings”) which owns all of the registered share capital of Tianjin Tiens Life Resources Co., Ltd., a Chinese Foreign Investment Enterprise (“Life Resources”) and 80% of Biological’s outstanding shares. Biological is a Chinese-foreign equity joint venture company established under Chinese laws on March 27, 1998, subject to the Law on Sino Foreign Equity Joint Ventures.

Tianjin Tianshi Biological Engineering Co., Ltd. (“Tianshi Engineering”), a Chinese company, owns the remaining 20% of Biological. Tianshi Engineering is 100% owned by Tianjin Tianshi Group Co., Ltd. (“Tianshi Group”), a Chinese company. Tianshi Group is 90% owned by Jinyuan Li, our Chairman, Chief Executive Officer, Acting Chief Financial Officer and President and owner of 95.1% of our outstanding stock, and 10% owned by Baolan Li, Jinyuan Li’s daughter~~. Tianshi Engineering acquired its 20% interest in Biological from Tianjin Tianshi Pharmaceuticals Co.~~, ~~Ltd.~~who ~~(“Tianshi Pharmaceuticals”)~~is ona ~~February~~member ~~28,~~of ~~2008. Tianshi~~our ~~Pharmaceuticals is~~Board ~~wholly~~of ~~owned by Tianshi Group~~Directors.

~~Tianshi Holdings acquired all of the registered share capital of~~ Life Resources from Tianshi International Investment Group Co., Ltd., a British Virgin Islands company (“Tianshi Investment”), on March 13, 2008 for $64.2 million. Jinyuan Li owns 100% of Tianshi Investment. Life Resources is currently constructing research and development, manufacturing and logistic facilities, as well as administrative offices in Tianjin, China totaling approximately 420,000 square meters. We ~~intend~~moved our administrative offices to ~~move~~the ~~our headquarters~~newly constructed Industrial Park on October 16, 2010. We expect to ~~these~~complete ~~new~~the move of our other facilities ~~once~~at ~~they~~the ~~are~~end ~~completed~~of 2011.

~~On November~~Table ~~15, 2009, Tianshi Holdings and Tianshi Investment entered a Contract for the Transfer~~ of Equity Interest (the “Transfer Contract”), pursuant to which Tianshi Holdings agreed to sell all of the registered share capital of Tiens Yihai Co. Ltd. (“Tiens Yihai”) it owned to Tianshi Investment for $37.0 million. Tiens Yihai holds land use rights for 50 acres of land located in Shanghai, China. Tiens Yihai was originally established to build a new research and development facility, but the Company suspended the proposed development in March 2007. Tianshi Holdings held 96% of the equity interest in Tiens Yihai. Tianjin Tianshi Pharmaceuticals Co., Ltd. owned the remaining 4% of Tiens Yihai’s share capital. The sale closed on November 15, 2009. Pursuant to the Transfer Contract, $3,700,000 of the purchase price was paid during the first quarter of 2010, and the remaining $33,300,000 is payable by November 14, 2010.Contents

The following chart shows the ownership interests in our operating subsidiaries.

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Products and Manufacturing

We have developed and produce 37 nutrition supplement products, which include wellness products and dietary supplements.

Each of our wellness products includes at least one health function and has been issued a Certificate of Domestic Wellness Product by the State Food and Drug Administration (SFDA). This SFDA certificate is required for the production and sale of wellness products in China. Dietary supplements, which do not include any health functions, are considered to be “ordinary food,” and do not require a SFDA certificate. Each of our products has been issued a Product Standard Code by the Bureau of Technical Supervision.

We put great emphasis on product quality assurance. In 2002, we were awarded a Quality System Certificate for compliance with the standard “ISO9001: 2000” in the area of Design and Development, Production and Service of Food and Health Care Food in China. In addition, many of our products have received a certificate of Hazard Analysis Critical Control Point (“HACCP”). HACCP identifies and assesses hazards and ~~risk~~risks associated with the manufacture, distribution and use of food-handling establishments. In ~~2008~~2009 and ~~2009~~2010, four of our products received a kosher certificate from the Kosher Supervision of America (“KSA”), which is recognized by rabbinical societies throughout the world. These products bear the KSA symbol, which tells consumers that ~~they~~the products are in compliance with kosher standards.

Our products are manufactured by Life Resources and Biological at our facilities in Tianjin, China. The manufacturing processes of our nutrition supplement products are categorized into six types depending on the different forms of the finished products: Powder, Tea, Capsules, Tablets, Granules and Soft Gel Capsules. All of our manufacturing complies with the product standards approved by the Bureau of Technical Supervision in China.

The following table lists our products.

Wellness Products * Dietary Supplement Products * Bone Treasure Tablets (b) Tianshi Barley Green Tablets (b) Chewable Calcium Tablets (b) Tianshi Breast Beauty Capsules Chewable Calcium Tablets with multi-flavor (b) Tianshi Calcium-Treasure Tablets (b) Grape Extract Capsules (a) (b) Tianshi Double-cellulose Tablets (a) (b) Tianshi Beauty Face Capsules (b) (c) Tianshi Eel Oil Capsules Tianshi Cell Rejuvenation Capsules (a) (b) Tianshi Hemp Seed Oil Softgels Tianshi Chitosan Capsules (a) (b) Tianshi Lycopene Tablets (a) (b) Tianshi Cordyceps Capsules (a) (b) Tianshi Multi-Vit-Mine Coffee (b) Tianshi Lipid Metabolic Management Tea (a) (b) (c) Tianshi Natto Capsules (b) Tianshi Metabolic Balance Capsules (a) (b) (c) Tianshi Perilla Oil Softgels (b) Tianshi Nutrient Super Calcium Powder (a) (b) Tianshi Pine Pollen Powder Capsules Tianshi ~~PressureCare~~Pressure Care Tea (b) Tianshi Propeptide Polypeptide Albumen Powder (b) Tianshi Slimming Tea (a) (b) (c) Tianshi Rich Selenium Green Tea Tianshi Spirulina Capsules (a) (b) Tianshi Sea Buckthorn Oil Softgels (a) (b) Tianshi Super Calcium Powder with Metabolic Factors (a) (b) Tianshi Super Calcium Milk Powder (b) Tianshi Super Calcium Powder for Children (a) (b) Tianshi Tibet-Garlic Capsules (b) Tianshi Super Calcium Capsules with Lecithin (a) (b) Tianshi Sweet Dreams Granules (a) (b) Tianshi Vitality Softgels (a) (b) Tianshi Throat Care Granules (b) Tianshi Zinc Capsules (a) (b)

*	These products are not intended to diagnose, treat, cure or prevent any disease.

(a)	This product has received Halal Approval, which certifies that our manufacturing processes comply with the requirements of Islamic dietary law.

(b)	This product has received an HACCP Certificate.

(c)	This product has received KSA Kosher Certificate.

~~For~~Table ~~the years ended December 31, 2009 and 2008, almost all~~ of our revenue was generated from related party customers. See note 16 to our consolidated financial statements, for a breakdown of domestic and international revenue, and revenue by product group, for the last two fiscal years. In 2009 and 2008, our Tianshi Cordyceps Capsules accounted for 10.6% and 15.4% of our revenue, respectively, and our Tianshi Nutrient Super Calcium Powder accounted for 19.0% and 16.8% of our revenue, respectively.Contents

For the years ended December 31, 2010 and 2009, almost all of our revenue was generated from related party customers. See note 17 to our consolidated financial statements, for a breakdown of domestic and international revenue, and revenue by product group, for the last two fiscal years. In 2010 and 2009, our Tianshi Cordyceps Capsules accounted for 17.4% and 10.6% of our revenue, respectively, and our Tianshi Nutrient Super Calcium Powder accounted for 15.7% and 19.0% of our revenue, respectively.

Trademarks and Patents

We consider the “Tiens” logo important to our business and have registered our products under the logo “Tiens” with the State Administration of Industry and Commerce in China. The registration is valid for a period of ten years from May 21, 2002 and can be renewed for further ten-year periods multiple times. We have conducted extensive research and developed Tianshi Super Calcium Powder with Metabolic Factors and Tianshi Super Calcium Powder for Children, which have each been awarded a patent from the State Intellectual Properties Office in China with respective patent numbers of ZL97115067.2 and ZL97115068.0. These two patents are effective for 20 years, commencing on January 13, 2001.

Suppliers

We have established long-term relationships with most of our suppliers. We believe that the raw materials required for manufacturing our products are relatively easy to find and alternative suppliers are convenient to locate. The following table lists our principal suppliers:

SUPPLIER PRODUCT Tianjin Xinhengyang Import and Export Trade Co.,Ltd Whole and de-fatted milk powder, Polydextrose Tianjin Xingsheng Import and Export Trade Co.,Ltd Cordyceps mycelium powder Shanghai Guangdeli Capsule Co.,Ltd Capsules Qinghai Kangpu Biological ~~Techonology~~Technology Development Co.,Ltd Seabuckthorn seed oil Tianjin Tangchao Food Industry Co.,Ltd Extraction of grape seed, yolk lecithin Tianjin Xindayutong Trade Co., Ltd Gelatin, Vitamin E powder Shanxi Guangsheng Capsule Co., Ltd Capsules ~~Tianjin~~Baolingbao ~~Runya~~Biological ~~Techonology Development~~ Co., Ltd ~~Spirulina powder~~Isomaltooligosaccharide, ~~wheat~~Anhydrous ~~germ~~glucose ~~oil~~Hebei ~~Suzhou~~Jinmu ~~Capsule~~Pharmaceutical Group Co.,Ltd ~~Capsules~~Folium nelumbinis, Herba gynostemma pentaphyllum Shandong Aokang Biological ~~Techonology~~Technology Co.,Ltd Chitosan

Research and Development

We incurred research and development expenses of $1.38 million and $1.53 million in ~~2009~~2010 and ~~2008~~2009, respectively. As of December 31, ~~2009~~2010, we employed 7991 staff members in research and development, which accounts for aan ~~reduction~~increase of 40 12 employees in our research and development team during ~~2009~~2010.

Marketing and Distribution

In China, we sell our products to Tianshi Engineering, an affiliated Chinese company, through our subsidiaries Biological and Life Resources. Tianshi Engineering, in turn, sells the products to customers through its branches and affiliated companies and at chain stores, which are owned by individual distributors, who are not affiliates of the Company. During ~~2009~~2010 Tianshi Engineering closed ~~six~~five of its less profitable branches in China. As of December 31, ~~2009~~2010, Tianshi Engineering had 9287 branches in China. Prior to 2006, Biological sold all of its products to Tianshi Engineering as finished products at a price equal to 25% of the Chinese market price for the products. This 25% figure was negotiated between the parties in 2003, before we acquired Tianshi Holdings, and we believe that it is a reasonable sales price for us to receive. We used this pricing formula in ~~2009~~2010, and currently continue to use the same pricing formula.

At the beginning of 2006, Biological also began selling semi-finished products to Tianshi Engineering. To qualify for a direct selling license in China, Tianshi Engineering is required to produce a part of the products that it sells in China. As a result, Biological began to sell semi-finished products to Tianshi Engineering, which jointly shares with us licenses to produce, manufacture and sell the products. The price of semi-finished goods sold to Tianshi Engineering was originally set at the beginning of 2006 to provide us with a 75% gross profit margin. However, based on fluctuations in the cost of raw materials and quantities produced, this percentage varied during the year. This 75% figure was negotiated between the parties, and we believe that it is reasonable. The goal of this new pricing policy was to try to maintain our gross margins on semi-finished goods at a similar level to historical gross margins for finished goods.

AsTable of ~~June~~ 2008, Life Resources replaced Biological in the production of semi-finished products and began to produce and sell semi-finished products to Tianshi Engineering on the same pricing terms as Biological’s previous sales. Biological currently only sells finished goods to Tianshi Engineering. Starting in October 2009, Life Resources transferred part of its production and sale of semi-finished products to Biological.Contents

~~Internationally, our~~As ~~strategy~~of isJune to2008, ~~develop~~Life aResources ~~strong~~replaced ~~direct~~Biological ~~sales~~in ~~force through our international affiliated companies. Currently~~ the ~~United~~production ~~States is not a significant part~~ of ~~our~~semi-finished ~~business.~~products Weand ~~sell~~began ~~our products~~ to ~~overseas~~produce ~~affiliated companies~~and ~~located~~sell ~~in 54 countries who in turn re~~semi-~~package~~finished ~~the~~ products to ~~meet the~~Tianshi ~~needs~~Engineering ofon the ~~local~~same ~~markets~~pricing ~~and~~terms ~~sell~~as ~~them~~Biological’s toprevious ~~independent direct~~ sales ~~distributors~~. ~~During~~In October 2009, weLife ~~increased~~Resources ~~the~~transferred ~~number~~part of ~~countries~~its ~~where~~production we sell directly to overseas affiliates from 46 to 54. Our CEO, Jinyuan Li, owns or controls these overseas related companies. Due to the common ownership, there are no formal sales or administrative agreements among us and ~~those overseas~~sale ~~related parties. The business operations among these related entities have historically been, and continue to be, regulated through internal policies. In 2009 our highest sales outside~~ of ~~China~~semi-finished ~~were~~products to ~~the following eleven countries, in descending order: Indonesia, Russia, Peru, South Africa, Vietnam, Portugal, Ukraine, Romania, Bengal, Nigeria, and Kenya~~Biological.

Internationally, our strategy is to develop a strong direct sales force through our international affiliated companies. We sell our products to overseas affiliated companies located in 45 countries who in turn re-package the products to meet the needs of the local markets and sell them to independent direct sales distributors. Currently, the United States is not a significant part of our business. During 2010, we decreased the number of countries where we sell directly to overseas affiliates from 54 to 45. Our CEO, Jinyuan Li, owns or controls these overseas related companies. Due to the common ownership, there are no formal sales or administrative agreements among us and those overseas related parties. The business operations among these related entities have historically been, and continue to be, regulated through internal policies. In 2010 our highest sales outside of China were to the following eleven countries, in descending order: Russia, South Africa, Kazakhstan, Roumania, Ukraine, Lagos, India, Bengal, Ghana, Uganda and Columbia.

As operation costs vary from country to country, international market prices vary accordingly. We sell our products to overseas affiliates at the FOB (destination port) price, which consists of 25% of the Chinese retail price for similar products in Chinese market, including customs duty, value-added tax and other miscellaneous transportation cost. The overseas affiliates mark up the products to cover their expenses and realize profits of approximately 10%.

Competition

Internationally, we engage in the direct selling industry and compete with other direct selling organizations. Some of them have a longer operating history and higher visibility, name recognition and financial resources than we do. The leading direct selling companies in our existing markets are Avon and Alticor (Amway). Some of our competitors, including Avon and Alticor (Amway), have been granted a direct selling business license in certain parts of China pursuant to China’s regulations governing direct selling. In other cites and/or provinces of China, the selling models of Avon and Alticor (Amway) are similar to the model utilized by our company,; therefore, Avon and Alticor (Amway) are our main competitors in our Chinese operations. The direct selling regulations require Tianshi Engineering, our affiliate who sells our products in China, to apply for approval to conduct a direct selling enterprise in China. ~~Tianshi Engineering~~ ~~has~~On ~~made~~March an11, ~~application for~~2011, ~~but~~Tianshi ~~has~~Engineering ~~not yet~~ received, a direct selling license in ~~China~~Tianjin.

Regulatory Framework

Product Regulation

The central governing authority in China for wellness products is the SFDA, which is under the jurisdiction of the State Council. SFDA issues administrative rules. Provincial, city and town authorities implement the rules of the SFDA. Other than the SFDA, other ministries and administrations also have certain responsibility for the management of wellness or nutrition supplement products, such as the State Administration for Industry and Commerce.

We develop and manufacture products that are classified as nutrition supplement products, which include wellness products and dietary supplement products. Wellness products may not be sold in China without a wellness products certificate. The governmental approval process in China for a newly developed wellness product is as follows:

An application for a product certificate is filed with SFDA, which directs the applicant to send product samples to one of the government appointed research institutes;

The appointed research institute conducts clinical trials, stability tests, function tests and toxicity tests on the product, makes a report and sends the report back to SFDA within 6 months; and

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The Expert Committee of SFDA makes a final decision on the application and issues a “wellness products certificate” or a refusal notice to the applicant.

This certificate authorizes the sales and marketing of the product in China. The certificate does not expire and does not require renewal. The approval process generally takes nine to twelve months. Dietary supplement products are not subject to SFDA regulation.

Sales and Marketing Regulations

In most countries, ~~sales of~~ our products are usually considered general commodities, which do not require specific selling permits and are not subject to the strict regulations applied to drugs and medicine. In some countries, direct selling (or multi-level marketing) is highly regulated or prohibited. Since we sell our products to our affiliated companies for sale internationally, the local approval issues with respect to sales and distribution are addressed by our affiliates.

In China, we aim to expand our market share through the branches, chain stores, and affiliated companies of Tianshi Engineering, our affiliate ~~who~~that sells our products in China. The regulatory environment with respect to direct selling in this market remains fluid and the process for obtaining the necessary governmental approvals ~~have~~has been interpreted differently by different governmental authorities.

Tianshi Engineering has applied for a direct selling license in a number of provinces and must obtain a series of approvals from the Departments of Commerce in such provinces, as well as the Departments of Commerce in each city and district in which we plan to operate. Tianshi Engineering is also required to obtain the approval of the State Ministry of Commerce, which is the national government authority overseeing direct selling.

Tianshi Engineering has found that it is taking more time than anticipated to work through the approval process with the Chinese authorities. These authorities have broad discretion in interpreting the regulations and granting necessary approvals. A delay in obtaining approvals at one level can delay its ability to obtain approvals at the next level. The complexity of the approval process as well as the government’s continued cautious approach as direct selling develops in China makes it difficult to predict a timeline for obtaining these approvals.

Environmental Compliance

We are subject to China’s National Environmental Protection Law, as well as a number of other national and local laws and regulations regulating air, water and noise pollution and setting pollutant discharge standards. We believe that all our manufacturing operations are in material compliance with all applicable environmental laws. During ~~2009~~2010, we did not incur any costs to comply with environmental laws.

Employees

As of December 31, ~~2009~~2010, we had 1,~~455~~380 full-time employees. We have no part-time employees. We believe that our relations with our employees are satisfactory.

~~Reports to~~Available ~~Security Holders~~Information

~~We deliver~~This ~~annual~~Annual ~~reports~~Report on Form 10-K, ~~which~~for ~~include~~the ~~our~~fiscal ~~financial~~year ~~statements,~~ended ~~to our~~December ~~shareholders. We~~31, ~~file~~2010 ~~annual~~is ~~reports~~available on ~~Form~~our ~~10-K,~~website ~~quarterly reports~~at onhttp://www.tiens-bio.com. ~~Form~~The ~~10-Q,~~Company’s ~~current~~Annual ~~reports~~Report on Form 810-K ~~and~~for ~~proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of~~ the ~~Securities~~fiscal ~~Exchange~~year ~~Act~~ended ofDecember ~~1934~~31, as2010, ~~amended~~excluding ~~(the “Exchange~~exhibits, ~~Act”). The public may read~~ and ~~copy these materials at~~ the ~~Securities and Exchange Commission~~Company’s ~~(“SEC”)~~complete ~~Public~~audited ~~Reference~~financial ~~Room~~statements atfor ~~100~~the Ffiscal ~~Street,~~year ~~NE, Washington,~~ended ~~D.C.~~December ~~20549~~31, on2010, ~~official~~will ~~business~~be ~~days~~mailed ~~during~~without ~~the~~charge ~~hours of 10:00 am~~ to ~~3:00~~any ~~pm.~~stockholder, ~~The~~upon ~~public~~written ~~may~~request ~~obtain~~to ~~information~~Secretary ~~on the operation~~ of the ~~public reference~~Company, ~~room~~c/o byTiens ~~calling~~Biotech ~~the~~Group ~~SEC at 1-800-SEC-0330. The SEC also maintains a website~~ (~~http://www.sec.gov~~USA), ~~that contains reports~~Inc., ~~proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically~~No. ~~You~~17, ~~may~~Xinyuan ~~also~~Road, ~~obtain~~Wuqing ~~copies~~New-Tech ofIndustrial ~~our reports filed with the SEC~~Park, ~~free of charge~~Tianjin, onPeople’s ~~our~~Republic ~~website~~of atChina ~~http://www~~301700.~~tiens-bio.com.~~

We file annual and quarterly reports, proxy statements and other information with the SEC. Stockholders may read and copy any reports, statements or other information that we file at the SEC’s public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. Our public filings are also available from commercial document retrieval services and at the Internet Web site maintained by the SEC at www.sec.gov.

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ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

We conduct our main business activities in Tianjin, China. Our primary facilities are located at No. 6.17, ~~Yuanquan~~Xinyuan Road, Wuqing New-tech Industrial Park, Tianjin, PRC.

~~Since 2003~~On January 1, 2009, Biological ~~has~~entered ~~leased~~into an office ~~space~~ and ~~manufacturing~~ facilities ~~from~~ lease agreement with Tianshi Group. ~~The~~ ~~lease~~Under ~~expired at~~ the ~~end~~terms of ~~2007~~the ~~and~~agreement, ~~the~~Biological’s annual rent ~~was~~is equal to 1% of ~~our~~its ~~total~~ gross revenues. ~~The~~ ~~rent~~In ~~was negotiated~~addition, byBiological ~~the~~is ~~parties~~obligated ~~before~~to wepay ~~acquired Tianshi Holdings~~insurance, maintenance and weother ~~believe that~~expenses itrelated isto athe ~~reasonable~~premises. ~~rent~~This ~~for~~agreement ~~the~~expired ~~facilities.~~on InDecember ~~addition~~31, we2009. ~~are~~On ~~obligated to~~January ~~pay~~1, ~~insurance~~2010, ~~maintenance~~Biological and ~~other~~Life ~~expenses~~Resources ~~related~~each toentered ~~the~~an ~~premises.~~office ~~This lease~~and ~~has~~facilities ~~been~~lease ~~renewed~~agreement ~~annually~~with ~~since~~Tianshi ~~2008~~Group on the same ~~economic~~ terms. ~~The current~~as Biological’s lease ~~covers~~agreement with Tianshi Group in 2009. These two leases cover the following real properties:

one office buildings with an area of 1,350 square meters; and

one dormitory with an area of 2,365 square meters.

InThe ~~2009 we~~Company paid rent under these leases in the amount of $500,361 and $458,382 tofor ~~Tianshi~~the ~~Group~~year ~~under~~ended ~~the~~December ~~lease~~31, 2010 and 2009, respectively.

On ~~December~~ ~~14,~~January ~~2007~~1, ~~Biological entered a Real Property Transfer Agreement (the “Transfer Agreement”) with Tianshi Group. Under the Transfer Agreement~~2009, ~~Biological~~ ~~transferred~~each ~~to Tianshi Group title to buildings consisting~~ of ~~approximately~~ ~~34,000 square meters of office, workshop, conference and exhibition space located at our headquarters in Tianjin China for $15,316,496.~~ Biological ~~also transferred land use rights on the underlying land, which is owned by the government of China, continuing through December 30, 2054 with respect to the conference center property~~ and ~~May~~Life ~~31, 2043~~Resources ~~with respect the other properties. On December 14, 2007, Biological and Tianshi Group also~~ entered a Lease Agreement ~~(the~~with ~~“2007~~Tianshi ~~Lease Agreement”)~~Group pursuant to which Biological ~~has~~and Life Resources will have the right to use and occupy the ~~office~~ workshop and ~~workshop~~warehouse spaces being transferred under the 2007 Transfer Agreement. ~~The lease is rent-free, but Biological is required to pay Tianshi Group for utility charges~~ and ~~maintenance~~the ~~costs~~2008 onTransfer ~~the buildings~~Agreement. The lease ~~continues~~agreements ~~until~~cover the ~~earlier~~ offollowing ~~the~~workshop ~~date~~and ~~that~~warehouse ~~we move to the new administrative offices being constructed by Life Resources, or the land use rights on the underlying property expire.~~spaces:

~~The following~~· ~~properties~~four ~~are~~workshops ~~covered~~with byan ~~the~~area ~~December~~of 148,549 ~~2007~~square ~~lease:~~meters; and

· ~~two~~one ~~workshops~~warehouse with an area of 83,~~600~~870 square meters;.

· The ~~two~~leases ~~warehouses~~are ~~with~~rent-free, anexcept ~~area~~that, Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continue until the earlier of 9the date Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31,~~447~~ ~~square~~2010, ~~meters;~~Biological and Life Resources recorded $330,708 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

· one power station with an area of 615 square meters.

On December 25, 2008, Biological and Tianshi Group entered a Property Transfer Agreement (the “Property Transfer Agreement”). Under the Property Transfer Agreement, Biological transferred to Tianshi Group four buildings consisting of 9,974.31 square meters including three workshops and a canteen located at our headquarters in Tianjin, China. Pursuant to the Property Transfer Agreement, Tianshi Group will pay Biological RMB 32,800,000 ($4,797,328) over several installments. In 2009, Tianshi Group has paid an aggregate of RMB 15,000,000 ( or US$2,193,900) to Biological under the Property Transfer Agreement. The remaining RMB 17,800,000 (or US$2,603,428) will be paid in 2010.

On January 1, 2009, the 2007 Lease Agreement was terminated and each of Biological and Life Resources entered a Lease Agreement with Tianshi Group pursuant to which Biological and Life Resources will have the right to use and occupy the workshop spaces being transferred under the 2007 Transfer Agreement and the 2008 Transfer Agreement. The leases are rent-free, except that, Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continue until the earlier of the date Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31, 2009, Biological and Life Resources recorded $303,056 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

Life Resources Property

Life Resources is currently constructing research and development, manufacturing and logistic facilities, as well as administrative offices totaling approximately 420,000 square meters. ~~Construction began in July 2006.~~ The facilities are located ~~seven~~in ~~kilometers from~~ our current headquarters in Tianjin, China.

As of December 31, ~~2009~~2010, the ~~majority~~office ofbuildings, ~~the~~dormitories, ~~main~~power ~~structures~~center, ofboiler ~~the~~room, ~~Life~~warehouse ~~Resources facility~~for ~~construction~~wellness ~~project~~products had been ~~completed.~~transferred ~~Interior~~from ~~decoration~~construction ofin ~~the warehouses,~~progress ~~work~~to ~~plants,~~fixed ~~power~~assets. The product exhibition center, ~~boiler~~quality ~~room~~control center and ~~dormitories~~wash ~~are~~house ~~near completion.~~were ~~Interior~~undergoing interior decoration ofand ~~the~~expect ~~office~~to ~~buildings,~~be ~~product~~completed ~~exhibition center,~~at ~~quality~~the ~~control~~end ~~center,~~of ~~and~~June ~~washhouse is underway~~2011. The interior decoration of ~~the~~work ~~product~~plants ~~exhibition center~~ and ~~wash~~other ~~house~~warehouses ishas ~~expected~~been be nearly completed inand ~~the~~these ~~first~~facilities ~~half~~will ofbe ~~2010,~~put ~~and~~into use once the ~~office~~equipment ~~building~~is ~~and~~installed. ~~quality~~We ~~control center~~expect ~~are~~the ~~expected~~equipment to be ~~completed~~installed inat the ~~second~~end ~~half~~ of ~~2010~~2011. As of the end of ~~2009~~2010, the cost of the completed work of ~~these~~construction in progress and other facilities was $~~139~~204,~~090~~854,~~047~~576 (based on an exchange rate of $1 = RMB 6.~~8371~~6120 as of December 31, ~~2009~~ 2010), which includes amounts paid for the underlying land use right. We ~~expect~~The ~~that~~office ~~all~~buildings, ~~construction~~dormitories, ~~work~~power ~~and~~center, ~~equipment installation~~boiler ~~will~~room ~~be completed in 2010~~ and ~~that~~warehouse ~~the~~for ~~Life~~wellness ~~Resources~~products ~~facility~~had ~~is estimated~~been toput ~~begin~~into ~~operation~~use byfrom ~~June~~October 2010. We ~~have~~expect ~~provided~~that ~~for~~other ~~an amount~~construction ofwork upand toequipment ~~$36,461,613~~installation ~~(based~~will onbe ancompleted ~~exchange rate of $1 = RMB 6.8291 as of January 1, 2010)~~ in ~~our 2010 budget for capital expenditures on the Life Resources facility~~2011. ~~We intend to move our headquarters to these new facilities upon its completion.~~

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ITEM 3. LEGAL PROCEEDINGS.

We are not a party to any material pending legal proceedings.

ITEM 4. (REMOVED AND RESERVED)

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASERS OF EQUITY SECURITIES.

Market Prices of Common Stock

Our common stock is listed on NYSE Amex under the symbol “TBV”. The following table sets forth the range of high and low sales prices for our common stock reported by NYSE Amex in each fiscal quarter from January 1, ~~2008~~2009 to December 31, ~~2009~~ 2010.

	High		Low
2008
2010
Quarter Ended March 31	$	2.42	$	2.00
Quarter Ended December 31	$	1.75	$	1.25
Quarter Ended June 30	$	2.15	$	1.42
Quarter Ended September 30	$	1.85	$	1.33
Quarter ended September 30	$	1.60	$	0.92
Quarter Ended June 30	$	2.62	$	1.75
Quarter ended December 31	$	2.20	$	0.76
Quarter Ended March 31	$	3.10	$	2.16
2009
Quarter Ended March 31	$	4.45	$	1.11
Quarter Ended December 31	$	5.35	$	2.45
Quarter Ended September 30	$	5.57	$	2.26
Quarter Ended June 30	$	3.02	$	1.67
Quarter ended September 30	$	5.57	$	2.26
Quarter Ended March 31	$	4.45	$	1.11
Quarter ended December 31	$	5.35	$	2.45

Stockholders

As of ~~April~~ 1March 29, ~~2010~~2011, there were a total of 71,333,586 shares of our common stock outstanding, held by approximately ~~935~~930 stockholders of record.

Dividend Policy

We have not declared any dividends on our common stock since inception and do not intend to pay dividends on our common stock in the foreseeable future. If we ever determine to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency from the PRC for the payment of such dividends from the profits of Biological and Life Resources. Please see additional discussion under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations--—Financial Condition, Liquidity and Capital Resources.”

Securities Authorized for Issuance Under Equity Compensation Plans

None.

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ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS:

The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The words or phrases “would be,” “will allow,” “expect to”, “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward-looking statements”. Such statements include those concerning our expected financial performance, our corporate strategy and operational plans. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations; (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under “Liquidity and Capital Resources”; and (e) whether Tianshi Engineering, our affiliate who sells our products in China, obtains a direct selling license in China. Statements made herein are as of the date of the filing of this Form 10-K with the Securities and Exchange Commission and should not be relied upon as of any subsequent date.

Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Overview

Tiens USA researches, develops, manufactures, and markets 37 nutrition supplement products, including wellness products and dietary supplement products. Our operations are conducted from our headquarters in Tianjin, China through our 80% owned subsidiary, Biological, and ~~through~~ our wholly-owned subsidiary, Life Resources. We sell our products to affiliated companies in China and internationally.

We develop our products at our product research and development center, which employs highly qualified professionals in the fields of pharmacology, biology, chemistry and fine chemistry.

In China, we sell our products to Tianshi Engineering, an affiliated company. Tianshi Engineering, in turn, sells the products to customers through its branches and affiliated companies and at chain stores, which are owned by individual distributors. Internationally, we sell our products to overseas affiliates who in turn re-package the products to meet the needs of the local markets and sell to independent distributors who use the products themselves and/or resell them to other distributors or consumers.

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Results of Operations

Year Ended December 31, ~~2009~~2010 Compared to Year Ended December 31, ~~2008~~2009

	Year ended December 31,
	2009			2008			Change
	2010			2009			Change
REVENUE	$	61,976,069		$	77,247,898		-19.8%
REVENUE - RELATED PARTIES	$	41,021,135		$	60,032,968			-33.3	%
COST OF SALES		20,167,492			24,870,178		-18.9%
REVENUE - THIRD PARTIES		323,585			1,943,101
GROSS PROFIT		41,808,577			52,377,720		-20.2%
COST OF SALES-RELATED PARTIES		14,850,739			18,754,680			-25.6	%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		16,009,382			18,574,719		-13.8%
COST OF SALES-THIRD PARTIES		158,638			1,412,812
INCOME FROM OPERATIONS		25,799,195			33,803,001		-23.7%
GROSS PROFIT		26,335,343			41,808,577			-37.0	%
(Interest expense)		(186,543	)		(266,273	)	-29.9%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		19,530,501			16,009,382			22.0	%
Interest income		301,709			881,070		-65.8%
INCOME FROM OPERATIONS		6,804,842			25,799,195			-73.6	%
Other (expense) income		(176,757	)		(2,099,913	)	-91.6%
OTHER (EXPENSE) INCOME, NET		(176,578	)		(61,591	)		186.7	%
OTHER (EXPENSE) INCOME, NET		(61,591	)		(1,485,116	)	-95.9%
INCOME BEFORE PROVISION FOR INCOME TAXES		6,628,264			25,737,604			-74.2	%
INCOME BEFORE PROVISION FOR INCOME TAXES		25,737,604			32,317,885		-20.4%
PROVISION FOR INCOME TAXES		1,469,548			930,703			57.9	%
PROVISION FOR INCOME TAXES		930,703			2,345,474		-60.3%
NET INCOME		5,158,716			24,806,901			-79.2	%
NET INCOME		24,806,901			29,972,411		-17.2%
LESS: Net income attributable to the noncontrolling interest		(323,101	)		(965,557	)		-66.5	%
LESS: Net income attributable to the noncontrolling interest		(965,557	)		(2,315,215	)	-58.3%
NET INCOME ATTRIBUTABLE TO TIENS BIOTECH GROUP	$	4,835,615		$	23,841,344			-79.7	%
NET INCOME ATTRIBUTABLE TO TIENS BIOTECH GROUP	$	23,841,344		$	27,657,196		-13.8%
WEIGHTED AVERAGE NUMBER OF SHARES, BASIC AND DILUTED		71,333,586			71,333,586
WEIGHTED AVERAGE NUMBER OF SHARES, BASIC AND DILUTED		71,333,586			71,333,586
EARNINGS PER SHARE, BASIC AND DILUTED	$	0.07		$	0.33
EARNINGS PER SHARE, BASIC AND DILUTED	$	0.33		$	0.39

Revenue. In ~~2009~~2010 revenue was $6241.03 million, compared to $7762.20 million in ~~2008~~2009, a decrease of 1933.83%. ~~Revenue for~~ ~~2009 consisted of $60.0 million in revenue from related parties and $1.9 million in revenue from third parties, while revenue for 2008 was entirely from related parties.~~ The breakdown of revenue between Chinese and international sales is as follows:

Chinese and International Revenue

Revenue	~~2009~~Year 2010		~~2008~~Year 2009		% Change
China	$	2724,~~241~~894,~~333~~472	$	3327,~~711~~241,~~474~~333	~~-19.2%~~	-8.6	%
International	$	3416,~~734~~450,~~736~~248	$	4334,~~536~~734,~~424~~736	~~-20.2%~~	-52.6	%

For ~~2009~~2010, revenue in China was $2724.29 million, a decrease of 198.26% compared to $3327.7 2 million for 2008. During the third quarter of 2008, Tianshi Engineering announced plans to increase the prices of its products beginning in October 2008. We believe this announcement prompted customers to stock up on certain products during 2008. Consumer demand for our products decreased in the first and third quarters of 2009~~, offset by some increases in sales that we experienced during the second and fourth quarters of 2009 as a result of marketing efforts~~.

~~Management believes~~The decrease in revenue for the year of 2010 was mainly due to the decrease in international sales. For the year of 2010, international revenue was ~~primarily~~$16.5 million, ~~due~~a decrease of 52.6% compared to ~~declining customer~~$34.7 ~~demand~~million for ~~our~~the ~~products~~year of 2009. The reasons for the decrease in ~~2009~~international asrevenue ainclude, ~~result~~but are ofnot limited to the ~~global~~following: ~~economic crisis.~~(1) During 2008, China’s Administration of Quality Supervision, Inspection and Quarantine (“AQSIQ”) carried out a national campaign against unsafe food and substandard products, which brought on a general slow-down and backlog of export clearances for Chinese food products. Upon the lifting of the ~~regulation~~regulations, overseas affiliated companies began to purchase more products, thereby increasing sales of 2009; (2) Our Indonesia affiliated company has not purchased from us during the year of 2010, given they purchased more products in 2009 after the 2008 product scarcity for the reason noted above. During the first ~~two~~ ~~quarters~~half of 2009, our Indonesia affiliated company purchased $9.2 ~~However~~million of finished and semi-finished product from us, ~~management~~which ~~believes~~was ~~that~~2.7 times their purchases for the ~~impact~~first half of 2008. In addition, local Original Equipment Manufacturers (“OEM”) in Indonesia have been producing healthcare products with our semi-finished goods, which have a profit margin that is much lower than the profit margin of finished goods. The sales decline in Indonesia accounts for 43.56% of that in overseas. (3) The lasting global economic ~~crisis~~recession ~~was~~has ~~reflected~~generally inreduced ~~the~~customers' ~~third~~buying power. ~~and~~During ~~forth~~the ~~quarters~~early stages of ~~2009~~the recession, the direct selling business is generally benefited with the new sales force joined by the unemployed population. ~~The decreased~~This ~~international~~positive ~~revenue~~effect ~~reflects~~has abeen ~~sharp~~fading ~~decline~~away during the later stages of the recession; (4) Our affiliated companies in ~~sales~~many regions have made certain adjustments to ~~Asia-Pacific~~ their marketing programs and ~~Europe~~reorganizations at their branch and higher levels, which is expected to boost sales performance over the long-~~Asia~~run ~~during~~but ~~2009~~negatively affect sales in the short-run.

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~~Tianshi Engineering’s~~Table ~~application~~of for a direct selling license in China is still pending. Until the application is approved, Tianshi Engineering will continue to sell our products through its branches, affiliated companies, and chain stores in China.Contents

Cost of sales. Cost of sales were $2015.20 million in ~~2009~~2010 compared to $2420.92 million in ~~2008~~2009, a decrease of 18 25.96%. ~~Cost~~ ~~of sales for 2009 consisted of $18.8 million in cost of sales to related parties and $1.4 million in cost of sales to third parties, while cost of sales for 2008 was entirely to related parties.~~ This decrease was primarily due to the corresponding decrease in sales. Cost of sales decreased at a lower rate than revenue, primarily due to fixed costs, which do not increase or decrease in line with sales.

Gross profit. Gross profit decreased by 2037.20% to $4126.83 million in ~~2009~~2010, compared to $5241.~~4million~~8million in ~~2008~~2009. The gross profit margin for ~~2009~~2010 was 6763.57% compared to 67.85% in ~~2008~~2009.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~decreased~~increased by 1322.80% to $1619.0 5 million in ~~2009~~2010, compared to $1816.60million ~~million~~ in ~~2008~~2009. The ~~decrease~~increase was primarily due to ~~decreases~~increases in allowance for bad debt ($01.69 million), salaries expenses ~~($0.5~~ ~~million), advertising expenses~~ ($0.47 million), and Research & Development Expenses ($0.36 million). ~~Selling, general and administrative expenses as a percentage of sales increased primarily due to fixed costs, which do not increase or decrease in line with sales.~~

Other (expense) income, net. Other income, net was $0.12 million of expense in ~~2009~~2010, compared to expense of $10.506 million in ~~2008~~2009. ~~The~~This ~~difference~~ was ~~primarily~~mainly due to the $1decrease in interest income and the increase in interest expense of 2010 compared to 2009.2 ~~million donation~~In wethe ~~made~~second ~~towards~~half of 2010, the ~~Sichuan~~Company ~~earthquake~~obtained ~~relief~~a ~~efforts~~ $9.1million loan from Tianshi Engineering with an interest rate of 5.31% per year and ~~the~~ a $03.140 million ~~donation we~~loan ~~made~~from ~~for~~Construction ~~road~~Bank ~~building~~with ~~for a~~the ~~village~~benchmark interest rate of ~~Cangzhou~~ ~~City~~one-year loan (The interest rate is 5.56% from October 20, in2010 ~~the~~to ~~Hebei~~December ~~Province of~~25, ~~China~~2010 and 5.81% from December 26, ~~each~~2010 ofto December 31, 2010.), which ~~was made during~~contributed ~~2008~~to the increase of interest expense.

~~Net~~Provision for income tax. ~~For~~Provision ~~the~~for ~~above stated~~income ~~reasons,~~tax ~~net~~increased ~~income~~by in57.9% ~~2009~~to ~~was~~ $231.85 million in 2010, compared to $270.79 million in ~~2008,~~2009. aThe ~~decrease~~main reason of 13this increase was that Life Resources began to pay income tax at the rate of 12.85% from January 1, 2010.

Net income. For the above stated reasons, net income in 2010 was $4.8 million compared to $23.8 million in 2009, a decrease of 79.7%.

Financial Condition, Liquidity and Capital Resources

We have historically met our working capital and capital expenditure requirements, including funding for expansion of operations, through net cash flow provided by operating activities. Our principal source of liquidity is our operating cash flow. From the forth quarter of 2010, due to the large amount of cash required for construction in progress and materials purchase of Life Resources, we obtained bank loans.

~~Net~~On ~~cash provided~~October by9, ~~operating~~2010, ~~activities~~Life ~~was~~Resources ~~$43.9~~entered ~~million~~into ina ~~2009~~loan agreement with Agricultural Bank of China (Agricultural Bank), ~~compared~~pursuant to which Agricultural Bank loaned RMB200,000,000 (or US$~~18.8million~~30,248,000) inwith ~~2008.~~the benchmark interest rate of The ~~increase primarily~~People’s ~~reflects~~Bank ~~the fact~~of ~~that~~China to fund Life Resources’ construction in ~~2009~~progress ~~Tianshi~~under ~~Engineering~~the ~~and~~guarantee ~~overseas~~of ~~affiliated~~Tiens ~~companies~~Group. ~~paid~~Under ~~us for~~the ~~products~~agreement, ~~timely~~Life Resources is permitted the full amount before October 8, ~~while~~2011, inand ~~2008~~repay ~~Tianshi~~it ~~Engineering~~before ~~offset~~October ~~part~~8, 2013. As of ~~the amounts~~December ~~owed~~31, to2010, usLife inResources ~~purchase~~has ~~liabilities~~drawn ~~and~~RMB122,000,000 ~~other~~(or ~~liabilities~~US$18,451,280) weof ~~owed~~the ~~Tianshi Investment~~loan.

AsOn ~~of December~~October 3120, ~~2009~~2010, we ~~had~~obtained ~~positive~~a ~~working~~loan ~~capital~~ of ~~$35.2 million. Cash~~RMB20,000,000 ~~was~~(US $13,024,800) from Construction Bank of China for purchasing raw materials and other auxiliary materials at the term of one year.8 ~~million~~The asweighted-average interest rate of ~~December~~the ~~31,~~short-term ~~2009~~debt is the one-year benchmark lending rate (The interest rate is 5.56% from October 20, ~~compared~~2010 to ~~$44.9~~ ~~million~~December as25, ofand 5.81% from December 3126, ~~2008~~2010 to December 31.).

Net cash ~~used~~ inprovided ~~investing~~by operating activities was $8360.04 million in ~~2009~~2010, compared to $3743.39million ~~million~~ in ~~2008~~2009. In ~~2009,~~Our ~~Life~~net ~~Resources~~income ~~paid~~in the year of 2010 was $115.82 million, ina ~~connection with~~79.2% ~~purchasing~~decrease ~~large~~from ~~machinery and equipment~~2009.

~~Accounts receivable-related~~As ~~parties decreased to $15.4 million as~~ of December 31, ~~2009 from $23.9 million as of December 31~~2010, ~~2008,~~we ~~mainly~~had ~~due~~negative toworking ~~the~~capital ~~decrease in sales in the last two quarters~~ of ~~2009 compared to those of 2008. Other receivables-related parties increased to~~ $4410.63 million. asCash ofwas ~~December 31, 2009 from~~ $1510.72 million as of December 31, ~~2008. On November 15~~2010, ~~2009,~~compared ~~Tianshi Holdings and Tianshi Investment entered the Transfer Contract, pursuant~~ to ~~which Tianshi Holdings agreed to sell all of the registered share capital of Tiens Yihai it owned to Tianshi Investment for~~ $371.08 million~~. Tiens~~ ~~Yihai holds~~as ~~land use rights for 50 acres~~ of ~~land~~December ~~located in Shanghai~~31, ~~China. Tiens Yihai was originally established to build a new research and development facility, but the Company suspended the proposed development in March 2007. The sale closed on November 15,~~ 2009. ~~Pursuant to the Transfer Contract, $3.7 million of the purchase price was paid during the first quarter of 2010, and the remaining $33.3 million is payable by November 14, 2010.~~

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Net cash used in investing activities was $73.2 million in 2010 compared to $83.0 million in 2009. In 2010, Life Resources paid $54.5 million on construction in progress.

Accounts receivable-related parties decreased to $10.0 million as of December 31, 2010 from $15.4 million as of December 31, 2009, which was mainly due to the decrease in sales in the year of 2010 compared to those of 2009. Other receivables-related parties decreased to $17.4 million as of December 31, 2010 from $44.6 million as of December 31, 2009, which was mainly due to our collection of a receivable from Tianshi Investment for the sale of Tiens Yihai Co., Ltd. (“Tiens Yihai”).

Going forward, our primary requirements for cash consist of:

completion of construction by Life Resources of new research and development, manufacturing and logistic facilities, and administrative offices;

the continued production of existing products and general overhead and personnel related expenses to support these activities;

the development costs of new products; and

expansion of production scale to meet the demands of our markets.

As of December 31, 2009, the majority of the main structures of the Life Resources facility construction project had been completed. Interior decoration of the warehouses, work plants, power center, boiler room and dormitories are near completion. Interior decoration of the office buildings, product exhibition center, quality control center, wash house is underway. The interior decoration of the product exhibition center and wash house is expected be completed in the first half of 2010, and the office building and quality control center are expected to be completed in the second half of 2010. As of the end of 2009, the cost of the completed work of these facilities was $139.1 million (based on an exchange rate of $1 = RMB 6.8371 as of December 31, 2009), which includes amounts paid for the underlying land use right. We expect that all construction work and equipment installation will be completed in 2010 and that the Life Resources facility is estimated to begin operation by June 2010. We have provided for an amount of up to $36.5 million (based on an exchange rate of $1 = RMB 6.8291 as of January 1, 2010) in our 2010 budget for capital expenditures on the Life Resources facility. We intend to move our headquarters to these new facilities upon its completion.

The Wholly Foreign Owned Enterprise Law (1986), as amended, and The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended, contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises, such as Life Resources, may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, Life Resources are required to set aside a certain amount of any accumulated profits each year (a minimum of 10%, and up to an aggregate amount equal to half of its registered capital), to fund certain reserve funds. These reserves are not distributable as cash dividends, except in the event of liquidation, and cannot be used for working capital purposes. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. We have not declared any dividends on our common stock since inception and do not intend to pay dividends on our common stock in the foreseeable future. If we ever determine to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of such dividends from the profits of Biological and Life Resources.

We anticipate that our current operating activities will enable us to meet our anticipated cash requirements for 2010.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Estimates

Management’s discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See note 2 to our consolidated financial statements, “Summary of Significant Accounting Policies.” Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.

Revenue Recognition

During ~~2009~~ 2010, we sold both semi-finished products and finished products to Tianshi Engineering domestically. Revenue from semi-finished products was recognized at delivery point. Revenue from finished products was recognized only when the related party Chinese distributors recognized sales of our products to unaffiliated third parties. Revenues in both cases are net of taxes.

For overseas sales, we only sell finished products. We recognize revenue from international sales (non-Chinese) to affiliated parties, net of taxes, as goods are shipped and clear review by the customs department of the Chinese government.13

WeTable ~~are generally not contractually obligated to accept returns. However, on a case by case negotiated basis, we permit customers to return products. Revenue is recorded net~~ of an allowance for estimated returns. Such reserves are based upon management’s evaluation of historical experience and estimated costs. The amount of the reserves ultimately required could differ materially in the near term from amounts included in the accompanying consolidated financial statements. As of December 31, 2009, Tianshi Engineering, an affiliated company, owned all of the related party distributors that sell our products in China.Contents

For overseas sales, we sell finished products. We recognize revenue from international sales (non-Chinese) to affiliated parties, net of taxes, as goods are shipped and clear review by the customs department of the Chinese government.

We are generally not contractually obligated to accept returns. However, on a case by case negotiated basis, we permit customers to return products. Revenue is recorded net of an allowance for estimated returns. Such reserves are based upon management’s evaluation of historical experience and estimated costs. The amount of the reserves ultimately required could differ materially in the near term from amounts included in the accompanying consolidated financial statements. As of December 31, 2010, Tianshi Engineering, an affiliated company, owned all of the related party distributors that sell our products in China.

Allowance for Doubtful Accounts

Our trade accounts receivables are mainly due from related companies. We have made full provision for accounts receivable-related parties aging over one year and a general allowance for doubtful debts of 0.5% of the remaining accounts receivable-related parties. Management reviews its accounts receivable on a regular basis to determine if the bad debt allowance is adequate at each year-end, paying particular attention to the age of ~~receivable~~ receivables outstanding.

Inventories

Inventories are stated at the lower of cost or market using the moving average basis. Management reviews inventory annually for possible obsolete goods or to determine if any reserves are necessary for potential obsolescence.

Recent ~~Accounting~~ ~~Pronouncements~~accounting pronouncements

In ~~December~~ ~~2007~~October 2009, the ~~Financial~~FASB issued Accounting Standards ~~Board~~Update (~~“FASB”~~ASU) ~~issued~~2009-13, ~~a pronouncement~~Multiple-Deliverable ~~establishing~~Revenue ~~principles~~Arrangements ~~and~~(ASU ~~requirements~~2009-13) ~~for~~(formerly ~~how~~EITF ~~the~~08-1, ~~acquirer recognizes~~Revenue ~~and~~Arrangements ~~measures~~with inMultiple ~~its~~Deliverables) ~~financial~~which ~~statements~~amends ~~the~~ASC ~~identifiable assets~~605, ~~the liabilities~~Revenue ~~and~~Recognition. ~~any~~This ~~non-controlling~~accounting ~~interest~~update inestablishes ~~the~~a ~~acquiree,~~hierarchy ~~and~~for determining the ~~goodwill acquired~~value inof aeach ~~business~~element ~~combination~~within or a ~~gain~~multiple ~~from~~deliverable ~~a bargain purchase~~arrangement. ~~It also determines what information to disclose.~~ The ~~objective~~amendments ofin ~~the~~this ~~pronouncement~~update ~~is to~~are ~~improve~~effective ~~the~~for ~~relevance,~~revenue ~~representational~~arrangement ~~faithfulness,~~entered ~~and~~into ~~comparability~~or ~~of the~~materially ~~information~~modified ~~that a reporting entity provides~~ in ~~its~~fiscal ~~financial~~years ~~reports~~beginning ~~about a~~on ~~business~~or ~~combination~~after ~~and~~June ~~its~~15, ~~effects~~2010. ~~This~~The ~~pronouncement became~~adoption ~~effective in the first quarter~~ of ASU 2009.-13 ~~The~~did ~~Company~~not ~~adopted~~have itan ~~beginning~~impact ~~January 1, 2009 and had no effect~~ on the Company’s consolidated financial statements..

In ~~December~~ ~~2007~~January 2010, the FASB issued aASU ~~pronouncement~~2010-02 ~~providing~~— ~~guidance~~Consolidation on(Topic ~~how~~810): ~~to report~~Accounting aand ~~non-controlling~~Reporting ~~interest~~for Decreases in ~~consolidated~~Ownership ~~financial~~of ~~statements~~a Subsidiary. ~~The objective~~This ofupdate ~~the~~amends ~~pronouncement~~Subtopic is810-10 and related guidance to ~~improve~~clarify that the ~~relevance,~~scope ~~comparability,~~of ~~and transparency~~the decrease in ownership provisions of the ~~financial~~Subtopic ~~information~~and related guidance applies to (i) a subsidiary or group of assets that is a ~~reporting~~business ~~entity~~or ~~provides~~nonprofit ~~in its~~activity; ~~consolidated~~(ii) ~~financial~~a ~~statements.~~subsidiary ~~This~~that ~~pronouncement became~~is ~~effective in~~a ~~the~~business ~~first~~or ~~quarter~~nonprofit ofactivity ~~2009,~~that ~~and~~is ~~should~~transferred beto ~~applied~~an ~~retrospectively~~equity ~~for~~method ~~all periods~~investee ~~presented.~~or Asjoint aventure; ~~result~~and (iii) an exchange of ~~the~~a ~~adoption~~group of ~~the~~assets ~~pronouncement~~that ~~from~~constitutes ~~January 1,~~a ~~2009,~~business ~~the~~or ~~Company~~nonprofit ~~reclassified~~activity ~~minority~~for a noncontrolling interest in an entity, but does not apply to: (i) sales of ~~$9.8 million~~in substance real estate; and $9 (ii) conveyances of oil and gas mineral rights.0 ~~million~~The toamendments ~~noncontrolling~~in ~~interest as~~this aupdate ~~component~~are ofeffective ~~equity~~beginning onin the ~~Company’s~~ ~~Consolidated~~period ~~Balance~~that ~~Sheet~~an ~~for~~entity adopts FAS 160 (now included in Subtopic 810-10). The adoption of the ~~years~~provisions ~~ended~~in ~~December~~ASU ~~31,~~2010-02 ~~2009~~did ~~and 2008,~~not ~~respectively~~have an impact on the Company’s consolidated financial statements.

InThe ~~March 2008~~FASB has issued ASU 2010-06, ~~the~~Fair ~~FASB~~Value ~~issued~~Measurements aand ~~pronouncement~~Disclosures ~~requiring~~(Topic ~~enhanced~~820): ~~disclosure~~Improving Disclosures about ~~an entity’s~~Fair ~~derivative~~Value ~~and~~Measurements. ~~hedging~~This ~~activities~~ASU requires some new disclosures and ~~thereby~~clarifies ~~improves~~some ~~the~~existing ~~transparency of~~disclosure ~~financial~~requirements ~~reporting~~about fair value measurement as set forth in Codification Subtopic 820-10. ~~The~~ASU ~~objective~~2010-06 ofamends Codification Subtopic 820-10 and now requires a reporting entity to use judgment in determining the ~~pronouncement~~appropriate isclasses of assets and liabilities and to provide ~~adequate~~ ~~information~~disclosures about ~~how~~the ~~derivative~~valuation techniques and ~~hedging~~inputs ~~activities~~used ~~affect~~to ~~an entity’s~~measure ~~financial~~fair ~~position,~~value ~~financial~~for ~~performance,~~both recurring and ~~cash~~nonrecurring ~~flows~~fair value measurements. ~~This pronouncement became~~ASU 2010-06 was effective infor ~~the~~interim ~~first~~and ~~quarter~~annual ofreporting ~~2009~~periods beginning after December 15, ~~and~~2009. ~~its adoption~~As ~~from~~this ~~January~~standard 1relates specifically to disclosures, ~~2009~~the ~~had~~adoption ~~no effect~~did not have an impact on the Company’s consolidated financial ~~statements~~position and results of operations.

1514

InTable ~~April 2008, the FASB issued a pronouncement amending the factors to be considered in determining the useful life~~ of intangible assets accounted for pursuant to previous topic guidance. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. This pronouncement is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years, and its adoption had no effect on the Company’s consolidated financial statements.Contents

In ~~May 2008~~February 2010, the FASB issued ASU 2010-10, "Consolidation (Topic 810)." The amendments to the consolidation requirements of ASC Topic 810 resulting from the issuance of Statement 167 are deferred for a ~~pronouncement~~reporting ~~requiring~~entity's interest in an entity (1) that has all the attributes of an ~~insurance~~investment ~~enterprise recognize~~company aor ~~claim~~(2) ~~liability~~for ~~prior~~which it is industry practice to anapply ~~event~~measurement principles for financial reporting purposes that are consistent with those followed by investment companies. An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of ~~default~~variable interest entities in ASC Subtopic 810-10 (~~insured~~before ~~event~~the Statement 167 amendments) ~~when there~~or isother ~~evidence~~applicable ~~that~~consolidation ~~credit~~guidance, ~~deteriorations~~such ~~have~~as ~~occurred~~the guidance for the consolidation of partnerships in anASC ~~insured financial~~Subtopic ~~obligation~~810-20. ~~This~~The ~~pronouncement~~deferral is ~~effective~~primarily ~~for~~the ~~financial~~result ~~statements issued~~of differing consolidation conclusions reached by the International Accounting Standards Board ("IASB") for ~~fiscal~~certain ~~years~~investment funds when compared with the conclusions reached under Statement 167. The deferral is effective as of the beginning of a reporting entity's first annual period that begins after ~~December~~November 15, ~~2008~~2009, and ~~its adoption had~~for nointerim ~~effect~~periods onwithin that first annual reporting period, which coincides with the effective date of Statement 167. Early application is not permitted. The provisions of ASU 2010-10 are effective for the Company’s ~~consolidated~~beginning in 2010. The adoption of ASU 2010-10 did not have an impact on the financial ~~statements~~ position, results of operations or cash flows of the Company.

In ~~October~~ ~~2008~~February 2010, the FASB issued a ~~pronouncement~~an ~~amending~~accounting ~~previous~~standard ~~guidance~~that ~~to clarify~~amended ~~the~~certain ~~application~~recognition ~~of fair value in inactive markets~~ and ~~allows~~disclosure ~~for~~requirements ~~the~~related ~~use of~~to ~~management’s~~subsequent ~~interior~~events. ~~assumptions~~The ~~about~~accounting ~~future~~standard ~~cash~~requires ~~flows~~an ~~with~~entity ~~appropriately risk-adjusted~~that ~~discount~~is ~~rates~~an ~~when~~SEC ~~relevant~~filer ~~observable~~to ~~market~~evaluate ~~data~~subsequent ~~does~~events ~~not exist.~~through ~~The~~the ~~objective~~date ofthat the ~~pronouncement~~financial ~~has~~statements ~~not~~are ~~changed~~issued and ~~continues~~removes ~~to be~~ the ~~determination~~requirement ~~of the price~~ that ~~would~~an beSEC ~~received~~filer indisclose anthe ~~orderly~~date ~~transaction that~~through iswhich ~~not~~subsequent aevents ~~forced~~have ~~liquidation~~been orevaluated. ~~distressed~~This ~~sale~~guidance atwas ~~the~~effective ~~measurement~~upon ~~date~~issuance. The adoption of ~~the~~this ~~pronouncement~~standard ~~did~~had ~~not~~no ~~have an~~ effect on the Company’s consolidated financial ~~statements~~position or results of operations.

In ~~June 2009~~May 2010, the FASB issued aASU ~~pronouncement~~2010-19, to“Foreign ~~improve~~Currency ~~the~~(Topic ~~relevance,~~830): ~~representational faithfulness,~~Foreign ~~and~~Currency ~~comparability~~Issues: ofMultiple ~~the~~Foreign ~~information~~Currency ~~that~~Exchange aRates”. ~~reporting~~The ~~entity provides~~amendments in ~~its~~this ~~financial~~ASU ~~statements~~are ~~about~~effective aas ~~transfer~~ of ~~financial~~the ~~assets;~~announcement ~~the effects~~date of aMarch ~~transfer on its financial position~~18, ~~financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets~~2010. ~~This~~The ~~pronouncement~~adoption isof ~~effective~~this ~~for~~update ~~financial~~did ~~statements issued~~not ~~for~~have ~~fiscal~~an ~~years beginning after December 15, 2009 and interim periods within those fiscal years. The Company is evaluating the~~ impact ~~that this Statement will have~~ on the Company’s ~~consolidated~~ financial statements.

In ~~June 2009~~July 2010, the FASB issued aASU ~~pronouncement~~2010-20, ~~amending~~Disclosures ~~previous~~about ~~topic~~the ~~guidance,~~Credit Quality of Financing Receivables and ~~changes~~ ~~how~~the aAllowance ~~company~~for ~~determines~~Credit ~~when~~Losses, anwhich ~~entity~~amends ~~that~~ASC is310, ~~insufficiently capitalized~~Receivables. orThis isASU ~~not~~requires ~~controlled~~disclosures ~~through~~related ~~voting~~to ~~(or~~financing ~~similar~~receivables ~~rights)~~and ~~should~~the ~~be consolidated~~allowance for credit losses by portfolio segment. The ~~determination~~ASU ~~whether~~also arequires ~~company~~disclosures of information regarding the credit quality, aging, nonaccrual status and impairments by class of receivable. A portfolio segment is ~~required~~the tolevel ~~consolidate~~at ~~an entity~~which a creditor develops a systematic methodology for determining its credit allowance. A receivable class is ~~based~~a ~~on,~~subdivision ~~among~~of ~~other~~a ~~things,~~portfolio ansegment ~~entity’s~~with ~~purpose~~similar ~~and~~measurement ~~design~~attributes, risk characteristics and ~~a company’s~~common ~~ability~~methods to ~~direct~~monitor ~~the~~and ~~activities~~assess ofcredit ~~the~~risk. ~~entity~~Trade ~~that~~accounts ~~most~~receivable ~~significantly impact~~with ~~the~~maturities ~~entity’s~~of ~~economic~~one ~~performance.~~year ~~This~~or ~~pronouncement~~less isare excluded from the disclosure requirements. The effective date for ~~financial~~ ~~statements~~disclosures ~~issued~~as ~~for~~of ~~fiscal~~the ~~years~~end ~~beginning~~of ~~after~~the ~~December~~reporting ~~15,~~period ~~2009 and~~is ~~interim~~the ~~periods~~first ~~within~~quarter ~~those~~of fiscal ~~years~~year 2011. The ~~Company~~ effective date for disclosures for activity during the reporting period is ~~evaluating~~ the ~~impact~~second ~~that~~quarter ~~this~~of ~~pronouncement~~fiscal year 2011. The adoption will not have a material effect on the Company’s consolidated financial statements.

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 Company’s consolidated financial statements upon adoption.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this item can be found following the signature page of this Annual Report.

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

~~Not applicable~~None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness, as of the end of the period covered by this report, of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective.

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Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and concluded that as of the end of the period covered by this report, our internal controls over financial reporting were effective.

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

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the fourth quarter of ~~2009~~2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Set forth below are the names of our directors and executive officers as of March 29, ~~2010~~ 2011. Jinyuan Li has served on the Board since September 2003. ~~Manbo~~Baolan HeLi was appointed to the Board in ~~June~~October ~~2009~~2010. All other directors have served on the Board since January 2004. Directors are elected annually by our shareholders at the annual meeting. Each director holds his or her office until his or her successor is elected and qualified or his or her earlier resignation or removal. Mr. Li’s and Ms. Li’s statutory employment agreements provide for an indefinite period.

NAME	AGE	POSITION
Jinyuan Li	5253	Chairman, Chief Executive Officer, President and ~~Director~~Acting Chief Financial Officer
Manbo He	40	Chief Financial Officer and Director
Yupeng Yan	48	Executive Vice President and Director
Yupeng Yan	47	Executive Vice President and Director
Baolan Li	28	Director
Socorro Quintero	5859	Director
Howard Balloch	59	Director
Gilbert Raker	67	Director
Gilbert Raker	66	Director

None of our directors and officers was selected pursuant to any agreement or understanding with any other person. There is no family relationship between any director or executive officer and any other director or executive officer.16

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Jinyuan Li

Jinyuan Li has served as the Chairman of the Board and a Director since September 2003. In June 2010, Jinyuan Li was appointed as Acting Chief Financial Officer. Jinyuan Li is also the President and founder of Tianshi Group and has held the position of President since 1995. Mr. Li has 14 years of experience in the petroleum and plastics industries. He holds a number of leadership positions in government and social associations, including as Standing Committee Member of Tianjin Political Consultative Conference; Vice-chairman of China Enterprise Confederation & China Enterprise; Executive of All-China Federation of Industry & Commerce; Vice Chairman of China Association for the Promotion of Industrial Development; and Vice President of Chinese Healthcare Association, etc. Mr. Li was elected as one of the Top Ten Most Outstanding Talents in the Greater China Area; one of the Ten Most Popular Personages Among the High-Ranking, by China Economic Forum; Excellent Entrepreneur, by the Organization Committee of the Second Chinese Entrepreneur Forum in 2003, and as the Most Creative Chinese Businessman of Asia in 2004. Mr. Li holds an MBA from Nankai University.

Manbo He

Mr. He has served as our Chief Financial Officer since June 2009. Prior to that, Mr. He served as Advisor to Holley Group Co. Ltd. from October 2008 to April 2009 and as Chief Operating Officer of Holley Group Co. Ltd. from April 2006 to October 2008. During that time he was also appointed as an Executive Director of the Board of Directors at Holley Technology Co., Ltd. Mr. He served as Vice President of Calston Investment Co., Ltd. from February 2003 to April 2006. Mr. He is a Canadian certified general accountant and has received his Bachelor of Business Administration from Beijing Institute of Business in China and a Master of Business Administration from Thunderbird School of Global Management in United States.

Yupeng Yan

Mr. Yan has served as our Executive Vice-President since September 2003. Mr. Yan has also served as Vice-President of Tianshi Group since March 1997, acting as general manager of its Global Information Technology Center from July 2007 to January 2009 and as head of its Global Marketing Center from June 2004 to June 2007. Since November 2008 Mr. Yan has served as the Vice General Manager of Global Marketing Center and Vice President of Tianshi Group’s China Region. Mr. Yan currently holds a number of leadership positions including Vice-Dean of Tianshi College (formerly Tianshi Occupational Technique Institute), and Vice-Chairman of Tianshi Science and Technique Association. Mr. Yan was elected as one of the Chinese Ten Outstanding Professional Managers in 2004. Mr. Yan received an Executive MBA from Nankai University in July 2004.

Baolan Li

On October 20, 2010, Baolan Li joined the Board of Directors of the Company. Ms. Li is the daughter of Jinyuan Li, the Chairman, Chief Executive Officer, President and Acting Chief Financial Officer of the Company. From August 2008 to October 2010, Ms. Li served as the Assistant of the Chief Financial Officer of the Company and as the Assistant of the Vice President – Marketing. Prior to her appointment to the Company, Ms Li attended the Royal Holloway University of London, London, UK and received a Bachelor’s Degree with Honors in Industrial and Financial Economics in 2006 and a Master’s Degree in Economics in 2008. Ms. Baolan Li held a short-term internship position with ICEA Investment Banking Division (Hong Kong) from September 2006 to November 2006.

Socorro Quintero

Dr. Socorro Quintero serves as our director. Drsince January 2004. ~~Quintero~~She is an Associate Professor of Finance ~~and~~at ~~Managing~~Oklahoma ~~Director~~City University’s Meinders School of Business (“OCU”) where she has organized and managed the Corporate Directors Institute at(“CDI”) ~~Oklahoma City~~in ~~University’s~~2007 ~~Meinders~~and ~~School~~2009. The CDI brings together directors and governance professionals to share the latest issues and best practices in corporate board governance. In February 2011, Dr. Quintero joined the board of ~~Business~~directors and became the chairperson of the audit committee of the board of directors of Joway Health Industries Group (~~“OCU”~~GTVI.OB). Prior to joining OCU in 1993, she was an Assistant Professor of Finance at the University of South Florida in Tampa. DrHer teaching and research expertise covers varied areas in finance, including, but not limited to, investments, asset pricing, capital budgeting, and financial derivatives. ~~Quintero~~She ~~has~~obtained ~~extensive~~her PhD in Finance from the University of Texas at Austin in 1989. Before her career in finance, her earlier work ~~experience~~experiences were in various industrial engineering ~~capacities~~ and management capacities while working for Abbott Laboratories, Atlantic Steel Company~~, Abbott~~ ~~Laboratories~~ and Levi Strauss & CoCompany. ~~She~~Dr. ~~received~~Quintero obtained a ~~B.S.~~Bachelor of Science in Physics from the University of the Philippines in 1972, anand ~~M.S.~~Master of Science in Industrial Engineering from the Georgia Institute of Technology, ~~and~~in aAtlanta ~~Ph.D.~~ in ~~Finance from the University of Texas at Austin~~1977.

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Gilbert Raker

Mr. Raker serves as our director since January 2004. Since February 2010 Mr. Raker has been the President of Wyngate Management Corporation,, a private consulting company that works in association with several IR / PR, investment and ismerchant ~~currently~~banking firms in New York City that specialize in assisting middle market firms. From February 2010 to February 2011 he was also the Vice Chairman and a ~~Director~~director of Electro-Comp Services, Inc., a private company ~~primarily~~ engaged in the testing ~~and~~, verification ofand ~~the~~brokering ~~functionality~~ of electronic components ~~as well as the brokering of said components located in Clearwater, FL~~. From January 2009 to February 2010 he worked with a niche investment bank in New York that focused on financing middle market companies. From November 1988 to January 2009 he was the President, Chief Executive Officer and Chairman of the Board of SEMX Corporation, a multi-national company that manufactured materials and components used in microelectronic circuitry on a worldwide basis for the automotive, consumer electronics, defense, medical and aerospace industries. Prior to November 1988, Mr. Raker worked at two private equity investment firms, was employed as the Chief Financial Officer and in one case as the Chief Operating Officer of two New York Stock Exchange listed companies and served in a variety of capacities in numerous private and public companies. He began his career as a Management Consultant for Touche Ross. Mr. Raker received his B.S. in Chemistry from Eastern University, his MBA in Production Management from Syracuse University and completed all of the course work for a PhD in Finance and Economics at Syracuse University. Early in his career he taught Accounting and Production Management at Eastern University and Syracuse University, respectively.

Howard Balloch

Mr. Balloch serves as our director and is the founder and President of The Balloch Group, an investment advisory and merchant banking firm located in Beijing, China. Mr. Balloch served as the Canadian ambassador to the People’s Republic of China from February of 1996 until July of 2001. Mr. Balloch currently serves on the board of directors of the following companies: Ivanhoe Energy, Inc. (TSX: IE, NASDAQ: IVAN), Ivanhoe Mines Ltd. (TSX, NYSE, NASDAQ: IVN), East Energy Corp. (TSX: EEC), Methanex Corporation (TSX:MX, NASDAQ: MEOH), and Maple Leaf Education Holding. Mr. Balloch is also the Vice-Chairman of the Canada China Business Council. Mr. Balloch received his B.A. and M.A. degrees from McGill University.

Board Leadership Structure

The Board of Directors believes that Mr. Li’s service as both Chairman of the Board, Chief Executive Officer, President and ~~President~~Active Chief Financial Officer is in the best interest of the Company and its stockholders. Mr. Li possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareholders, employees and customers.

Each of the directors other than Jinyuan Li, Yupeng Yan and Baolan Li is independent (see “Director Independence” below), and the Board of Directors believes that the independent directors provide effective oversight of management. The Board of Directors has not designated a lead director. Our independent directors call and plan their executive sessions collaboratively and, between Board of Directors meetings, communicate with management and one another directly. In the circumstances, the directors believe that formalizing in a lead director functions in which they all participate might detract from rather than enhance performance of their responsibilities as directors.

Board’s Role In Risk Oversight

The Board of Directors is responsible for the overall risk oversight of the Company. The Board discusses, and receives updates from senior management on the identification, assessment, management and mitigation of the critical risks facing the Company. The Audit Committee requires the Company’s management to update the Audit Committee about the Company’s major financial risk exposure and the steps that management has taken to monitor and control such exposure and oversee the risks related to financial issues. The Audit Committee monitors risks associated with financial reporting and internal controls, receives annual reports on risk assessment from the Company’s auditors and regularly discusses financial and economic risks as well as financial implications of certain regulatory or legal risks with the Company’s Chief Executive Officer, Acting Chief Financial Officer, other members of senior management and outside counsel or consultants.

Director Qualifications

We seek directors with established strong professional reputations and experience in areas relevant to the strategy and operations of our businesses. We seek directors who possess the qualities of integrity and candor, who have strong analytical skills and who are willing to engage management and each other in a constructive and collaborative fashion. We also seek directors who have the ability and commitment to devote significant time and energy to service on the Board and its committees. We believe that all of our directors meet the foregoing qualifications.

The Board of Directors believes that the leadership skills and other experiences of its Board members, as described below, provide the Company with a range of perspectives and judgment necessary to guide our strategies and monitor their execution.

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Jinyuan Li: Jinyuan Li has extensive PRC business experience and being a founder of the Company has enabled him to lead the Board throughout the development of the Company.

Yupeng Yan: Yupeng Yan has extensive experience in management and marketing which enables him to guide the Board through related decisions.

Baolan Li: Baolan Li has a strong academic background that enables her to be an effective director.

Socorro Quintero: Socorro Quintero has strong academic background and extensive experience in reviewing financial results of companies which enables her to effectively serve as the chairman of our Audit Committee since the Company’s listing in the United States.

Gilbert Raker: Gilbert Raker has extensive experience in finance and management, and his leadership experience gained while serving on the board of a multi-national company enable him to effectively serve as a member of our Audit Committee and Compensation Committee.

Board Practices

Our business and affairs are managed under the direction of our Board of Directors. The primary responsibilities of our Board of Directors are to provide oversight, strategic guidance, counseling and direction to our management.

The Board has an Audit Committee and does not have a Nominating Committee. The entire Board assumes the duties that would be delegated to a Nominating Committee. The Company believes that this practice focuses the attention of each director on the important task of selecting nominees, and a separate committee is unnecessary.

Nominations by Stockholders

There have been no changes to the procedures by which the stockholders of our company may recommend nominees to the Board of Directors since the filing of the Company’s Definitive Proxy Statement on April 2729, ~~2009~~2010 for its Annual Meeting of Stockholders, which was held on May 28, ~~2009~~2010.

Audit Committee

The Board of Directors has established an audit committee in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee ~~are~~during the fiscal year ended December 31, 2010 were Socorro Quintero, Chairperson, Howard Balloch and Gilbert Raker, each of whom is was independent as defined under Section 121(A) of NYSE Amex listing standards currently in effect. ~~None~~During the fiscal year ended December 31, 2010, none of the Audit Committee members iswas a current officer or employee of our company or any of its affiliates.

The Board of Directors has determined that Socorro Quintero and Gilbert Raker each qualifies as an “audit committee financial expert” under Item 407(d) of Regulation S-K.

Code of Ethics

The Board has adopted a Code of Ethics to promote its commitment to the legal and ethical conduct of our company’s business. The Chief Executive Officer, Chief Financial Officer, and other senior officers are required to abide by the Code of Ethics, which provides the foundation for compliance with all corporate policies and procedures, and best business practices.

The Code of Ethics was filed as an exhibit to our Annual Report on Form 10-KSB for the year ended December 31, 2004. A written copy of the Code of Ethics can be found on our website at www.tiens-bio.com and will be provided upon request at no charge by writing to ~~our corporate secretary~~Secretary, ~~Charles~~ ~~Lv, at~~ Tiens Biotech Group (USA), Inc., No. 617, ~~Yuanquan~~Xinyuan Road, Wuqing New-Tech Industrial Park, Tianjin, China 301700.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5 and amendments to these forms furnished to us, all parties subject to the reporting requirements of Section 16(a) of the Exchange Act filed all such required reports during and with respect to 2009.

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Section 16(a) Beneficial Ownership Reporting Compliance

ITEM 11. EXECUTIVE COMPENSATION.

Compensation Discussion and Analysis

All compensation decisions for our executive officers, including the salary of our ~~CEO~~ Chief Executive Officer, Acting Chief Financial Officer and President, Jinyuan Li, are made by Jinyuan Li. Because Jinyuan Li owns more than 50% of our voting stock, we are a “controlled company” pursuant to Rule 801(a) of NYSE Amex Rules (“NYSE Amex Rules”). Therefore, we are exempt from NYSE Amex Rule 805(a), which requires that the compensation of a CEO and all other executive officers be determined, or recommended to the Board for determination, by a compensation committee composed of independent directors, or the majority of independent directors on the Board.

The objectives of our compensation programs.

We seek to attract and retain executive officers of the highest caliber and motivate them to maximize the success of our business.

What our compensation program is designed to reward.

Our CEO believes that he is incentivized by his large equity ownership in our company. Therefore, he believes that a long-term employment contract providing a base salary is appropriate compensation for him. With respect to the other executive officers’ base salaries, our CEO bases his recommendations on past salary levels with our company and his perception of the quality of their respective performances and attempts to match their salaries with his perception of compensation levels at a small number of companies he considers comparable. The CEO also takes in to consideration the relatively low salaries provided to executive officers by companies in China compared to public companies in the United States. Our CEO assesses the normal responsibilities of each position, as well as the extra responsibilities and additional work related to special projects which such executive officers may be expected to perform. No relative weight was assigned to any of the foregoing factors.

Elements of compensation.

Each executive officer receives cash compensation as a base salary. Base salary for our executive officers is fixed by their respective employment agreements, as described under “Employment Agreements.” Jinyuan Li’s salary for ~~2009~~2010 was fixed pursuant to employment agreements with Tianjin Tianshi Biological Development Co. Ltd. (“Biological”) entered into in 2005. ~~Zheng~~Manbo ~~Wan~~He was our principal financial officer from ~~November 12, 2008 to~~ June 1, 2009 ~~and his salary was fixed pursuant~~ to ~~an employment agreement dated November 3, 2008. Manbo He has been our principal financial officer since~~ June 1, ~~2009~~2010, and his salary for ~~2009~~ 2010 was fixed pursuant to an employment agreement with Biological, dated June 1, ~~2009,~~ ~~which provides for a term through April 9, 2014~~2009. Their base salaries were based on our CEO’s subjective perceptions of salaries paid by comparable companies for comparable positions. Our executive officers did not receive any bonuses for ~~2009~~2010. Due to the fact that we do not currently and did not in ~~2009~~2010 give bonuses to any of our named executive officers, Jinyuan Li did not identify any individual or corporate goals when setting the remuneration of ~~Messrs~~Mr. ~~Wan and~~ He for ~~2009~~2010.

Our strategy is to maintain compensation for employees at levels that are equal to or in excess of those offered by companies of comparable size, consistent with the individual employees’ capabilities and responsibilities. We do not currently have a stock option plan, but may consider adopting one in the future to further incentivize its employees.

Why we chose to pay each element.

We have entered into long-term employment agreements with ~~Messrs~~Mr. Li, ~~Wan and He~~ providing for his base ~~salaries~~salary.

The employment agreements with ~~Messrs~~Mr. Li and HeMs. Li provide for payments upon termination for specified reasons. These payments are required by local Chinese employment regulations. Additional information regarding applicable payments under such agreements is provided under the heading “Potential Payments Upon Termination or Change of Control.”

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How we determine the amount for each element of pay.

With respect to the executive officers’ base salaries, our CEO bases his recommendations on past salary levels and his perception of the quality of the executive officers’ respective performances and attempts to match their salaries with his perception of compensation levels at a small number of companies he considers comparable, although not necessarily included in the NYSE Amex Composite Index or NASDAQ Biotechnology Index. Our CEO assesses the normal responsibilities of each position, as well as the extra responsibilities and additional work related to special projects which such executive officers may be expected to perform. Our CEO also takes in to consideration the relatively low salaries provided to executive officers by companies in China compared to public companies in the United States.

Compensation Committee Interlocks and Insider Participation

During ~~2009~~ 2010, the members of the Compensation Committee were Gilbert Raker and Yupeng Yan. The Compensation Committee did not deliberate on executive compensation for fiscal ~~2009~~2010. Yupeng Yan was an employee and officer of our company during ~~2009~~2010. No member of the Compensation Committee has a relationship that would constitute an interlocking relationship with Executive Officers or Directors of our company or another entity.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K of the Exchange Act with management and the full Board. Based on that review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for ~~2009~~ 2010 .

The Compensation Committee

Gilbert Raker, Chairman

Yupeng Yan

Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal years ended December 31, ~~2009~~2010 and ~~2008~~ 2009.

Name and Principal Position (1)	Year	Salary ($)		Total ($)
Jinyuan Li	2010	$	166,660	$	166,660
Chairman, Chief Executive	2009	$	166,660	$	166,660

Manbo He	2010	$	21,778	$	21,778
Chief Financial Officer (2)	2009	$	23,333	$	23,333

Name and Principal Position (1)	Year	Salary ($)		Total ($)
Jinyuan Li	2009	$	166,660	$	166,660
Chairman, Chief Executive	2008	$	166,660	$	166,660
Manbo He	2009	$	23,333	$	23,333
Chief Financial Officer (2)
Zheng Wan	2009	$	25,464	$	25,464
Former Chief Financial Officer (3)	2008	$	8,618	$	8,618

(1) Yupeng Yan was an employee Director of our company during 2010 and 2009 but is not identified as a “named executive officer” because his total compensation was less than $100,000.

(12) ~~Yupeng Yan~~ ~~was~~Manbo anHe ~~employee~~became ~~Director~~Chief ofFinancial ~~our~~Officer ~~company~~and ~~during~~Director ~~2009~~of ~~but~~the ~~did~~Company ~~not~~on ~~qualify~~June as1, ~~a “named~~2009 ~~executive~~and ~~officer”~~resigned ~~because~~effective ~~his~~June ~~total compensation was less than $100~~17,~~000~~ 2010.

(2) Manbo He became Chief Financial Officer and Director on June 1, 2009 and was not an executive officer of our company prior to that.

(3) Zheng Wan resigned as our Chief Financial Officer and Director on June 1, 2009. Mr. Wan became Chief Financial Officer and Director on November 12, 2008 and was not an executive officer of our company prior to that.

Grants of Plan Based Awards; Outstanding Equity Awards at Fiscal Year-End; Option Exercises and Stock Vested

We do not have any stock option plans.

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Pension Benefits

None.

Nonqualified Deferred Compensation

We do not provide any pension benefits or nonqualified deferred compensation to ~~any~~our ~~of its~~ employees.

Employment Agreements

Our subsidiary, Biological, has entered into a statutory employment agreement with each of the named executive officers of our company. Jinyuan Li’s contract is dated June 1, 2005 and has an indefinite period. ~~Zhen Wan’s contract was dated November 3, 2008 and provided for a term through December 31, 2013.~~ The employment contract for Yupeng Yan is dated April 1, 2004 and provided for a term through March 31, 2009. On April 1, 2009, Yupeng Yan’s employment contract was renewed ~~and~~with ~~had~~ an indefinite period. ~~Manbo He also has an employment contract with Biological, dated June 1, 2009 which provides for a term through April 9, 2014.~~

Under each of these employment contracts, the employee receives vacation time and social insurance according to Chinese government regulations. ~~The employment agreements can be renewed within 15 days of the expiration of each agreement with the mutual consent of the parties.~~ Biological may rescind each agreement without notice if, among other events, the employee materially violates Biological’s rules and regulations or the employee grossly neglects his or her duties and discloses our confidential business information that harms us. Biological may rescind each agreement on 30 days’ notice and provide economic compensation if, among other events, the employee suffers from a disease or non-work related injury and after a recovery period is unable to work, or due to material changes, the performance of the agreement has become unpractical. Pursuant to the terms of each of the employment agreements, the employee may rescind his contract on 30 days’ written notice.

For 2009, we paid a salary of $166,660 to Jinyuan Li and $77,000 to Yupeng Yan. Mr. Wan’s contract provided for an annual salary of $80,000. Mr. He’s contract provides for an annual salary of $40,000.

Potential Payments upon Termination

~~The employment contracts of Messrs~~Mr. Li’s ~~and~~employment Hecontract ~~each~~provides ~~provided~~ for a one-time lump sum payment equal to six months of ~~the~~his ~~employee’s~~ then current salary if we terminate his employment contract for one of the following reasons:

The employee has a non-work-related injury and is unable to perform his responsibilities; or

The employee is unable to perform his responsibilities for other reasons; or

The circumstances based on which the employment contract was entered into have materially changed, and the performance of the contract becomes impractical; or

We are contemplating bankruptcy and determine to reduce staff.

Assuming that ~~Messrs~~Mr. Li orwas ~~He were~~ terminated for one of the above-stated reason, Mr. Li would receive $83,330~~, and~~ ~~Mr. He would receive $20,000.~~ There are no other circumstances, including a change of control of our company, where we are required to make any additional payment to ~~Messrs~~ Mr. Li ~~and Wan~~.

Director Compensation

~~For~~On ~~the fiscal~~October ~~year~~20, ~~ended~~2010, ~~December 31~~our subsidiary, ~~2009~~Biological, ~~members~~entered ofinto a statutory labor contract with Ms. Li to document the ~~Board~~terms ~~who~~of ~~are~~her ~~not~~employment ~~our employees~~by ~~are~~Biological. ~~entitled~~Pursuant to ~~receive~~the terms of the agreement, Biological shall pay Ms. Li an annual ~~cash~~fee ~~retainer~~ of $3040,000. The agreement is for an indefinite period. The contract shall be terminated in compliance with the PRC Labor Contract Law, when unilaterally terminated by either party or when terminated pursuant to a mutual consent between the parties.

For the fiscal year ended December 31, 2010, the remaining members of the Board who are not our employees are entitled to receive an annual cash retainer of $30,000.

Director Summary Compensation Table

The table below summarizes the compensation we paid to non-employee Directors for the fiscal year ended December 31, ~~2009~~2010.

Name (1)	Fees Earned or Paid in Cash ($)		Total ($)
Howard Balloch	$	30,000	$	30,000
Gilbert Raker	$	30,000	$	30,000
Socorro Quintero	$	30,000	$	30,000
Yupeng Yan (2)	$	0	$	0

~~(1)~~Table ~~Jinyuan~~of Li, Zheng Wan and Manbo He are not included in this table as they were our employees during 2009 and received no compensation for their services as Directors. Their compensation is disclosed in the table in the “Summary Compensation Table”.Contents

(2) Yupeng Yan was an employee Director of our company during 2009 and received no additional compensation for his services as Director. He is not a named executive officer and is excluded from the “Summary Compensation Table”.

Name (1)	Fees Earned or Paid in Cash ($)		Total ($)
Howard Balloch(2)	$	30,000	$	30,000
Baolan Li(3)	$	7,889	$	7,889
Gilbert Raker	$	30,000	$	30,000
Socorro Quintero	$	30,000	$	30,000

(1)	Jinyuan Li, and Manbo He are not included in this table as they were our employees during 2010 and received no compensation for their services as Directors. Their compensation is disclosed in the table in the “Summary Compensation Table”.

(2)	Effective as of December 31, 2010, Howard Balloch resigned from his position as Director of the Company.

(3)	On October 20, 2010, the Board of Directors appointed Baolan Li as a member of the Board of Directors of the Company.

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

The following table sets forth information with respect to the beneficial ownership of shares of common stock as of March 29, ~~2010~~2011 by each person or entity who is known by us to beneficially own five percent or more of our common stock; each director and executive officer of our company; and all directors and executive officers of our company as a group.

Name of Beneficial Owner (1)	Number of Shares		Percent of Class
Jinyuan Li		67,830,000		95.1	%
Baolan Li		—		—
Yupeng Yan		—		—
Socorro Quintero		—		—
Gilbert Raker		—		—
All Directors and Executive Officers as a Group (6 persons)		67,830,000		95.1	%
TIENS (USA) Investment Holdings Group Overseas Limited (2)		67,830,000		95.1	%

Name of Beneficial Owner (1)	Number of Shares	Percent of Class
Jinyuan Li	67,830,000	95.1%
Manbo He	—	—
Yupeng Yan	—	—
Socorro Quintero	—	—
Howard Balloch	—	—
Gilbert Raker	—	—
All Directors and Executive Officers as a Group (6 persons)	67,830,000	95.1%
TIENS (USA) Investment Holdings Group Overseas Limited (2)	67,830,000	95.1%

(1) Unless otherwise indicated, the address for each named individual or group is c/o Tiens Biotech Group (USA), Inc., No. 17, Xinyuan Road, Wuqing New-Tech Industrial Park, Tianjin, China 301700.

(12) ~~Unless~~ ~~otherwise~~The ~~indicated~~shares are owned by TIENS (USA) Investment Holding Group Overseas Limited (“TIH”). As sole director of TIH, ~~the~~Jinyuan ~~address~~Li ~~for~~has ~~each~~voting ~~named~~and ~~individual~~dispositive orpower ~~group~~over the shares. The business address of TIH is c/o Tiens Biotech Group (USA), Inc., No. 617, ~~Yuanquan~~Xinyuan Road, Wuqing New-Tech Industrial Park, Tianjin, China 301700.

(2) The shares are owned by TIENS (USA) Investment Holding Group Overseas Limited (“TIH”). As sole director of TIH, Jinyuan Li has voting and dispositive power over the shares. The business address of TIH is c/o Tiens Biotech Group (USA), Inc., No. 6, Yuanquan Road, Wuqing New-Tech Industrial Park, Tianjin, China 301700.

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

Changes in Control

There were no arrangements, known to the Company, including any pledge by any person of securities of the Company the operation of which may at a subsequent date result in a change in control of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Director Independence

The Board has determined that ~~directors~~during ~~Howard~~the ~~Balloch~~fiscal year ended December 31, 2010, directors Socorro Quintero and Gilbert Raker are “independent” under Section 803(A) of the listing standards of NYSE Amex. The remaining members of the Board dodid not satisfy these “independence” definitions. The ownership by Jinyuan Li, the Company’s President, Chief Executive Officer and Acting Chief ~~Executive~~ Financial Officer, of more than 50% of the Company’s voting stock makes it a “controlled company” to which NYSE Amex rules requiring a majority of the directors to be independent and relating to executive compensation and Board nominations need not apply. The Board has an Audit Committee and a ~~Compensation~~ ~~Committee. The Board’s~~ Compensation Committee ~~members are Messrs~~. Gilbert Raker and Yupeng Yan. Mr. Gilbert Raker, as a member of the Board’s Compensation Committee, is independent as defined under Section 803(A) of NYSE Amex listing standards currently in effect. The Audit Committee members are Ms. Socorro Quintero, Chairperson, and Messrs. Howard Balloch and Gilbert Raker, each of whom is independent as defined under Section 803(A) of NYSE Amex listing standards currently in effect. The Board does not have a Nominating Committee. The entire Board assumes the duties that would be delegated to a Nominating Committee.

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Transactions with Related Parties

We market our products through various domestic and international business entities that are related to us through common ownership. As a result, most of our total consolidated sales in ~~2009~~2010 were to related parties.

We have a sales contract with Tianshi Engineering which requires Tianshi Engineering to purchase all of our products to be sold in China. We sell our finished products to Tianshi Engineering at a price equal to 25% of the Chinese retail market price for the products. This 25% figure was negotiated between the parties in 2003, before we acquired Tianshi Holdings, and we believe that it is a reasonable sales price for us to receive. The price of semi-finished goods sold to Tianshi Engineering was originally set at the beginning of 2006 to provide us with a 75% gross profit margin. However, based on fluctuations in the cost of raw materials and quantities produced, the gross profit margin percentage varied during the year. This 75% figure was negotiated between the parties, and we believe that it is reasonable. The goal of this new pricing policy was to try to maintain our gross margins on semi-finished goods at a similar level to historical gross margins for finished goods. All of Tianshi Engineering’s Chinese affiliated companies are owned in whole or in part by Jinyuan Li’s immediate family members.

24Internationally, we sell our products to overseas related companies located in 45 countries who in turn re-package and sell them to independent direct sales distributors. Our CEO, Jinyuan Li, owns or controls these overseas related companies. Due to the common ownership, there are no formal sales or administrative agreements among us and those overseas related parties. The business operations among these related entities are regulated through internal policies.

Internationally, we sell our products to overseas related companies located in 54 countries who in turn re-package and sell them to independent direct sales distributors. Our CEO, Jinyuan Li, owns or controls these overseas related companies. Due to the common ownership, there are no formal sales or administrative agreements among us and those overseas related parties. The business operations among these related entities are regulated through internal policies.

As operation costs vary from country to country, international market prices vary accordingly. We sell our products to overseas affiliates at the FOB (destination port) price, which consists of 25% of the Chinese retail price, including customs duty, value-added tax and other miscellaneous transportation cost. The overseas affiliates mark up the products to cover their expenses and realize profits of approximately 10%.

Our related party transactions are required to be reviewed and approved or ratified by a majority of our non-interested Board of Directors. The following tables are provided to facilitate your understanding of the transactions and outstanding balances between those related parties and us during ~~2009~~2010 and ~~2008~~2009.

	December 31, 2009		December 31, 2008
	December 31, 2010		December 31, 2009
Accounts receivable, trade – related parties, net of allowance for doubtful accounts of $1,419,178 and $1,108,789 as of December 31, 2009 and 2008, respectively	$	15,379,312	$	23,941,431
Accounts receivable, trade – related parties, net of allowance for doubtful accounts of $3,869,617 and $1,419,178 as of December 31, 2010 and 2009, respectively	$	10,012,861	$	15,379,312
Other receivables – related parties	$	4417,~~561~~376,~~626~~522	$	1544,~~729~~561,~~076~~626
Advances from customers – related parties	$	48,~~426~~688,~~751~~877	$	34,~~239~~426,~~650~~751
Other payables – related parties	$	31,~~326~~417,~~110~~516	$	63,~~373~~326,~~900~~110
Current portion of long-term debt - related party	$	-	$	2,130,000
Long term debt – related party	$	-	$	2,137,742

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Revenue-related Parties

The details of revenue-related parties are as follows:

	2009		2008
	2010		2009
Tianshi Engineering	$	2524,~~298~~570,~~232~~887	$	3325,~~711~~298,~~474~~232
Overseas Related Companies		3416,~~734~~450,~~736~~248		4334,~~536~~734,~~424~~736
Total	$	6041,~~032~~021,~~968~~135	$	7760,~~247~~032,~~898~~968

In China, we sell our products to Tianshi Engineering, an affiliated company. Tianshi Engineering, in turn, sells the products to customers through its branches and affiliated companies and at chain stores which are owned by individual distributors. Internationally, we sell our products to overseas affiliates who in turn re-package the products to meet the needs of the local markets and sell to independent distributors who use the products themselves and/or resell them to other distributors or consumers.

Accounts Receivable-related Parties

The details of accounts receivables, trade-related parties are as follows:

	December 31, 2010			December 31, 2009
Tianshi Engineering	$	1,803,688		$	5,035,320
Overseas Related Companies		12,078,790			11,763,170
Allowance for Doubtful Accounts		(3,869,617	)		(1,419,178	)
Total	$	10,012,861		$	15,379,312

	December 31, 2009			December 31, 2008
Tianshi Engineering	$	5,035,320		$	4,362,355
Overseas Related Companies		11,763,170			20,687,865
Allowance for Doubtful Accounts		(1,419,178	)		(1,108,789	)
Total	$	15,379,312		$	23,941,431

Other Receivables-related Parties

Other receivables - related parties are generated by our making various cash advances and short term loans, the allocation of various expenses to related parties, and amounts transferred from accounts receivable. The following table summarizes the other receivables- related parties balances:

The details of other receivables-related parties are as follows:

	December 31,		December 31,
	2009		2008
Tianshi Investment	$	37,000,000	$	-
Tianshi Engineering		5,688,926		11,636,208
Tianshi Group		1,613,168		4,018,078
Sego Property service (Tianjin) Co.,Ltd.		77,612		-
Tiens SmartFlow Logistics (International) Group Ltd.		74,651		-
Tianjin Tianshi Life Science Co., Ltd.		55,878		-
Tianshi Yinshi Hotel		36,566		36,475
Tianshi Indonesia Logistic & Trade Co., Ltd.		9,873		-
Sego Hotel management Co.,Ltd.		2,730		-
Tianshi Pharmaceuticals		1,588		5,922
Shengshi Real Estate Development		634		1,657
Tianjin Xingda Travel Co., Ltd		-		12,932
Shanghai Tianshi Jinquan Investment Co.		-		1,846
Beijin Xingda Travel Co., Ltd		-		1,195
Others		-		14,763
Total	$	44,561,626	$	15,729,076

~~Historically, Tianshi~~Table ~~Engineering remitted payment to us upon sales to third party customers. However, in order to support Tianshi Engineering’s marketing efforts in anticipation~~ of receiving a direct selling license in China, we have agreed to allow Tianshi Engineering to defer payment to us. The credit terms provide an interest-free credit term of three months. Any amounts exceeding this term are transferred from accounts receivable - related parties to other receivable - related parties. Beginning January 1, 2007, the other receivables - related parties became interest bearing once a loan contract is adopted. The interest rate is the interest rate, on the date the loan commences, that is stipulated by the People’s Bank of China for a loan of the same level.Contents

	December 31,		December 31,
	2010		2009
Tiens Life science Co., Ltd.		11,525,219		-
Tianshi Engineering		5,603,197		5,688,926
All-Legend Property service (Tianjin) Co.,Ltd.		155,798		77,612
All-Legend Hotel Co.,Ltd.		37,856		-
Tianshi Yinshi Hotel		37,810		36,566
Tianshi Indonesia Logistic & Trade Co., Ltd.		9,902		9,873
Tianshi Taijisheng Health management Co., Ltd		5,459		-
Shengshi Real Estate Development		1,072		634
Tianshi Pharmaceuticals		139		1,588
All-Legend Hotel management Co.,Ltd.		70		2,730
Tianshi Group		-		1,613,168
Tiens SmartFlow Logistics (International) Group Ltd.		-		74,651
Tianjin Tianshi Life Science Co., Ltd.		-		55,878
Tianshi investment		-		37,000,000
Total	$	17,376,522	$	44,561,626

Historically, Tianshi Engineering remitted payment to us upon sales to third party customers. However, in order to support Tianshi Engineering’s marketing efforts in anticipation of receiving a direct selling license in China, we have agreed to allow Tianshi Engineering to defer payment to us. The credit terms provide an interest-free credit term of three months. Any amounts exceeding this term are transferred from accounts receivable-related parties to other receivable-related parties. The other receivables-related parties become interest bearing once a loan contract is adopted. The interest rate is the interest rate, on the date the loan commences, that is stipulated by the People’s Bank of China for a loan of the same level.

On April 21, 2009, the Company entered into a loan agreement with Tianshi Engineering. Pursuant to that agreement, effective as of April 1, 2009, $2,562,017 of other receivables-related parties, which originated from Tianshi Engineering as accounts receivable, became interest bearing. The loan was due on June 30, 2009 and the stated interest rate was 4.86%. Both the principal of $2,562,017 and interest on the loan of $12,624 were paid off on May 7, 2009. In 2010, Tianshi Engineering paid all accounts receivable within three months. For the years ended December 31, 2010 and 2009, the interest income from the other receivables-related parties amounted to $0 and $12,624, respectively.

During the years ended December 31, 2010 and 2009, we and Tianshi Group used common meters at our headquarters for electricity and water, and also used the same employee insurance account. When making payments to these outside parties, we usually pay the fees first and then are reimbursed by Tianshi Group. These pro-rated amounts relating to Tianshi Group are categorized as other receivables-related parties.

On December 25, 2008, Biological entered into a Property Transfer Agreement with Tianshi Group, pursuant to which Biological transferred four buildings at the price of RMB32,800,000 (US$4,785,520). As of March 31, 2010, the amount was paid in full by Tianshi Group.

On November 15, 2009, Tianshi Holdings and Tianshi Investment entered the Transfer Contract, pursuant to which Tianshi Holdings agreed to sell all of the registered share capital of Tiens Yihai it owned to Tianshi Investment for $37.0 million. Tiens Yihai holds land use rights for 50 acres of land located in Shanghai, China. Tiens Yihai was originally established to build a new research and development facility, but the Company suspended the proposed development in March 2007. Tianshi Holdings held 96% of the equity interest in Tiens Yihai. Tianjin Tianshi Pharmaceuticals Co., Ltd. owned the remaining 4% of Tiens Yihai’s share capital. The sale closed on November 15, 2009. Pursuant to the Transfer Contract, the purchase price of $37.0 million was paid in full by November 12, 2010. Payment of $3,700,000 was received in cash, $6,000,000 was offset against payables owed to Fuhong Development Co., Ltd, an entity that is 100% owned by Mr. Li, and $27,300,000 was offset against payables to Tianshi Engineering and Tianshi Group.

OnTable ~~April 21, 2009, the Company entered into a loan agreement with Tianshi Engineering. Pursuant to that agreement, effective as~~ of ~~April~~ 1, 2009, $2,562,017 of other receivables-related parties, which originated from Tianshi Engineering as accounts receivable, became interest bearing. The loan was due on June 30, 2009 and the stated interest rate was 4.86%. Both the principal of $2,562,017 and interest on the loan of $12,624 were paid off on May 7, 2009. For the year ended December 31, 2009 and 2008, the interest income from the other receivables - related parties amounted to $12,624 and $0, respectively.Contents

~~During~~ A portion of the ~~years~~construction ~~ended~~in ~~December~~progress 31at an amount of RMB83,263,708 ~~2009~~(US$12,592,803), which is recorded and ~~2008,~~paid for by Life Resources is built on the land owned by Tianshi ~~Group~~Life ~~and~~Science. ~~our~~In ~~company~~addition, ~~used common~~a ~~meters~~portion atof ~~our~~the ~~headquarters~~construction ~~for~~in ~~electricity~~progress ~~and~~at ~~water~~an amount of RMB5,245,839 (US$793,381), which is recorded and ~~also~~paid ~~used~~for by Tianshi Life Science is built on the ~~same~~ ~~employee~~land ~~insurance~~owned ~~account~~by Life Resources. ~~When~~Tianshi ~~making~~Life ~~payments~~Science and Life Resources intend to ~~these~~reimburse ~~outside~~each ~~parties, we~~other ~~usually~~for ~~pay~~the cost of the ~~fees~~above ~~first~~construction ~~and~~in ~~then~~progress. ~~are~~The ~~reimbursed~~agreement byis ~~Tianshi~~currently ~~Group~~being drafted. ~~These pro-rated~~The ~~amounts~~balance ~~relating~~of toRMB78,017,869 ~~Tianshi~~(US$11,799,422) ~~Group~~has ~~are~~been ~~categorized~~reclassified as other ~~receivables~~ receivable- related ~~parties~~party as of December 31, 2010, accordingly.

On December 31, 2008, Biological entered into a Property Transfer Agreement with Tianshi Group, pursuant to which Biological transferred four buildings at the price of RMB 32,800,000 ($4,797,328). As of December 31, 2009, the remaining balance due from Tianshi Group for the purchase of the four buildings amounted to RMB 17,800,000 (or US $2,603,428).

As the renminbi has been increasing in value against the dollar over the past several years, beginning in 2007, we have exchanged cash held in dollars into renminbi through Tianjin Xiongshi Construction and Decoration Co., Ltd (“Xiongshi Construction”), a related party construction company, which is 100% owned by the Company’s current Chairman, Chief Executive Officer and President, Jinyuan Li. For the years ended December 31, 2009 and 2008, the amounts transferred to Xiongshi and changed to renminbi were $0 and $12,500,000, respectively.

On November 15, 2009, Tianshi Holdings and Tianshi Investment entered the Transfer Contract, pursuant to which Tianshi Holdings agreed to sell all of the registered share capital of Tiens Yihai it owned to Tianshi Investment for $37.0 million. Tiens Yihai holds land use rights for 50 acres of land located in Shanghai, China. Tiens Yihai was originally established to build a new research and development facility, but the Company suspended the proposed development in March 2007. Tianshi Holdings held 96% of the equity interest in Tiens Yihai. Tianjin Tianshi Pharmaceuticals Co., Ltd. owned the remaining 4% of Tiens Yihai’s share capital. The sale closed on November 15, 2009. Pursuant to the Transfer Contract, $3,700,000 of the purchase price was paid during the first quarter of 2010, and the remaining $33,300,000 is payable by November 14, 2010.

Advances from Customers-related Parties

Advances from related party customers were $48.47 million and $34.24 million as of December 31, ~~2009~~2010 and ~~2008~~2009, respectively. These advances represented prepayments made to us to insure that overseas customers could obtain enough of our products to meet their market demands.

Other Payables-related Parties

These amounts arose primarily from previous cash advances from related parties such as management fees due to related parties and various non-operational transactions incurred with related parties. The details of other payable-related parties are as follows:

	December 31, 2009		December 31, 2008
	December 31, 2010		December 31, 2009
Fuhong Development Co.Ltd.	$	3,000,000	$	0
Tiens Group	$	639,529	$	0
Tianshi Germany Co., Ltd.		107,326		105,553
Tianshi Engineering		431,400		40,805
Tianjin Tianshi Global International Trade Co., Ltd.		93,606		23,344
Tianshi Germany Co., Ltd.		99,759		107,326
Tianjin Tianshi Global International Trade Co., Ltd.		96,794		93,606
Tianyuan Capital Development Co. Ltd.		84,359		84,359
Tianshi Engineering		40,805		0
Bejing All-legeng travel Co., Ltd.		65,660		0
Tianshi Administrative Committee of Industrial Park		1415		14
Tianshi Investment		0		6,080,385
Fuhong Development Co.Ltd.		0		3,000,000
Beijin Xingda Travel Co., Ltd.		0		80,245
Total	$	1,417,516	$	3,326,110
Total	$	3,326,110	$	6,373,900

On November 12, 2010, Tianshi Investment, Tianshi Engineering, Tianshi Group and the Company entered into an agreement, pursuant to which the Company’s other receivables from Tianshi Investment of $27,300,000 was offset against advances from Tianshi Engineering of $11,767,357, short-term debt from Tianshi Engineering of $9,077,156 and other payables to Tianshi Group of $6,455,487.

On January 21, 2008, Life Resources and Tianshi Investment entered into a loan agreement, pursuant to which Tianshi Investment agreed to provide a loan to Life Resources of $6.5 million without interest. The loan was originally due on June 30, 2008, but subsequently extended, most recently to June 30, 2009, on December 31, 2008. On June 30, 2009, we paid the loan in full.

On June 5, 2009, Biological, Tianshi Holdings, Tianshi Investment and Tianshi Group entered into an agreement pursuant to which Biological agreed to pay $3.9 million to Tianshi Group on behalf of Tianshi Investment, Tianshi Investment agreed to cancel a $3.9 million loan owed by Tianshi Holdings, and Tianshi Holdings agreed to cancel a $3.9 million dividend owed by Biological. ( See note 3 to our consolidated financial statements.)

On November 10, 2009, Tianshi Holdings borrowed $3,000,000 from Fuhong Development Co., Ltd, a British Virgin Islands company, which is 100% owned by Jinyuan Li, to fund its capital contribution to Life Resources. On the February 10, 2010, the loan was paid in full by cancelling the same amount Tianshi Investment owned to us.

~~Long Term~~On ~~Debt-related~~March ~~Party~~3, 2010, Tianshi Holdings borrowed another $3,000,000 from Fuhong Development to fund its capital contribution to Life Resources. On June 11, 2010, the loan was paid in full by canceling the same amount Tianshi Investment owed to the Company.

~~On September~~During ~~10,~~the ~~2004,~~third ~~Tianshi~~quarter ~~Holdings~~of ~~entered a term loan agreement with Tianyuan Capital Development Co. Ltd. (“Tianyuan Capital”)~~2010, ~~pursuant to which Tianyuan Capital agreed to lend $10.65 million in~~ the ~~aggregate~~Company toreceived ~~Tianshi Holdings~~$7, ~~at an interest rate of 5% per year~~614, ~~with interest payable on June 30~~ 300 and ~~December 31~~ $6, ~~commencing December 31~~270,600 from ~~2004.~~Tianshi ~~Pursuant~~Group toand ~~this agreement,~~ Tianshi ~~Holdings must repay the loan in ten consecutive semi-annual installments of $1~~Engineering,~~065,000 commencing~~ ~~June 30~~respectively, ~~2006~~in ~~and~~order ~~ending June 30, 2011. Tianshi Holdings used the loan proceeds~~ to fund ~~its~~a ~~capital~~portion ~~contribution~~of tothe ~~Tiens~~construction ~~Yihai.~~in Mrprogress. ~~Jinyuan~~As ~~Li owns 100%~~ of ~~Tianyuan Capital. Interest of $186,543 and $266,273 was paid for the years ended~~ December 31, ~~2009 and 2008~~2010, ~~respectively, and~~ the ~~loan~~amounts had ~~was~~been ~~paid~~ returned in full ~~by us on December 31, 2009~~.

Transactions with Tianshi Group

~~Since 2003,~~On ~~Biological~~December ~~has~~25, ~~leased~~2008, ~~office~~Biological ~~space~~ and ~~manufacturing facilities from~~ Tianshi Group. ~~The~~entered ~~lease~~into ~~provides~~a ~~for~~Property anTransfer ~~annual~~Agreement ~~rent~~(the at“Property 1%Transfer ~~of our total gross revenues~~Agreement”). ~~The~~Under ~~rent was negotiated by~~ the ~~parties~~Property ~~before~~Transfer ~~we acquired Tianshi Holdings~~Agreement, ~~and~~Biological wetransferred ~~believe~~to ~~that~~Tianshi itGroup isfour abuildings ~~reasonable~~consisting ~~rent~~of ~~for the facilities~~9,974.31 ~~The term~~square ofmeters, ~~the~~including ~~lease~~three ~~was~~workshops ~~for five years~~ and ~~expired~~a ~~on December 31~~canteen, ~~2007.~~located ~~In addition,~~at weour ~~are~~headquarters ~~obligated~~in toTianjin ~~pay~~China. ~~insurance,~~Pursuant ~~maintenance and other expenses related~~ to the ~~premises.~~Property ~~This~~Transfer ~~lease~~Agreement, ~~has~~Tianshi ~~been~~Group ~~renewed~~will ~~annually~~pay ~~since~~Biological ~~2008~~RMB32,800,000 ~~on the same economic terms~~(US$4,797,328). ~~The~~ ~~total~~This ~~amount~~transaction ~~paid~~resulted onin ~~this~~a ~~lease~~loss ~~amounted~~of to RMB1,912,983 (US$~~545~~274,~~192~~762) for ~~the~~Biological. 12We ~~months~~bore ~~ended~~80% ~~December~~of 31the loss, ~~2008~~or $219,810.

On December 25, 2008, Biological and Tianshi Group entered into a Property Transfer Agreement (the “Property Transfer Agreement”). Under the Property Transfer Agreement, Biological transferred to Tianshi Group four buildings consisting of 9,974.31 square meters, including three workshops and a canteen, located at our headquarters in Tianjin China. Pursuant to the Property Transfer Agreement, Tianshi Group will pay Biological RMB 32,800,000 ($4,797,328). This transaction resulted in a loss of RMB 1,912,983 ($274,762) for Biological. We bore 80% of the loss, or $ 219,810.27

~~On January~~Table ~~1, 2009, each~~ of Biological and Life Resources entered a Lease Agreement with Tianshi Group pursuant to which Biological and Life Resources will have the right to use and occupy the workshop spaces being transferred under the Property Transfer Agreement. The leases are rent-free, except that Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continues until the earlier of the date that Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31, 2009, Biological and Life Resources recorded $303,056 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.Contents

On January 1, 2009, Biological entered into an office and facilities lease agreement with Tianshi Group. Under the terms of the agreement, Biological’s annual rent is equal to 1% of its gross revenues. In addition, Biological is obligated to pay insurance, maintenance and other expenses related to the premises. This agreement expires on December 31, 2010. On January 1, 2010, Life Resources entered an office and facilities lease agreement with Tianshi Group on the same terms as Biological’s lease agreement with Tianshi Group. The Company paid rent under these leases in the amount of $500,361 and $458,382 for the year ended December 31, 2010 and 2009, respectively.

On January 1, 2009, each of Biological and Life Resources entered a Lease Agreement with Tianshi Group pursuant to which Biological and Life Resources will have the right to use and occupy the workshop spaces being transferred under the Property Transfer Agreement. The leases are rent-free, except that Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continue until the earlier of the date that Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31, 2010, Biological and Life Resources recorded $330,708 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

Transactions with Tianshi Engineering

On October 31, 2007, Biological entered into ~~four~~two lease agreements with Tianshi Engineering that enable Tianshi Engineering to share the use of certain of Biological’s ~~product~~ production ~~workshops and~~ equipment to manufacture products which Tianshi Engineering owns, or jointly owns, with Biological. Each of the ~~four~~two agreements was effective as of January 1, 2008 and expired on December 31, 2009. On ~~December~~November 3120, ~~2007~~2009, ~~Biological~~ ~~entered~~the ~~into~~lease ~~two~~agreement ~~supplemental~~for ~~agreements,~~health ~~which added fourteen pieces of personal care~~ products production equipment ~~to,~~ and ~~removed~~the ~~two~~lease ~~health products~~agreement ~~production~~for ~~workshops~~personal ~~from,~~care ~~two~~product ofproduction ~~the~~equipment ~~lease~~were ~~agreements~~renewed by Biological ~~entered~~ ~~into~~and onTianshi ~~October~~Engineering ~~31,~~for ~~2007~~2010. Following is a summary of the monthly rent payable to Biological under the ~~four~~two leases Biological entered into on ~~October 31,~~November ~~2007 (as amended by the two supplemental agreements entered into on December 31~~20, ~~2007):~~2009.

Lease Agreement	Monthly rent
Lease Agreement for Health Products Production Equipment	$	11,383
Lease Agreement for Personal Care Product Production Equipment	$	6,098

Lease Agreement	Monthly rent
Lease Agreement for Health Products Production Equipment	$	12,252
Lease Agreement for Health Products Production Workshops	$	6,326
Lease Agreement for Personal Care Product Production Equipment	$	6,014
Lease Agreement for Personal Care Products Production Workshops	$	3,086

Rent revenue accrued from these leases amounted to $209,770 and $219,605 for the year ended December 31, 2010 and 2009, respectively.

~~The Property~~On ~~Transfer~~December ~~Agreement~~3, ~~described~~2010, ~~under~~lease ~~Item~~agreements 2for ofhealth ~~this~~products ~~annual~~production ~~report, included~~equipment ~~all~~and ~~the~~household ~~workshops~~chemical ~~covered~~products byproduction ~~the~~equipment ~~above~~were ~~listed~~renewed ~~lease agreements. Consequently,~~by ~~the~~Biological ~~Lease~~and ~~Agreement~~Tianshi ~~for~~Engineering. ~~Heath~~Each ~~Products Production~~of ~~Workshops~~the ~~and~~two ~~the~~agreements ~~Lease~~is ~~Agreement~~effective ~~for~~as ~~Personal~~of ~~Care~~January ~~Production Workshops~~1, ~~expired~~2011 atand ~~the~~expires ~~end~~on ofDecember ~~2008~~31, 2011.

Rent revenue accrued from these leases amounted to $219,605 and $326,956 for the year ended December 31, 2009 and 2008, respectively.

On November 20, 2009, Lease Agreement for Health Products Production Equipment and Personal Care Product Production Equipment were renewed by Biological and Tianshi Engineering. Each of the two agreements is effective as of January 1, 2010 and expires on December 31, 2010.

Transactions with Tianshi Pharmaceuticals

InOn ~~April 2004~~December 15, ~~Tianshi~~2009, ~~Holdings~~the Company entered into a ~~joint~~one-year ~~venture~~lease ~~contract~~agreement with Tianshi ~~Pharmaceuticals~~ toPharmaceutical. ~~establish~~Under ~~Tiens~~the ~~Yihai.~~terms ~~Tiens~~of ~~Yihai~~the ~~was~~lease ~~initially~~agreement, ~~99.4%~~the ~~owned by~~Company ~~Tianshi~~leased ~~Holdings~~equipment ~~and~~for ~~0.6%~~the ~~owned~~fee byof ~~Tianshi~~RMB25,383 ~~Pharmaceuticals~~(or US$3,755) per month. ~~Tiens~~In ~~Yihai~~addition, the Company is ~~located~~ inobligated ~~Shanghai,~~to ~~China~~pay insurance, maintenance and ~~was~~other ~~established~~expenses torelated ~~build~~on athe ~~new~~equipment. ~~research~~This agreement is effective from January 1, 2010 and ~~development~~ ~~facility~~expires inon ~~Shanghai~~December 31, ~~China~~2010. InThe ~~March~~company ~~2007~~has paid $45,062 weof ~~decided~~rent toexpense ~~suspend~~ for the ~~proposed~~twelve ~~development~~months byended ~~Tiens~~December ~~Yihai~~31, 2010. The lease agreement was extended for an additional one year period.

On October 14, 2008, Tiens Yihai received an approval from the local government to decrease its registered capital from $200 million to $29,989,361, an amount corresponding to its paid-in capital. Pursuant to the change in registered capital, the percentage of capital ownership of both investors changed. The share held by Tianshi Holdings decreased from 99.4% to 96% and the share owned by Tianshi Pharmaceuticals increased from 0.06% to 4% of Tiens Yihai’s share capital.

Tianshi Pharmaceuticals, Tianshi Holdings, Tianshi Pharmaceuticals and Tianshi Group entered into a letter of intent on December 31, 2008.,pursuant to which, Tianshi Holdings intended to sell its 96% share of Tiens Yiahi to Tianshi Pharmaceuticals with Tianshi Group guaranteeing payment, However, this transaction was abandoned.

On December 15, 2009, the Company entered into a one-year lease agreement with Tianshi Pharmaceutical. Under the terms of the lease agreement, the Company leased equipment for the fee of $3,711 per month. In addition, the Company is obligated to pay insurance, maintenance and other expenses related on the equipments. This agreement is effective from January 1, 2010 and expired on December 31, 2010.

Transactions with Tianshi Investments

On December 20, 2007, Tianshi Holding entered into a Sale and Purchase Agreement with Tianshi Investment, Biological and Tianshi Engineering. Pursuant to the Sale and Purchase Agreement, Tianshi Holdings agreed to buy all of the registered share capital of Life Resources from Tianshi Investment for RMB 474,674,415, or $64,247,182. The closing of the transaction was subject to government approval of the transfer of Life Resources to Tianshi Holdings. On March 13, 2008, the government approved the transfer.

Pursuant to the Sale and Purchase Agreement, we advanced a deposit of $64,247,182 to Tianshi Investment on December 20, 2007. This acquisition deposit was settled as follows:

· $28,592,743 was paid by canceling a loan in the principal amount of RMB 200,000,000 to Tianshi Engineering owed by Biological together with interest accrued;

· $16,557,914 was paid by canceling other receivables due to Biological from Tianshi Engineering; and

· $19,096,525 was paid in cash.

On January 14, 2008, Tianshi Holdings and Tianshi Investment entered into a Loan Agreement pursuant to which Tianshi Holdings loaned Tianshi Investment $4.1 million without interest. The loan was required to be used by Tianshi Investment to increase the registered share capital of Life Resources. The loan was due on March 31, 2008, provided however, that if the government approved the transfer of the shares of Life Resources to Tianshi Holdings prior to that date, the loan would be cancelled, as Life Resources would then be a wholly-owned subsidiary of Tianshi Holdings. The approval was received on March 13, 2008, and therefore, the loan was cancelled on the same date.

Transactions with Life Sciences

On August 25, 2008, Life Resources entered a definitive agreement with the Wuqing Branch Bureau of Tianjin Municipal Land and Resources and Administrative Bureau (the “Tianjin Government”) and Tianjin Tiens Life Science Co., Ltd (“Life Science”) pursuant to which Life Resources and Life Science will pay the Tianjin Government in connection with changes to the zoning on several parcels of land on which they respectively have land use rights from “industrial” to “educational.” Life Resources will pay a total of RMB 41,022,061 (or approximately US$6.0 million) in connection with the zoning changes to its parcels.

Transactions with Baofeng

On September 4, 2008, we entered into a one-year storage services agreement (the “Baofeng Agreement”) with Tianjin Baofeng Construction & Engineering Co., Ltd., a third party company. Under the Baofeng Agreement, Biological leased a warehouse of 6,745.28 square meters located in Wuqing New-tech Industrial Park, Tianjin, China at the lease fees of RMB 87,688.64 per month. The agreement terminated on September 9, 2009. The total amounts paid in 2009 and 2008 under this lease were $115,365 and $37,784, respectively.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

~~On January~~The ~~13, 2009, the~~ Board appointed Crowe Horwath LLP (“Crowe”) as independent auditors to audit our financial statements for the fiscal ~~year~~years ended December 31, ~~2008 and~~ 2009~~. From~~ ~~September 26, 2007 to January 13, 2009 Grobstein, Horwath & Company LLP (GH&C”) served as our independent auditors. Prior to September 26, 2007 Moore Stephens Wurth Frazer~~ and ~~Torbet,~~ ~~LLP (“MSWF&T”) had served as our independent auditor since 2002~~2010.

Table of Contents

Public Accounting Fees

Grobstein, Horwath & Company LLP
	2010		2009
	2008
Audit Fees	$	270,000	$	248,000
Audit Fees	$	294,000
Audit Related Fees	$	50,000	$	2,800
Audit Related Fees	$	0
Tax Fees	$	0	$	0
Tax Fees	$	5,000
All Other Fees	$	7,766	$	0
All Other Fees	$	0

Audit fees were for professional services rendered by ~~GH&C~~Crowe during the ~~2008~~2010 and 2009 fiscal ~~year~~ years for the audit of our annual financial statements and the review of the financial statements included in our quarterly reports on ~~Forms~~Form 10-Q, and services that are normally provided by ~~GH&C~~Crowe in connection with statutory and regulatory filings or engagements for that fiscal year. ~~GH&C~~ ~~did not~~Audit ~~bill~~related ~~any other~~ fees ~~for~~include ~~services~~performing ~~rendered~~the tointerim usaudit ~~during~~procedures ~~the~~related ~~fiscal~~to ~~year~~construction ~~ended December~~in ~~31,~~progress ~~2008~~in ~~for~~2010 ~~assurance~~ and ~~related~~discussions ~~services~~with inmanagement ~~connection~~and ~~with~~SEC ~~the audit~~legal orcounsel ~~review~~regarding sale of ~~our~~Yihai ~~financial~~in ~~statements~~2009. ~~Tax~~All other fees ~~involved~~were ~~preparation~~travel ~~of our~~expenses ~~consolidated~~incurred ~~tax~~for ~~returns~~audit by auditors.

Crowe Horwath LLP
	2009
Audit Fees	$	248,000
Audit Related Fees	$	2,800
Tax Fees	$	0
All Other Fees	$	0

Audit fees were for professional services rendered by Crowe during the 2009 fiscal year for the audit of our annual financial statements and the review of the financial statements included in our quarterly reports on Form 10-Q, and services that are normally provided by Crowe in connection with statutory and regulatory filings or engagements for that fiscal year. Audit related fees include discussions with management and SEC legal counsel regarding sale of Yihai.

Pre-approval of Services

The Audit Committee has adopted pre-approval policies for all services, including both audit and non-audit services, provided by our independent auditors. For audit services, each year the independent auditor provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year, which must be formally accepted by the Audit Committee before the audit commences. The independent auditor also submits an audit services fee proposal, which also must be approved by the Committee before the audit commences. The audit, tax, and all other fees and services described above were pre-approved for ~~2008~~2009 and ~~2009~~2010.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	The following are filed with this report:

(1) The financial statements listed on the Financial Statements Table of Contents.

(2) Not applicable.

(3) The exhibits referred to below, which include the following managerial contracts or compensatory plans or arrangements:

Form of Labor Contract.

· Labor Contract dated November 3, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Zheng Wan.

Labor Contract dated June 1, 2009 between Tianjin Tianshi Biological Development Co., Ltd. and Manbo He.

Labor Contract dated as of October 20, 2010 between Tianjin Tianshi Biological Development Co., Ltd. and Baolan Li.

(b) The exhibits listed on the Exhibit Index are filed as part of this report.

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Table of Contents

EXHIBIT INDEX

Exhibit No.		Description
2.1		Agreement and Plan of Reorganization, as amended, dated as of August 22, 2003, by and among Strategika, Tianshi Holdings and the Stockholders of Tianshi Holdings. (1)
3.1		Certificate of Incorporation of Tiens Biotech Group (USA), Inc., as amended (11)
3.2		By-laws of Tiens Biotech Group (USA), Inc. (2)
4.1		Specimen Stock Certificate (2)
10.1		Product Purchase and Sales Agreement, dated June 25, 2003, by and between Tianjin Tianshi Biological Development Co., Ltd. And Tianjin Tianshi Biological Engineering Co. Ltd. (3)
10.2		Term Loan Agreement, dated March 29, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (4)
10.3		Term Loan Agreement, dated April 24, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (5)
10.4		Term Loan Extension Agreement, dated June 28, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (5)
10.5		Term Loan Agreement, dated July 23, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (11)
10.6		Term Loan Extension Agreement, dated September 27, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (6)
10.7		Term Loan Agreement, dated October 15, 2007 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (11)
10.8		Health Products Production Workshops Lease Agreement, dated October 31, 2007 by and between Tianjin Tianshi Group Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.9		Personal Care Products Production Workshops Lease Agreement, dated October 31, 2007 by and between Tianjin Tianshi Group Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.10		Health Products Production Equipment Lease Agreement, dated October 31, 2007 by and between Tianjin Tianshi Biological Engineering Co., Ltd.. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.11		Personal Care Products Production Equipment Lease Agreement, dated October 31, 2007 by and between Tianjin Tianshi Biological Engineering Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.12		Real Property Transfer Agreement, dated December 14, 2007, by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (11)
10.13		Lease Agreement, dated December 14, 2007, by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (11)
10.14		Sale and Purchase Agreement dated December 20, 2007 by and among Tianshi International Investment Group Co., Ltd., Tianshi International Holdings Group Limited, Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (11)
10.15		Capital Contribution Agreement dated December 21, 2007 by and between Tianshi International Holdings Group Co., Ltd. and Tianshi International Investment Group Co. Ltd. (11)
10.16		Health Products Production Workshops Supplemental Agreement, dated December 31, 2007 by and between Tianjin Tianshi Group Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.17		Personal Care Products Production Equipment Supplemental Agreement, dated December 31, 2007 by and between Tianjin Tianshi Group Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (11)
10.18		Loan Agreement dated January 14, 2008 by and between Tianshi International Holdings Group Co., Ltd. and Tianshi International Investment Group Co. Ltd. (11)
10.19		Lease Agreement, dated January 17, 2008, by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (11)
10.20		Form of Labor Contract (3)
10.21		Loan Agreement dated January 14, 2008 by and between Tianshi International Holdings Group Limited and Tianshi International Investment Group Co., Ltd. (7)

3230

10.22		Loan Agreement dated January 21, 2008 by and between Tianshi International Investment Group Co., Ltd. and Tianjin Tiens Life Resources Co., Ltd. (7)
10.23		Agreement dated April 9, 2008 by and between Tianshi International Holdings Group Limited, Tianshi International Investment Group Co., Ltd., Tianjin Tianshi Biological Development Co., Ltd, and Tianjin Tianshi Biological Engineering Co., Ltd. (8)
10.24		Loan Agreement Amendment dated June 30, 2008 by and between Tianshi International Investment Group Co., Ltd. and Tianjin Tiens Life Resources Co., Ltd. (8)
10.25		Supplementary Agreement for Grant Contract of State-Owned Land Use Right dated August 25, 2008 by and among Tianjin Tiens Life Resources Co., Ltd., Wuqing Branch Bureau of Tianjin Municipal Land and Resources and Administrative Bureau and Tianjin Tiens Life Science Co., Ltd. (9)
10.26		Labor Contract dated November 3, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Zheng Wan (12)
10.27		Property Transfer Agreement dated December 25, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.28		Lease Agreement dated January 1, 2009 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.29		Equipment Lease Agreement dated January 1, 2009 between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.30		Storage Service Agreement dated September 4, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Baofeng Construction & Engineering Co., Ltd. (12)
10.31		Loan Agreement Amendment dated December 31, 2008 between Tianjin Tiens Life Resources Co., Ltd. and Tianshi International Investment Group Co., Ltd. (12)
10.32		Supplemental Agreement of Lease Agreement for Health Products Production Workshops dated December 31, 2007 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (12)
10.33		Supplemental Agreement of Lease Agreement for Personal Care Products Production Equipment dated December 31, 2007 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (12)
10.34		Term Loan Agreement, dated April 21, 2009 by and between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Biological Engineering Co, Ltd. (13)
10.35		Labor Contract dated June 1, 2009 between Tianjin Tianshi Biological Development Co., Ltd. and Manbo He. (14)
10.36		Agreement, dated June 5, 2009 by and among Tianjin Tianshi Biological Development Co, Ltd., Tianshi International Holdings Group Limited, Tianshi International Investment Group Co., Ltd. and Tianjin Tianshi Group Co., Ltd. (15)
10.37		Agreement on Debt Transfer and Offset, dated as of June 30, 2009, by and among Tianshi International Holdings Group Limited, Tianyuan Capital Development Co., and Tianjin Tianshi Biological Engineering Co., Ltd. (15)
10.38		Contract for the Transfer of Equity Interest, dated November 15, 2009, by and between Tianshi International Holdings Group Ltd. and Tianshi International Investment Group Co., Ltd. (16)
10.36*		Health Products Production Equipment Lease Agreement, dated November 20, 2009 by and between Tianjin Tianshi Biological Engineering Co., Ltd.. and Tianjin Tianshi Biological Development Co., Ltd.
10.37*		Household Chemical Products Production Equipment Lease Agreement, dated November 20, 2009 by and between Tianjin Tianshi Biological Engineering Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd.
10.38*		Equipment Lease Agreement dated December 15, 2009 between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Pharmaceuticals Co., Ltd.
10.39*		Agreement on Debt Transfer and Offset, dated as of December 31, 2009, by and among Tianyuan Capital Development Co., Tianshi International Holdings Group Limited and Tianjin Tianshi Biological Engineering Co., Ltd.
10.40*		Agreement on Debt Transfer and Offset, dated as of February 10, 2010, by and among Xianggang Fuhong Development Co., Ltd., Tianshi International Holdings Group Co., Ltd. and Tianshi International Investment Group Co., Ltd.
14.1		Code of Ethics (10)
21.1*		Subsidiaries

Table of Contents

10.22	Loan Agreement dated January 21, 2008 by and between Tianshi International Investment Group Co., Ltd. and Tianjin Tiens Life Resources Co., Ltd. (7)
10.23	Agreement dated April 9, 2008 by and between Tianshi International Holdings Group Limited, Tianshi International Investment Group Co., Ltd., Tianjin Tianshi Biological Development Co., Ltd, and Tianjin Tianshi Biological Engineering Co., Ltd. (8)
10.24	Loan Agreement Amendment dated June 30, 2008 by and between Tianshi International Investment Group Co., Ltd. and Tianjin Tiens Life Resources Co., Ltd. (8)
10.25	Supplementary Agreement for Grant Contract of State-Owned Land Use Right dated August 25, 2008 by and among Tianjin Tiens Life Resources Co., Ltd., Wuqing Branch Bureau of Tianjin Municipal Land and Resources and Administrative Bureau and Tianjin Tiens Life Science Co., Ltd. (9)
10.26	Labor Contract dated November 3, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Zheng Wan (12)
10.27	Property Transfer Agreement dated December 25, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.28	Lease Agreement dated January 1, 2009 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.29	Equipment Lease Agreement dated January 1, 2009 between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (12)
10.30	Storage Service Agreement dated September 4, 2008 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Baofeng Construction & Engineering Co., Ltd. (12)
10.31	Loan Agreement Amendment dated December 31, 2008 between Tianjin Tiens Life Resources Co., Ltd. and Tianshi International Investment Group Co., Ltd. (12)
10.32	Supplemental Agreement of Lease Agreement for Health Products Production Workshops dated December 31, 2007 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (12)
10.33	Supplemental Agreement of Lease Agreement for Personal Care Products Production Equipment dated December 31, 2007 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (12)
10.34	Term Loan Agreement, dated April 21, 2009 by and between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Biological Engineering Co, Ltd. (13)
10.35	Labor Contract dated June 1, 2009 between Tianjin Tianshi Biological Development Co., Ltd. and Manbo He. (14)
10.36	Agreement, dated June 5, 2009 by and among Tianjin Tianshi Biological Development Co, Ltd., Tianshi International Holdings Group Limited, Tianshi International Investment Group Co., Ltd. and Tianjin Tianshi Group Co., Ltd. (15)
10.37	Agreement on Debt Transfer and Offset, dated as of June 30, 2009, by and among Tianshi International Holdings Group Limited, Tianyuan Capital Development Co., and Tianjin Tianshi Biological Engineering Co., Ltd. (15)
10.38	Contract for the Transfer of Equity Interest, dated November 15, 2009, by and between Tianshi International Holdings Group Ltd. and Tianshi International Investment Group Co., Ltd. (16)
10.36	Health Products Production Equipment Lease Agreement, dated November 20, 2009 by and between Tianjin Tianshi Biological Engineering Co., Ltd.. and Tianjin Tianshi Biological Development Co., Ltd. (17)
10.37	Household Chemical Products Production Equipment Lease Agreement, dated November 20, 2009 by and between Tianjin Tianshi Biological Engineering Co., Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (17)
10.38	Equipment Lease Agreement dated December 15, 2009 between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Pharmaceuticals Co., Ltd. (17)
10.39	Agreement on Debt Transfer and Offset, dated as of December 31, 2009, by and among Tianyuan Capital Development Co., Tianshi International Holdings Group Limited and Tianjin Tianshi Biological Engineering Co., Ltd. (17)
10.40	Agreement on Debt Transfer and Offset, dated as of February 10, 2010, by and among Xianggang Fuhong Development Co., Ltd., Tianshi International Holdings Group Co., Ltd. and Tianshi International Investment Group Co., Ltd. (17)
10.41	Agreement, dated January 1, 2010 by and between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (18)

31.1*		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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10.42	Agreement, dated January 1, 2010 by and between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Group Co. Ltd. (18)
10.43	Agreement, dated June 11, 2010 by and between Tianshi International Holding Group Co., Ltd., Tianshi International Investment Group Co., Ltd. and Fuhong Development Co., Ltd. (19)
10.44	Labor Contract dated as of October 20, 2010 between Tianjin Tianshi Biological Development Co., Ltd. and Baolan Li (20)
10.45	Loan Agreement, dated August 24, 2010 by and between Tianjin Tiens Life Resources Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd. (21)
10.46*	Agreement on Debt Transfer and Offset, dated November 12, 2010 among Tianshi Group Co., Ltd., Tianshi International Holdings Group Co., Ltd., Tianshi International Investment Group Co., Ltd., Tianjin Tiens Life Resource Co., Ltd., Tianjin Tianshi Biological Development Co., Ltd., Tianjin Tianshi Biological Engineering Co., Ltd.
10.47*	Health Products Production Equipment Lease Agreement, dated December 3, 2010 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd.
10.48*	Household Chemical Products Production Equipment Lease Agreement, dated December 3, 2010 between Tianjin Tianshi Biological Development Co., Ltd. and Tianjin Tianshi Biological Engineering Co., Ltd.
10.49*	Loan Agreement, dated August 24, 2010, by and between Tianjin Tianshi Biological Engineering Co., Ltd. and Tianjin Tiens Life Resource Co., Ltd.
10.50*	Summary of RMB Working Capital Loan Contract dated October 20, 2010 by and between Tianjin Tiens Life Resources Co., Ltd. and China Construction Bank Co. Ltd., Tianjin Wuqing Branch
10.51*	Fixes Assets Loan Contract dated October 9, 2010 by and between Tianjin Tiens Life Resources Co., Ltd. and Agricultural Bank of China Tianjin Wuqing Branch
14.1	Code of Ethics (10)
21.1*	Subsidiaries
31.1*	Certification of the Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
32.1*	Certification of the Chief Executive Officer and Acting Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

(1) Filed as an exhibit to the Registrant’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2005.

(2) Filed as an exhibit to the Registrant’s Form 10-KSB filed with the Securities and Exchange Commission on March 7, 2002.

(3) Filed as an exhibit to the Registrant’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2006.

(4) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 15, 2007.

(5) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2007.

(6) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on November 14, 2007.

(7) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 15, 2008.

(8) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2008.

(9) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on November 14, 2008.

(10) Filed as an exhibit to the Registrant’s Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2005.

(11) Filed as an exhibit to the Registrant’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2008.

(12) Filed as an exhibit to the Registrant’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2009.

(13) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 15, 2009.

(14) Filed as an exhibit to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 4, 2009.

(15) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on August 14, 2009.

(16) Filed as an exhibit to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November 19, 2009.

34(17) Filed as an exhibit to the Registrant’s Form 10-K filed with the Securities and Exchange Commission on April 2, 2010.

(18) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 17, 2010.

(19) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on August 19, 2010.

(20) Filed as an exhibit to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 25, 2010.

(21) Filed as an exhibit to the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on November 15, 2010.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TIENS BIOTECH GROUP (USA), INC.
Date: April 2, 2010
Date: March 31, 2011
	/s/ Jinyuan Li
	Jinyuan Li
	Chief Executive Officer and President
	Chief Executive Officer, President and Acting Chief
	(Principal Executive Officer)
	Financial Officer
Date: April 2, 2010
	(Principal Executive Officer, Principal Financial and
	/s/ Manbo He
	Accounting Officer)
	Manbo He
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

3533

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Jinyuan Li	Chairman of the Board, Chief Executive	~~April~~March 231, ~~2010~~2011
Jinyuan Li	Officer, ~~and~~Acting ~~President~~Chief ~~(Principal~~Financial ~~Executive~~Officer and
	Officer)
	President (Principal Executive Officer,
/s/ Manbo He	Chief Financial Officer (Principal Financial	April 2, 2010
	Principal Financial and Accounting Officer)
Manbo He	and Accounting Officer) and Director
/s/ Yupeng Yan	Executive Vice President and Director	March 31, 2011
/s/ Yupeng Yan	Executive Vice President and Director	April 2, 2010
Yupeng Yan
/s/ Gilbert Raker	Director	April 2, 2010
/s/ Baolan Li	Director	March 31, 2011
Baolan Li
/s/ Gilbert Raker	Director	March 31, 2011
Gilbert Raker
/s/ Howard Balloch	Director	April 2, 2010
/s/ Socorro Quintero	Director	March 31, 2011
Howard Balloch
/s/ Socorro Quintero	Director	April 2, 2010
Socorro Quintero

3634

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TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Income and Other Comprehensive Income	F-3

Consolidated Statements of Shareholders’ Equity	F-4

Consolidated Statements of Cash Flows	F-5

Notes to Consolidated Financial Statements	F-6

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Tiens Biotech Group (USA), Inc.

We have audited the accompanying consolidated balance sheets of Tiens Biotech Group (USA), Inc. (the “Company”) as of December 31, ~~2009~~2010 and ~~2008~~2009, and the related consolidated statements of income and other comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, ~~2009~~2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, ~~2009~~2010 and ~~2008~~2009, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2009~~ 2010, in conformity with U.S. generally accepted accounting principles.

As discussed in ~~Note~~Notes 21, 3, 12, 13, 14 and 15 to the consolidated financial statements, inthe ~~2009~~Company has had numerous significant transactions with entities that are under common control, including that most of the Company’s ~~changed~~sales ~~the~~are ~~manner~~currently inand ~~which~~have ithistorically ~~accounts~~been ~~for~~made ~~noncontrolling~~to ~~interests~~related ~~in subsidiaries~~parties controlled by the majority shareholder of the Company.

As discussed in Notes 1, 3, 4, 10, 11, 12 and 13 to the consolidated financial statements, the Company has had numerous significant transactions with entities that are under common control, including that all of the Company’s sales are currently and have historically been made to related parties controlled by the majority shareholder of the Company.

/s/ Crowe Horwath LLP

~~Sherman Oaks~~Indianapolis, ~~California~~Indiana

~~April~~March 231, ~~2010~~ 2011

F-1

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TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, ~~2009~~2010 AND DECEMBER 31, ~~2008~~2009

	December 31,		December 31,
	2009		2008
	2010		2009
ASSETS
CURRENT ASSETS:
Cash	$	110,~~848~~155,~~328~~522	$	201,~~992~~848,~~573~~328
Cash related to assets held for sale		-		23,861,938
Accounts receivable, trade - related parties, net of
Total cash		1,848,328		44,854,511
allowance for doubtful accounts of $3,869,617 and $1,419,178
Accounts receivable, trade - related parties, net of allowance for doubtful accounts of $1,419,178 and $1,108,789 as of December 31, 2009 and December 31, 2008 , respectively		15,379,312		23,941,431
as of December 31, 2010 and December 31, 2009 , respectively		10,012,861		15,379,312
Inventories		5,~~328~~703,~~052~~349		85,~~365~~328,~~607~~052
Other receivables		~~995~~1,~~657~~045,952		~~813~~995,~~591~~657
Other receivables - related parties		4417,~~561~~376,~~626~~522		1544,~~729~~561,~~076~~626
Employee advances		~~115~~170,~~673~~842		~~112~~115,~~591~~673
Prepaid expenses		658,193		301,898
Prepaid expenses, net		415,208		658,193
Prepaid taxes		~~407~~3,~~534~~646,140		1407,~~531,207~~534
Other assets held for sale		-		10,904,842
Total current assets		48,526,396		69,294,375
Total current assets		69,294,375		106,554,754
PROPERTY, PLANT AND EQUIPMENT, net		72,037,542		10,124,483
PROPERTY, PLANT AND EQUIPMENT, net		10,124,483		10,274,643
OTHER ASSETS:
Construction in progress		~~125~~128,~~572~~715,~~621~~283		72125,~~300~~572,~~104~~621
Construction deposits		112,~~405~~490,~~997~~855		21,~~586~~405,~~302~~997
Intangible assets, net		12,~~864~~987,~~295~~000		1312,~~137~~864,~~195~~295
Other assets		1110,~~847~~721,~~937~~040		8711,~~541~~847,937
Total other assets		~~151~~164,~~690~~914,~~850~~178		88151,~~111~~690,~~142~~850
Total assets	$	~~231~~285,~~109~~478,~~708~~116	$	~~204~~231,~~940~~109,~~539~~708
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	514,~~012~~120,~~157~~791	$	65,~~283~~012,~~849~~157
Advances from customers - related parties		48,~~426~~688,~~751~~877		34,~~239~~426,~~650~~751
Wages and benefits payable		1,~~484~~613,~~852~~782		1,~~449~~484,~~146~~852
Other taxes payable		-		117,818
Short-term debt		3,024,800		-
Contractor deposits		183,395		163,248
Income taxes payable		490,782		-
Contractor payables		18,513,216		11,871,456
Contractor deposits		209,376		183,395
Other payables		1,151,551		1,933,743
Contractor payables		28,134,711		18,513,216
Other payables - related parties		3,326,110		6,373,900
Other payables		1,113,416		1,151,551
Current portion of long term debt, related party		-		2,130,000
Other payables - related parties		1,417,516		3,326,110
Liabilities directly associated with assets classified as held for sale		-		122,047
Total current liabilities		58,814,051		34,098,032
Total current liabilities		34,098,032		33,684,857
NON-CURRENT LIABILITIES
Long term debt, net of current portion, related party		-		2,137,742
Long term debt		18,451,280		-
Deferred income		11,~~236~~473,~~501~~853		11,~~208~~236,~~844~~501
Total non current liabilities		1129,~~236~~925,~~501~~133		1311,~~346~~236,~~586~~501
Total liabilities		4588,~~334~~739,~~533~~184		4745,~~031~~334,~~443~~533
Commitments and Contingencies
EQUITY:
Shareholders' equity of the Company:
Common stock, $0.001 par value, 250,000,000 shares authorized, 71,333,586 issued and outstanding, respectively		71,334		71,334
Common stock, $0.001 par value, 250,000,000 shares authorized,
Paid-in-capital		18,042,189		9,234,123
71,333,586 issued and outstanding, respectively		71,334		71,334
Statutory reserves		13,217,217		9,420,783
Paid-in-capital		18,349,908		18,042,189
Retained earnings		126,370,263		106,325,356
Statutory reserves		16,465,144		13,217,217
Accumulated other comprehensive income		18,262,123		23,851,062
Retained earnings		127,957,951		126,370,263
Total shareholders' equity of the Company		175,963,126		148,902,658
Accumulated other comprehensive income		23,393,626		18,262,123
Noncontrolling interest		9,812,049		9,006,438
Total shareholders' equity of the Company		186,237,963		175,963,126
Total equity		185,775,175		157,909,096
Noncontrolling interest		10,500,969		9,812,049
Total liabilities and equity	$	231,109,708	$	204,940,539
Total equity		196,738,932		185,775,175
Total liabilities and equity	$	285,478,116	$	231,109,708

The accompanying notes are an integral part of this statement.

F-2

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TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 and ~~2008~~2009

	2009			2008
	2010			2009
REVENUE - RELATED PARTIES	$	6041,~~032~~021,~~968~~135		$	7760,~~247~~032,~~898~~968
REVENUE - THIRD PARTIES		1323,~~943,101~~585			-1,943,101
COST OF SALES - RELATED PARTIES		1814,~~754~~850,~~680~~739			2418,~~870~~754,~~178~~680
COST OF SALES - THIRD PARTIES		1158,~~412,812~~638			-1,412,812
GROSS PROFIT		4126,~~808~~335,~~577~~343			5241,~~377~~808,~~720~~577
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1619,~~009~~530,~~382~~501			1816,~~574~~009,~~719~~382
INCOME FROM OPERATIONS		256,~~799~~804,~~195~~842			3325,~~803~~799,~~001~~195
Interest expense		(~~186~~230,~~543~~905	)		(~~266~~186,~~273~~543	)
Interest income		~~301~~18,~~709~~362			~~881~~301,~~070~~709
Other expense		~~(176~~35,~~757~~965	)		(2176,~~099,913~~757	)
OTHER (EXPENSE) INCOME, NET		(61,591	)		(1,485,116	)
OTHER EXPENSE, NET		(176,578	)		(61,591	)
INCOME BEFORE INCOME TAXES		256,~~737~~628,~~604~~264			3225,~~317~~737,~~885~~604
INCOME TAXES		~~930~~1,~~703~~469,548			2930,~~345,474~~703
NET INCOME		245,~~806~~158,~~901~~716			2924,~~972~~806,~~411~~901
LESS: Net income attributable to the noncontrolling interest		(~~965~~323,~~557~~101	)		(2965,~~315,215~~557	)
NET INCOME ATTRIBUTABLE TO THE COMPANY		234,~~841~~835,~~344~~615			2723,~~657~~841,~~196~~344
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment		~~441~~5,~~140~~131,503			7441,~~891,018~~140
Gain from the release of exchange reserves		(6,030,079	)		-
Loss from the realization of foreign currency sale		-			(6,030,079	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY		189,~~252~~967,~~405~~118			3518,~~548~~252,~~214~~405
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST		~~993~~664,~~504~~854			2993,~~764,347~~504
COMPREHENSIVE INCOME	$	1910,~~245~~631,~~909~~972		$	3819,~~312~~245,~~561~~909
EARNINGS PER SHARE, BASIC AND DILUTED	$	0.3307		$	0.3933
WEIGHTED AVERAGE NUMBER OF SHARES, BASIC AND DILUTED		71,333,586			71,333,586

The accompanying notes are an integral part of this statement.

F-3

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TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

											Accumulated
											other
	Number		Common		Paid-in		Statutory		Retained		comprehensive			Noncontrolling
	of shares		stock		capital		reserves		earnings		income			interest			Totals
BALANCE, January 1, 2008		71,333,586	$	71,334	$	8,842,009	$	9,420,783	$	78,668,160	$	15,960,044		$	6,144,063		$	119,106,393
Net Income										27,657,196					2,315,215			29,972,411
Foreign currency translation gain												7,891,018			449,132			8,340,150
Paid-in-capital						392,114									98,028			490,142
BALANCE, December 31, 2008		71,333,586	$	71,334	$	9,234,123	$	9,420,783	$	106,325,356	$	23,851,062		$	9,006,438		$	157,909,096
Net Income								3,796,434		20,044,907					965,560			24,806,901
Foreign currency translation gain												441,140			27,947			469,087
Free rent provided by related party						303,056									23,699			326,755
Effect from sale of Yihai						2,474,931									(211,595	)		2,263,336
Realization of foreign currency translation gain relating to the sale of Yihai						6,030,079						(6,030,079	)					-
BALANCE, December 31, 2009		71,333,586	$	71,334	$	18,042,189	$	13,217,217	$	126,370,263	$	18,262,123		$	9,812,049		$	185,775,175
Net Income								3,247,927		1,587,688					323,101			5,158,716
Foreign currency translation gain												5,131,503			341,753			5,473,256
Free rent provided by related party						307,719									24,066			331,785
BALANCE, December 31, 2010		71,333,586	$	71,334	$	18,349,908	$	16,465,144	$	127,957,951	$	23,393,626		$	10,500,969		$	196,738,932

The accompanying notes are an integral part of this statement.

F-4

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TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008~~2009

	2009			2008
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	245,~~806~~158,~~901~~716		$	2924,~~972~~806,~~411~~901
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Provision for doubtful accounts		406,795			1,037,089
Deferred income		(142,070	)		-
Provision for obsolete inventory		309,343			293,648
Provision for doubtful accounts		2,349,703			406,795
Depreciation		2,173,251			2,681,167
Increase (decrease) provision for obsolete inventory		(237,632	)		309,343
Amortization		381,742			323,276
Depreciation		2,036,280			2,173,251
Interest income		4,761			55,641
Amortization		338,019			381,742
Gain on sale of assets		47,054			39,208
Interest expense		167,586			4,761
loss on assets written off		5,876			192,833
(Gain) loss on sale of assets		(63,773	)		47,054
Rental expense borne by a related party		326,774			-
Loss on assets written off		40,982			5,876
Rental expense borne by a related party		330,708			326,774
(Increase) decrease in assets:
Accounts receivable, trade - related parties		83,~~308~~411,~~993~~877			~~(17~~8,~~917~~308,~~994~~993	)
Accounts receivable, trade - third parties		-			109,674
Other receivables		(16,036	)		(184,540	)
Other receivables		(184,540	)		314,367
Other receivables - related parties		9,936,038			1,668,812
Other receivables - related parties		1,668,812			2,538,775
Inventories		93,315			2,761,335
Inventories		2,761,335			(2,167,255	)
Employee advances		(50,112	)		(38,359	)
Employee advances		(38,359	)		(42,928	)
Prepaid expense		258,945			(419,419	)
Prepaid expense		(419,419	)		356,136
Increase (decrease) in liabilities:
Accounts payable		(18,~~249~~742,~~152~~972	)		2(1,~~007~~249,~~985~~152	)
Advances from customers - related parties		121,~~178~~603,~~463~~664			1,~~402~~178,~~445~~463
Wages and benefits payable		~~(43~~76,~~279~~914	)		~~195~~(43,~~555~~279	)
Other taxes payable		~~968~~(2,~~294~~674,295	)		(2968,~~654,720~~294	)
Other payables		(~~650~~74,~~296~~068	)		~~459~~(650,~~357~~296	)
Other payables - related parties		39,~~107~~069,~~699~~853			~~(390~~3,~~158~~107,699	)
Net cash provided by operating activities		4360,~~871~~357,~~048~~586			1843,~~806~~871,~~512~~048
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash outflow arising from disposal of a subsidiary		~~(23,975,473~~-	)		-(23,975,473	)
Collections from loans to local government		~~105,229~~-			~~457~~105,~~329~~229
Acquisition of intangible assets		-			(6,068,759	)
Construction deposits		(11,248,302	)		(2,664,741	)
Construction deposits		(2,664,741	)		(4,391,560	)
Contractor deposits		19,306			19,734
Contractor deposits		19,734			(464,499	)
Addition to construction in progress		(54,487,459	)		(42,734,161	)
Addition to construction in progress		(42,734,161	)		(25,714,095	)
Equipment deposits		(6,102,039	)		(11,782,984	)
Equipment deposits		(11,782,984	)		-
Proceeds from sales of properties		73,650			29,131
Proceeds from sales of properties		29,131			426,288
Purchase of equipment and automobiles		(1,441,906	)		(2,009,536	)
Purchase of equipment and automobiles		(2,009,536	)		(1,531,589	)
Net cash used in investing activities		(73,186,750	)		(83,012,801	)
Net cash used in investing activities		(83,012,801	)		(37,286,885	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from (repayment to) related parties		~~(3,946,860~~-	)		6(3,~~080~~946,~~385~~860	)
Payment on other payables-non current		-			(282,664	)
Proceed from short term debt		2,958,800			-
Payments on long term debt, related party		-			(1,197,662	)
Proceeds from long term debt		18,048,680			-
Payments to minority interest shareholder		-			(5,150,414	)
Net cash provided by (used in) financing activities		21,007,480			(3,946,860	)
Increase in paid in capital		-			482,516
EFFECT OF EXCHANGE RATE CHANGES ON CASH		128,878			82,430
Increase in deferred income		-			5,891,999
INCREASE (DECREASE) IN CASH		8,307,194			(43,006,183	)
Net cash provided by (used in) financing activities		(3,946,860	)		5,824,160
CASH, beginning of period		1,848,328			44,854,511
EFFECT OF EXCHANGE RATE CHANGES ON CASH		82,430			3,428,876
CASH, end of period	$	10,155,522		$	1,848,328
DECREASE IN CASH		(43,006,183	)		(9,227,337	)
CASH, beginning of period		44,854,511			54,081,848
CASH, end of period	$	1,848,328		$	44,854,511
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	~~105~~217,~~817~~154		$	~~266~~105,~~273~~817
Income taxes	$	31,~~287~~489,~~531~~417		$	3,~~877~~287,~~420~~531

The accompanying notes are an integral part of this statement.

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Table of Contents

Tiens Biotech Group (USA). Inc.

Notes to Consolidated Financial Statements

Note 1 - Background

Tiens Biotech Group (USA), Inc. (the "Company" or "Tiens") was incorporated on July 13, 1990 as Super Shops, Inc. in the State of Michigan. In October 2000, Super Shops, Inc. reincorporated in Delaware and changed its name to MIA Acquisition Corp., and subsequently to Strategika, Inc. in February 2002. On December 31, 2003, the Company changed its name from Strategika, Inc. to Tiens Biotech Group (USA), Inc.

The Company is currently owned 4.91% by public stockholders and 95.09% by Jinyuan Li, the Company’s current Chairman, ~~CEO~~Chief Executive Officer, Acting Chief Financial Officer and President. The Company owns 100% of Tianshi International Holdings Group Limited ("Tianshi Holdings"). Tianshi Holdings owns 80% of Tianjin Tianshi Biological Development Co., Ltd. ("Biological") and 100% of Tianjin Tiens Life Resources Co., Ltd. (“Life Resources”).

Acquisition of Tianshi Holdings and Biological

On September 9, 2003, the Company received all of the issued and outstanding common stock of Tianshi Holdings in exchange for the issuance by the Company of 68,495,000 shares of its common stock to the original stockholders of Tianshi Holdings, representing 95.09% of the issued and outstanding common stock of the Company at such time, after giving effect to the issuance.

On June 18, 2003, Tianshi Holdings acquired 80% of Biological from Tianshi Hong Kong International Development Co., Ltd. ("Tianshi Hong Kong"), which was 100% owned by the Company's current Chairman, Chief Executive Officer, Acting Chief Financial Officer and President, Jinyuan Li. Tianjin Tianshi Biological Engineering Co., Ltd. (“Tianshi Engineering”) owned the remaining 20% of Biological.

Tianshi Engineering is 49% owned by Baolan Li, the daughter of Jinyuan Li and a director of the Company, and 51% by Tianjin Tianshi Group Co., Ltd. ("Tianshi Group"). In June 2003, Tianshi Engineering transferred its 20% interest in Biological for no consideration to Tianjin Tianshi Pharmaceuticals Co., Ltd (“Tianshi Pharmaceuticals”） and Tianshi Holdings acquired 80% of Biological from Tianshi Hong Kong for no consideration. On February 25, 2008, Tianshi Pharmaceuticals, which is 100% owned by Tianshi Group, transferred its 20% interest in Biological to Tianshi Engineering.

Acquisition and sale of Tiens Yihai

In April 2004, Tianshi Holdings entered into a joint venture contract with Tianshi Pharmaceuticals to establish Tiens Yihai Co. Ltd., a Chinese-Foreign Equity Joint Venture (“Tiens Yihai”). Tiens Yihai was 99.4% owned by Tianshi Holdings and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai is located in Shanghai, China, and was established to build a new research and development facility in Shanghai, China. In March 2007, the Company decided to suspend the proposed development by Tiens Yihai.

In anticipation of this sale, the registered capital requirement of Tiens Yihai was decreased from $200 million to $29,989,361, equal to its then-current paid in, registered capital. This reduction was approved by the local government on October 14, 2008. Pursuant to the change of the registered capital requirement and the capital contributions from both investors, the equity interest held by Tianshi Holdings was decreased from 99.4% to 96% and the equity interest held by Tianshi Pharmaceuticals was increased from 0.6% to 4%. Tianshi Holdings, Tianshi Pharmaceuticals and Tianjin Tianshi Group Co., Ltd. (“Tianshi Group”) entered into a letter of intent on December 31, 2008, pursuant to which Tianshi Pharmaceuticals agreed to purchase the 96% equity interest in Tiens Yihai held by Tianshi Holdings, but this transaction was abandoned.

On November 15, 2009, Tianshi Holdings entered into a ~~Contract~~contract ~~for~~to ~~the~~transfer ~~Transfer~~of its 96% ~~of the~~ Equity Interests of Tiens Yihai ~~it owned~~ to Tianshi International Investment Group, Co., Ltd.., a British Virgin Islands ~~company~~Company (“Tianshi Investment”). Jinyuan Li owns 100% of Tianshi Investment. Pursuant to the Sale and Purchase Agreement, Tianshi Holdings agreed to sell its 96% equity interest in Tiens Yihai for $37.0 million ~~and settle the payment in two installments~~. ~~The~~As ~~first payment~~ of ~~$3,700,000 was settled during~~ the ~~first~~year ~~quarter~~ended of 2010, ~~and~~ the ~~second~~ ~~and~~company ~~final~~had ~~payment~~received ofthe ~~$33,300,000~~amount isin ~~due on November 14, 2010~~full.

Acquisition of Life Resources

On December 20, 2007, Tianshi Holdings entered a Sale and Purchase Agreement with Tianshi Investment. Pursuant to the Sale and Purchase Agreement, Tianshi Holdings agreed to buy all of the registered share capital of Life Resources for $64.2 million. On March 13, 2008, the Chinese government approved the transfer and the Company became the 100% shareholder of Life Resources.

Life Resources was incorporated on April 29, 2005 as a Foreign Investment Enterprise (“FIE”) in Wuqing, Tianjin, PRC, with a registered share capital of $30,000,000. The Company is currently constructing research and development and manufacturing and logistic facilities, as well as administrative offices. Construction on the project began in July 2006. On March 13, 2008 and Jun 24, 2009, the Chinese government approved the increase of registered capital of Life Resources from $30,000,000 to $50,000,000 and from $50,000,000 to $65,000,000, respectively.

Nature of operations

The Company through its subsidiaries is primarily engaged in the manufacturing of nutritional supplement products, including wellness products and dietary supplement products. In the PRC, the Company sells its products to Tianshi Engineering. Tianshi Engineering, in turn, sells the products to customers through its branches and affiliated companies and at chain stores which are owned by individual distributors. Outside the PRC, the Company sells its products to overseas affiliated companies located in 5445 countries who in turn re-package them and sell to independent direct sales distributors.

Note 2 – Summary of significant accounting policies

BASIS OF PRESENTATION

These consolidated financial statements of the Company and its subsidiaries are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

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The reporting entity

The Company’s consolidated financial statements reflect the activities of the following Company subsidiaries:

Subsidiary		~~Jurisdiction~~	% Ownership	~~% Ownership~~
Tianshi Holding	British Virgin Islands	~~British Virgin Islands~~		100.0	~~100.0~~%
Biological	P.R.C.	~~P.R.C.~~		80.0	~~80.0~~%
Life Resources	P.R.C.	~~P.R.C.~~		100.0	~~100.0~~%

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances are eliminated in consolidation.

Use of estimates

In preparing financial statements in conformity with ~~U.S.~~accounting ~~GAAP~~principles generally accepted in the United States of America, the Company makes estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and sales and expenses during the reported periods. Significant estimates include useful life of long ~~lived~~lives asset, provision for ~~bad~~doubtful ~~debt~~accounts and allowance for sales ~~return~~ returns. Management bases its estimates on historical experience and on various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Foreign currency translation

The reporting currency of the Company is the US dollar. Biological and Life Resources’ financial records are maintained and the statutory financial statements are stated in its local currency, Renminbi (RMB), as their functional currency. Results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by ~~the~~OANDA.com ~~People's Bank of China~~ at the end of each reporting period. Translation adjustments resulting from this process are included in other comprehensive income in the ~~statement~~statements of income and other comprehensive income.

This quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People's Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the People's Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices, shipping documents and signed contracts.

Translation adjustments amounted to $~~441~~5,~~140~~131,503 and $7441,~~891,018~~140 for the years ended December 31, ~~2009~~ 2010 and ~~2008~~2009, respectively. Asset and liability accounts at December 31, ~~2009~~ 2010 were translated at RMB6.8461 to US$1.00 ~~USD~~ compared to RMB6.8584 at December 31, ~~2008~~ 2009. Equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the years ended December 31, ~~2009~~2010 and ~~2008~~2009 were RMB6.8476 and RMB6.9684, respectively. Cash flows are also translated at average translation rates for the period. Therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet and statement of shareholders’ equity.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. These amounts are not material to the financial statements.

Translation adjustments are reported under comprehensive income as a component of stockholders’ equity.

Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value hierarchy, prioritizes the inputs used in measuring fair value into three broad levels as follows:

• Level one — Quoted market prices in active markets for identical assets or liabilities;

• Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

• Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company's financial instruments consist primarily of cash, trade accounts receivable, trade payables, advances, other receivables, and debt instruments. The carrying amounts of the Company's financial instruments generally approximate their fair values at December 31, ~~2009~~2010 and December 31, ~~2008, except for long-term debt, which has a fixed interest rate~~2009. The fair value of the long-term debt is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities. The carrying value and fair value of long-term debt is as follows:

F-7

	December 31, 2009				December 31, 2008
	Balance sheet amount		Fair value		Balance sheet amount		Fair value
Long-term debt - related party	$	-	$	-	$	4,267,742	$	4,244,098

Cash

Cash includes cash on hand and demand deposits in accounts maintained with banks 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 significant risks on its cash in bank accounts.

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Accounts receivable

The Company's trade accounts receivable are mainly due from related companies. The Company ~~has~~maintains ~~made~~a full provision for accounts receivable-related parties aged over one year based upon the related parties ~~ability~~abilities to collect their receivables and a general allowance for doubtful debt of 0.5% of the remaining accounts receivable-related parties. Management reviews its accounts receivable on a regular basis to determine if the provision for doubtful ~~debts~~accounts is adequate, paying particular attention to the age of receivables outstanding. At December 31, ~~2009~~2010 and December 31, ~~2008~~2009 receivables outstanding more than 180 days totaled $56,~~089~~985,~~510~~556 and $35,~~316~~089,~~115~~510, respectively. The Company did not charge-off any receivables for the periods reported and does not accrue interest on any of its accounts receivable. The following table represents the changes in the allowance for doubtful accounts:

	Balance at Beginning of Period		Increase of provision for Doubtful Accounts		Balance at End of Period
Twelve month period ended December 31, 2009
Year ended December 31, 2010
Reserves and allowances deducted from assets accounts:
Allowance for doubtful accounts:	$	1,419,178	$	2,450,439	$	3,869,617
Year ended December 31, 2009
Allowance for doubtful accounts:	$	1,108,789	$	310,389	$	1,419,178
Twelve month period ended December 31, 2008
Reserves and allowances deducted from assets accounts:
Allowance for doubtful accounts:	$	71,700	$	1,037,089	$	1,108,789

Inventories

Inventories are stated at the lower of cost or market using the ~~moving~~weighted average basis. The Company reviews its inventory annually for possible obsolete goods or to determine if any reserves are necessary for potential obsolescence.

Prepaid expenses

Prepaid expenses consist of advances to suppliers and short-term prepaid expenses. The Company reviews its advances to suppliers annually to determine whether provisions should be adjusted. The amount included in prepaid expense is net of any provisions. Provisions for prepaid expenses are as follows:.

	Balance at Beginning of Period		Increase of provision for Doubtful Accounts		Balance at End of Period
Twelve month period ended December 31, 2009
Year ended December 31, 2010
Reserves and provisions deducted from assets accounts:
Provision for prepaid expenses:	$	1,018,474	$	38,077	$	1,056,551
Year ended December 31, 2009
Provision for prepaid expenses:	$	952,071	$	66,403	$	1,018,474
Twelve month period ended December 31, 2008
Reserves and provisions deducted from assets accounts:
Provision for prepaid expenses:	$	872,053	$	80,018	$	952,071

Property, plant and equipment, net

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

F-8

	Estimated Useful Life
Buildings and improvements	20 years
Machinery and equipment	10 years
Computer, office equipment and furniture	5 years
Automobiles	5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss is included in the consolidated statements of income and other comprehensive income. Maintenance, repairs and minor renewals are charged directly to expenses as incurred. Major additions and betterment to buildings and equipment are capitalized.

Construction in progress

Construction in progress represents the costs incurred in connection with the construction of buildings or new additions to the Company's plant facilities. No depreciation is provided for construction in progress until such time as the relevant assets are completed and are ready for their intended use.

Construction deposits

Construction deposits represent advances paid by the Company to contractors.

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Table of Contents

Intangible assets

Intangible assets mainly consist of land use rights. All land located in the PRC is owned by the government and cannot be sold to any individual or company. However, the government grants "land use rights" for a specified period of time. The Company amortizes its land use rights according to the actual useful life of 50 years. Other intangible assets include patents and trademarks and are amortized over their estimated useful life ranging from five to ten years.

Other assets

Other assets consist of deposits made to purchase equipment and a long-term prepaid expense. The Company will transfer the deposits made to purchase equipment from other assets to property, plant and equipment upon taking ownership. The Company amortizes its long-term prepaid expense according to the service period.

Impairment of long-lived assets

Long-lived assets, including intangible assets of the Company, are reviewed annually as to whether their carrying value has become impaired. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. For the years ended December 31, 2010 and 2009, the Company determined there to be no impairment of long-term assets.

Deferred income

Deferred income consists of government grants. On August 2, 2005 and November 20, 2006, the Company received two government grants related to the purchase of land use rights in the amount of ~~RMB 35~~RMB35,803,461 (or US $5,223,725). On August 28, 2008, Life Resources paid ~~RMB 41~~RMB41,022,061 (or US $5,985,119) for the zoning changes to one parcel of land on which the land use rights were changed from “industrial” to “educational”. On September 12, 2008, the Company received ~~RMB 41~~RMB41,022,061 (or US US$5,985,119) from a government grant. The grants are treated as deferred income and ~~will be~~ amortized over the life of the buildings on the land from October 2010.

Noncontrolling interest

Noncontrolling interest represents the outside shareholder’s 20% ownership of Biological and ~~4% ownership~~is presented as a reduction of ~~Tiens~~net ~~Yihai.~~income ~~Effective~~to ~~from~~arrive ~~November~~at ~~15,~~net ~~2009,~~income ~~the~~attributable ~~company transferred~~to ~~its~~the ~~share~~Company ofand ~~Tiens~~as ~~Yihai~~a tocomponent ~~Tianshi~~of ~~Investment~~equity.

Revenue recognition

The Company sells both semi-finished products and finished products to Tianshi Engineering domestically. Revenue from semi-finished products was recognized at delivery point. Revenue from finished products ~~was~~is recognized only when the related party Chinese distributors recognized sales of the Company's products to unaffiliated third parties. Revenues in both cases are net of taxes.

For overseas sales, the Company sells mostly finished products. The Company recognizes revenue from international sales (non-Chinese) to affiliated parties, net of taxes, as goods are shipped and clear review by the customs department of the Chinese government.

The Company is generally not contractually obligated to accept returns. However, on a case by case negotiated basis, the Company permits customers to return their products. Revenue is recorded net of an allowance for estimated returns. Such ~~reserves~~ ~~are~~allowance is based upon management's evaluation of historical experience and estimated costs. The amount of the ~~reserves~~allowance ultimately required could differ materially in the near term from amounts included in the accompanying consolidated financial statements. As the Company did not receive any returns of products during the past two years, and management does not anticipate allowing any returns in ~~2010~~2011 related to revenues in ~~2009~~2010, no allowance for estimated returns has been recorded for the years ended December 31, ~~2009~~2010 and ~~2008~~ 2009.

F-9

Advertising costs

The Company sells ~~most~~all of its products to related parties, and these related parties are primarily responsible for marketing. Advertising costs of the Company for the years ended December 31, ~~2009~~2010 and ~~2008~~2009 amounted to $1113,~~914~~167 and $~~418~~11,~~138~~914, respectively, and were expensed as incurred.

Shipping and handling

Shipping and handling ~~totaled~~expense $~~340~~390,~~275~~197 and $~~618~~340,~~807~~275 for the years ended December 31, ~~2009~~ 2010 and ~~2008~~2009, respectively. The Company sells products on FOB condition, however, it usually prepays shipping and handling expenses to transportation companies on behalf of customers and collects these shipping and handling expenses when it receives payments from customers. The payments received from customers ~~were~~ are included in revenue, and the related shipping and handling costs ~~were~~are included in selling, general and administrative expenses.

Research and development

Research and development expenses include salaries, supplies, and overhead such as depreciation, utilities and other costs. These costs are expensed as incurred. The Company expensed research and development costs of $1,~~262~~832,~~623~~360 and $1,~~549~~262,~~132~~ 623 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively. These costs are included in selling, general and administrative expenses in the ~~accompanying~~ consolidated statements of income and other comprehensive income.

Income taxes

The Company accounts for income taxes in under the liability method,. ~~deferred~~Deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized when, in management’s opinion, it is more likely than not that some portion of the deferred tax assets will not be realized. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

The Company has not been subjected to income tax examinations by taxing authorities for the years ended December 31, 2009 and 2008. The Company is subject to tax examination in the PRC for all years, as tax returns remain open to examination until notified by the taxing authorities, and the Company has not received any notifications to date. The company records interest and penalties as other expense on the consolidated income and other comprehensive income statements. During the years ended December 31, 2009 and 2008, the Company did not recognize any amount in interest and penalties.F-9

Table of Contents

The Company has not been subjected to income tax examinations by taxing authorities for the years ended December 31, 2010 and 2009. The Company is open to tax examination in the PRC for all years, as tax returns remain open to examination until notified by the taxing authorities, and the Company has not received any notifications to date. The Company records interest and penalties as other expense on the consolidated statements of income and other comprehensive income. During the years ended December 31, 2010 and 2009, the Company did not recognize any amount in interest and penalties.

Earnings per share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. There are no differences between Basic and Diluted EPS for the periods ended December 31, ~~2009~~2010 and ~~2008~~ 2009.

Recently issued accounting pronouncements

In ~~December~~ ~~2007~~October 2009, the FASB issued aAccounting ~~pronouncement~~Standards ~~establishing~~Update ~~principles~~(ASU) ~~and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets~~2009-13, ~~the~~Multiple-Deliverable ~~liabilities~~Revenue ~~and~~Arrangements ~~any~~(ASU ~~non~~2009-~~controlling interest~~13) in(formerly ~~the~~EITF ~~acquiree~~08-1, ~~and~~Revenue ~~the~~Arrangements ~~goodwill~~with ~~acquired~~Multiple inDeliverables) awhich ~~business~~amends ~~combination~~ASC ~~or a~~605, ~~gain~~Revenue ~~from a bargain purchase~~Recognition. ItThis ~~also~~accounting ~~determines~~update ~~what~~establishes ~~information~~a tohierarchy ~~disclose. The~~for ~~objective~~determining of the ~~pronouncement~~value isof toeach ~~improve~~element ~~the~~within ~~relevance,~~a ~~representational faithfulness,~~multiple ~~and~~deliverable ~~comparability~~arrangement. ofThe ~~the~~amendments ~~information~~in ~~that~~this aupdate ~~reporting~~are ~~entity provides~~effective infor ~~its~~revenue ~~financial~~arrangement ~~reports~~entered ~~about~~into aor ~~business~~materially ~~combination~~modified ~~and~~in ~~its~~fiscal ~~effects. This~~years ~~pronouncement became~~beginning ~~effective~~on inor ~~the~~after ~~first~~June ~~quarter~~15, ~~of 2009~~2010. The ~~Company~~ ~~adopted~~adoption itof ASU ~~beginning~~2009-13 ~~January~~did 1,not ~~2009~~have ~~and~~an ~~had~~impact ~~no effect~~ on the Company’s consolidated financial statements..

In ~~December~~ ~~2007~~January 2010, the FASB issued aASU ~~pronouncement~~2010-02 ~~providing~~— ~~guidance~~Consolidation on(Topic ~~how~~810): ~~to report~~Accounting aand ~~non-controlling~~Reporting ~~interest~~for Decreases in ~~consolidated~~Ownership ~~financial~~of ~~statements~~a Subsidiary. ~~The objective~~This ofupdate ~~the~~amends ~~pronouncement~~Subtopic is810-10 and related guidance to ~~improve~~clarify that the ~~relevance,~~scope ~~comparability,~~of ~~and transparency~~the decrease in ownership provisions of the ~~financial~~Subtopic ~~information~~and related guidance applies to (i) a subsidiary or group of assets that is a ~~reporting~~business ~~entity~~or ~~provides~~nonprofit ~~in its~~activity; ~~consolidated~~(ii) ~~financial~~a ~~statements.~~subsidiary ~~This~~that ~~pronouncement became~~is ~~effective in~~a ~~the~~business ~~first~~or ~~quarter~~nonprofit ofactivity ~~2009,~~that ~~and~~is ~~should~~transferred beto ~~applied~~an ~~retrospectively~~equity ~~for~~method ~~all periods~~investee ~~presented.~~or Asjoint aventure; ~~result~~and (iii) an exchange of ~~the~~a ~~adoption~~group of ~~the~~assets ~~pronouncement~~that ~~from~~constitutes ~~January 1,~~a ~~2009,~~business ~~the~~or ~~Company~~nonprofit ~~reclassified~~activity ~~minority~~for a noncontrolling interest in an entity, but does not apply to: (i) sales of ~~$9.8 million~~in substance real estate; and $9 (ii) conveyances of oil and gas mineral rights.0 ~~million~~The toamendments ~~noncontrolling~~in ~~interest as~~this aupdate ~~component~~are ofeffective ~~equity~~beginning onin the ~~Company’s~~ ~~Consolidated~~period ~~Balance~~that ~~Sheet~~an ~~for~~entity ~~the~~adopts ~~years~~FAS ~~ended~~160 ~~December~~(now ~~31,~~included ~~2009~~in ~~and 2008,~~Subtopic ~~respectively~~810-10). The ~~noncontrolling~~ ~~interests~~adoption isof ~~presented~~the ~~after~~provisions ~~net~~in ~~income~~ASU in2010-02 ~~accordance~~did ~~with~~not have an impact on the ~~new~~ ~~guidance~~Company’s consolidated financial statements.

InThe ~~March 2008~~FASB has issued ASU 2010-06, ~~the~~Fair ~~FASB~~Value ~~issued~~Measurements aand ~~pronouncement~~Disclosures ~~requiring~~(Topic ~~enhanced~~820): ~~disclosure~~Improving Disclosures about ~~an entity’s~~Fair ~~derivative~~Value ~~and~~Measurements. ~~hedging~~This ~~activities~~ASU requires some new disclosures and ~~thereby~~clarifies ~~improves~~some ~~the~~existing ~~transparency of~~disclosure ~~financial~~requirements ~~reporting~~about fair value measurement as set forth in Codification Subtopic 820-10. ~~The~~ASU ~~objective~~2010-06 ofamends Codification Subtopic 820-10 and now requires a reporting entity to use judgment in determining the ~~pronouncement~~appropriate isclasses of assets and liabilities and to provide ~~adequate~~ ~~information~~disclosures about ~~how~~the ~~derivative~~valuation techniques and ~~hedging~~inputs ~~activities~~used ~~affect~~to ~~an entity’s~~measure ~~financial~~fair ~~position,~~value ~~financial~~for ~~performance,~~both recurring and ~~cash~~nonrecurring ~~flows~~fair value measurements. ~~This pronouncement became~~ASU 2010-06 was effective infor ~~the~~interim ~~first~~and ~~quarter~~annual ofreporting periods beginning after December 15, 2009, ~~and~~As ~~its adoption~~this ~~from~~standard ~~January~~relates 1specifically to disclosures, ~~2009~~the ~~had~~adoption ~~no effect~~did not have an impact on the Company’s consolidated financial ~~statements~~position and results of operations.

In ~~April 2008~~February 2010, the FASB issued a ~~pronouncement~~ASU ~~amending~~2010-10, ~~the~~"Consolidation ~~factors~~(Topic 810)." The amendments to bethe ~~considered in~~consolidation ~~determining~~requirements of ASC Topic 810 resulting from the ~~useful~~issuance ~~life~~of Statement 167 are deferred for a reporting entity's interest in an entity (1) that has all the attributes of ~~intangible~~an ~~assets~~investment ~~accounted~~company or (2) for ~~pursuant~~which it is industry practice to ~~previous~~ ~~topic~~apply ~~guidance~~measurement principles for financial reporting purposes that are consistent with those followed by investment companies. ~~Its~~ ~~intent~~An isentity that qualifies for the deferral will continue to ~~improve~~be assessed under the ~~consistency~~overall ~~between~~ guidance on the ~~useful~~consolidation ~~life~~of variable interest entities in ASC Subtopic 810-10 (before the Statement 167 amendments) or other applicable consolidation guidance, such as the guidance for the consolidation of anpartnerships ~~intangible~~in ~~asset~~ASC ~~and~~Subtopic 810-20. The deferral is primarily the ~~period~~result of ~~expected~~differing ~~cash~~consolidation ~~flows used~~conclusions toreached ~~measure~~by ~~its~~the ~~fair~~International ~~value~~Accounting Standards Board ("IASB") for certain investment funds when compared with the conclusions reached under Statement 167. ~~This~~The ~~pronouncement~~deferral is effective ~~for~~as ~~financial statements~~of ~~issued~~the ~~for~~beginning ~~fiscal~~of ~~years~~a ~~beginning~~reporting entity's first annual period that begins after ~~December~~November 15, ~~2008~~2009, and for interim periods within ~~those~~that ~~fiscal~~first ~~years~~annual reporting period, ~~and~~which ~~its~~coincides ~~adoption~~with ~~had~~the ~~no effect~~effective ondate of Statement 167. Early application is not permitted. The provisions of ASU 2010-10 are effective for the Company’s ~~consolidated~~beginning in 2010. The adoption of ASU 2010-10 did not have an impact on the financial ~~statements~~position, results of operations or cash flows of the Company.

In ~~May 2008~~February 2010, the FASB issued aan ~~pronouncement~~accounting ~~requiring~~standard that anamended ~~insurance~~certain ~~enterprise recognize~~recognition aand ~~claim~~disclosure ~~liability~~requirements ~~prior~~related to ansubsequent ~~event~~events. ofThe ~~default~~accounting ~~(insured~~standard ~~event)~~requires ~~when there~~an isentity ~~evidence~~ that ~~credit~~is ~~deteriorations~~an ~~have~~SEC ~~occurred~~filer into anevaluate ~~insured financial~~subsequent ~~obligation.~~events ~~This~~through ~~pronouncement~~the isdate ~~effective~~that ~~for~~the financial statements are issued ~~for~~and ~~fiscal~~removes ~~years~~the ~~beginning~~requirement ~~after~~that ~~December~~an ~~15, 2008,~~SEC ~~and~~filer ~~its~~ disclose the date through which subsequent events have been evaluated. This guidance was effective upon issuance. The adoption of this standard had no effect on the Company’s consolidated financial ~~statements~~ position or results of operations.

In ~~October~~ ~~2008~~May 2010, the FASB issued a ~~pronouncement~~ASU ~~amending~~2010-19, ~~previous~~“Foreign ~~guidance~~Currency ~~to clarify~~(Topic ~~the~~830): ~~application~~Foreign ofCurrency ~~fair~~Issues: ~~value~~Multiple inForeign ~~inactive~~Currency ~~markets~~Exchange ~~and allows for the use of management’s internal assumptions about future cash flows with appropriately risk-adjusted discount rates when relevant observable market data does not exist~~Rates”. The ~~objective~~amendments ofin ~~the~~this ~~pronouncement~~ASU ~~has~~are ~~not~~effective ~~changed~~as ~~and continues to be the determination~~ of the ~~price~~announcement ~~that~~date ~~would~~of beMarch ~~received~~18, ~~in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date~~2010. The adoption of ~~the~~this ~~pronouncement~~update did not have ana ~~effect~~material impact on the Company’s ~~consolidated~~ financial statements.

In ~~June 2009~~July 2010, the FASB issued aASU ~~pronouncement~~2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which amends ASC 310, Receivables. This ASU requires disclosures related to ~~improve~~financing receivables and the ~~relevance~~allowance for credit losses by portfolio segment. The ASU also requires disclosures of information regarding the credit quality, ~~representational faithfulness~~aging, nonaccrual status and ~~comparability~~impairments by class of receivable. A portfolio segment is the ~~information~~level ~~that~~at which a ~~reporting~~creditor ~~entity provides~~develops ina ~~its~~systematic ~~financial~~methodology ~~statements~~for ~~about~~determining aits ~~transfer~~credit ofallowance. ~~financial~~A ~~assets;~~receivable ~~the effects~~class is a subdivision of a ~~transfer~~portfolio onsegment ~~its financial~~with ~~position,~~similar ~~financial~~measurement ~~performance~~attributes, risk characteristics and ~~cash~~ ~~flows;~~common methods to monitor and aassess ~~transferor’s~~credit ~~continuing~~risk. ~~involvement,~~Trade ifaccounts ~~any,~~receivable inwith ~~transferred financial~~maturities ~~assets.~~of ~~This~~one ~~pronouncement~~year isor less are excluded from the disclosure requirements. The effective date for ~~financial~~disclosures ~~statements issued~~as ~~for~~of ~~fiscal~~the ~~years~~end ~~beginning~~of ~~after~~the ~~December~~reporting ~~15,~~period ~~2009~~is ~~and~~the ~~interim~~first ~~periods within~~quarter ~~those~~of fiscal ~~years~~year 2011. The ~~Company is~~effective ~~evaluating~~date for disclosures for activity during the ~~impact~~reporting ~~that~~period ~~this Statement~~is the second quarter of fiscal year 2011. The adoption will not have a material effect on the Company’s consolidated financial statements.

FOther accounting standards that have been issued or proposed by the FASB or other standards-10setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

In June 2009, the FASB issued a pronouncement amending previous topic guidance, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This pronouncement is effective for financial statements issued for fiscal years beginning after December 15, 2009 and interim periods within those fiscal years. The Company is evaluating the impact that this pronouncement will have on the Company’s consolidated financial statements.

Note 3 – Supplemental disclosure of cash flow information

On ~~June~~February 510, ~~2009~~2010, Tianshi Holdings, ~~Biological~~ Fuhong Development Co., ~~Tianshi~~Ltd. ~~Investment~~(“Fuhong Development”), and Tianshi ~~Group~~Investment entered into an agreement, pursuant to which liabilities in the form of a loan receivable due to ~~Tianshi~~Fuhong ~~Investment~~Development from the Company in the amount of ~~RMB 27~~$3,000,000 ~~(or~~were USoffset ~~$3.9~~against ~~million)~~assets ~~were~~in ~~offset against~~the form of a ~~cash~~loan ~~payment~~receivable ofdue ~~RMB 27,000,000~~to ~~(or~~the USCompany $3from Tianshi Investment.9 ~~million)~~Each ~~from Biological~~of toFuhong Development and Tianshi ~~Group~~Investment is 100% owned by Jinyuan Li.

F-10

Table of Contents

The right to offset existed because:

1. ~~The~~Tianshi ~~Company~~Investment had a determinable outstanding ~~loan~~debt ~~due~~payable to ~~Tianshi~~the ~~Investment~~Company;

2. ~~Tianshi~~The ~~Investment~~Company ~~agreed~~had ~~to lend~~ a determinable ~~amount~~outstanding debt payable to ~~Tianshi~~Fuhong ~~Group~~Development;

3. The Company funded the amount that Tianshi Investment agreed to lend to Tianshi Group;

4. The Company had the right to offset the amount of the outstanding loan due to Tianshi Investment with the amount that the Company funded to Tianshi Group;

5. The Company, Tianshi Investment and Tianshi Group agreed to offset the two amounts; and

6. The agreement to offset is enforceable under Chinese contract law.

On June 30, 2009, Tianshi Engineering paid $2,134,875 to Tianshi Investment on behalf of the Company, representing a loan payment by Tianshi Holdings. In return, $2,134,875 of Tianshi Holdings’ loan due from Tianshi Engineering was offset.

The right to offset existed because:

1. Tianshi Engineering had a determinable outstanding debt payable to the Company;

2. The Company had a determinable outstanding debt payable to Tianshi Investment;

The Company had the right to offset the two amounts;

4. The Company, ~~Tianshi~~Fuhong ~~Investment~~Development and Tianshi ~~Engineering~~Investment agreed to offset the two amounts; and

The agreement to offset is enforceable under Chinese contract law.

On June 3010, ~~2009~~2010, Tianshi ~~Engineering paid~~Holdings, $1Fuhong Development,~~170,817~~ toand ~~Tianyuan Capital~~Tianshi onInvestment ~~behalf~~entered ofinto ~~the~~another ~~Company~~agreement, ~~representing~~pursuant ~~one~~to ~~installment~~which liabilities in the form of a loan ~~that Tianyuan~~receivable ~~Capital~~due ~~lent~~ to ~~the~~Fuhong ~~Company,~~Development ~~plus~~from ~~interest~~the onCompany ~~that~~in ~~loan~~the ~~for~~amount ~~the~~of ~~six months~~$3,000,000 ~~ended~~were ~~June~~offset ~~30,~~against ~~2009.~~assets Inin ~~return,~~the ~~$1,170,817~~form of a loan ~~that~~receivable ~~Tianshi Holdings~~due ~~made~~ to ~~Tianshi~~the ~~Engineering~~Company ~~was~~from ~~offset~~Tianshi ~~against such payment~~Investment.

The right to offset existed because:

1. Tianshi ~~Engineering~~Investment had a determinable outstanding debt payable to the Company;

2. The Company had a determinable outstanding debt payable to ~~Tianyuan~~Fuhong ~~Capital~~Development;

The Company had the right to offset the two amounts;

4. The Company, ~~Tianyuan~~Fuhong ~~Capital~~Development and Tianshi ~~Engineering~~Investment agreed to offset the two amounts; and

The agreement to offset is enforceable under Chinese contract law.

On ~~December~~November 3112, ~~2009~~2010, Tianshi ~~Engineering~~Group, ~~paid~~Tianshi $3Investment,~~283,469~~ toTianshi ~~Tianyuan~~Engineering ~~Capital~~and ~~on behalf of~~ the ~~Company,~~ ~~representing~~company ~~the payment~~entered ofinto aan ~~loan~~agreement, ~~that Tianyuan~~pursuant ~~Capital lent~~ to which the Company,’s ~~plus~~liabilities ~~interest~~in onthe ~~that~~form ~~loan~~of ~~for~~advance ~~the~~from ~~six months~~Tianshi ~~ended~~Engineering ~~December~~of 31$11,767,357, ~~2009.~~short-term Indebt ~~return,~~from Tianshi Engineering of $39,~~283~~077,~~469~~156 ofand aother ~~loan~~payable ~~that~~to Tianshi ~~Holdings~~Group ~~made~~of to$6,455,487 ~~Tianshi Engineering~~were ~~was~~ offset against ~~such~~assets ~~payment~~in the form of other receivable from Tianshi Investment.

The right to offset existed because:

1. Tianshi ~~Engineering~~Investment had a determinable outstanding debt payable to the Company;

2. The Company had a determinable outstanding debt payable to ~~Tianyuan~~Tianshi ~~Capital~~Group and Tianshi Engineering;

3. The Company had the right to offset the ~~two~~four amounts;

4. The Company, ~~Tianyuan~~Tianshi ~~Capital~~Engineering, Tianshi Group and Tianshi ~~Engineering~~Investment agreed to offset the ~~two~~four amounts; and

The agreement to offset is enforceable under Chinese contract law.

Note 4 – Inventories

Inventories consist of the following:

F-11

	December 31,		December 31,
	2010		2009
Raw materials	$	1,392,141	$	1,937,306
Packing materials		479,651		729,517
Miscellaneous supplies		1,860,462		848,720
Work in process		640,664		476,529
Finished goods		1,330,431		1,335,980
Total	$	5,703,349	$	5,328,052

	December 31,		December 31,
	2009		2008
Raw materials	$	1,937,306	$	2,507,073
Packing materials		729,517		1,131,252
Miscellaneous supplies		848,720		402,630
Work in process		476,529		699,205
Finished goods		1,335,980		3,625,447
Total	$	5,328,052	$	8,365,607

The above amount indicates an inventory obsolescence reserve of $76,942 and $309,343 for the years ended December 31, 2010 and 2009, respectively.

The Company has written off obsolete inventories that amounted to $309,343 and $293,648 for the years ended December 31, 2009 and 2008, respectively.

Note 5 – Employee advances

Employee advances represents cash advances to various employees of the Company. In the PRC, a majority of business transactions are completed in cash. These cash advances represent monies advanced to certain employees to pay for various expenses and purchases related to the Company's daily operations. Employee advances amounted to $~~115~~170,~~673~~842 and $~~112~~115,~~591~~673 at December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

Note 6 – Prepaid expenses

Prepaid expenses consist of advances to suppliers and short-term prepaid expenses. The details of prepaid expenses net of the allowance as disclosed in Note 2 are as follows:

	December 31,		December 31,
	2009		2008
Advance to suppliers	$	655,443	$	297,576
Short-term prepaid expenses		2,750		4,322
Total	$	658,193	$	301,898

F-11

~~Note 7~~Table –of ~~Property, plant and equipment, net~~Contents

	December 31,		December 31,
	2010		2009
Advance to suppliers	$	412,458	$	655,443
Short-term prepaid expenses		2,750		2,750
Total	$	415,208	$	658,193

Note 7 – Prepaid taxes

Prepaid taxes primarily represents prepaid value added tax and income tax, which will be used to deducted from the value added tax payables and income tax payables in future. The detail of prepaid taxes was as follows:

	December 31,			December 31,
	2010			2009
Prepaid value added taxes	$	3,822,250		$	542,433
Prepaid income taxes		-			81,600
Taxes payable (except income taxes payable)		(176,110	)		(216,499	)
Total	$	3,646,140		$	407,534

Note 8 – Property, plant and equipment, net

Property, plant and equipment consisted of the following:

	December 31,			December 31,
	2009			2008
	2010			2009
Buildings and improvements	$	163,~~558~~687,~~934~~629		$	1,558,~~524~~934
Office equipment		~~348~~487,~~284~~179			~~383~~348,~~678~~284
Computer equipment and software		2,~~405~~855,~~467~~978			2,~~900~~405,~~333~~467
Machinery and equipment		1415,~~211~~325,~~726~~589			1214,~~835~~211,~~301~~726
Automobiles		4,~~470~~998,~~909~~126			4,~~145~~470,~~367~~909
Total		2287,~~995~~354,~~320~~501			2122,~~823~~995,~~203~~320
Less: accumulated depreciation		(1215,~~870~~316,~~837~~959	)		(1112,~~548~~870,~~560~~837	)
Property, plant and equipment, net	$	1072,~~124~~037,~~483~~542		$	10,~~274~~124,~~643~~483

Depreciation expense for the years ended December 31, ~~2009~~2010 and ~~2008~~2009 amounted to $2,~~173~~036,~~251~~ 280 and $2,~~681~~173,~~167~~251, respectively.

~~See~~ Note 10 ~~regarding~~9 ~~related~~- ~~party~~Intangible ~~sale of property.~~assets

Note 8 - Intangible assets

Intangible assets consisted of the following:

	December 31,			December 31,
	2010			2009
Land use rights	$	13,992,186		$	13,531,454
Other intangible assets		355,996			344,274
Less accumulated amortization		(1,361,182	)		(1,011,433	)
Intangible assets, net	$	12,987,000		$	12,864,295

Amortization expense for the years ended December 31, 2010 and 2009 amounted to $338,019, and $381,742 respectively.

F-12

	December 31,			December 31,
	2009			2008
Land use rights	$	13,531,454		$	13,498,149
Other intangible assets		344,274			343,426
Less accumulated amortization		(1,011,433	)		(704,380	)
Intangible assets, net	$	12,864,295		$	13,137,195

Table of Contents

On August 25, 2008, Life Resources entered into a definitive agreement with the Wuqing Branch Bureau of Tianjin Municipal Land and Resources and Administrative Bureau (the “Tianjin Government”) and Tianjin Tiens Life Science Co., Ltd. (“Life Science”), pursuant to which Life Resources and Life Science would pay the Tianjin Government in connection with changes to the zoning on several parcels of land on which they respectively have land use rights from “industrial” to “educational”. On August 28, 2008 and August 29, 2008, Life Resources paid a total of RMB 42,252,723 (or US$ 6,164,672) in connection with the zoning changes to its parcels.

Amortization expense for the years ended December 31, 2009 and 2008 amounted to $381,742 and $323,276 respectively.

The estimated amortization expense for the next five years is as follows:

Estimated amortization expense for
the year ending December 31,	Amount
2010	$	304,927
2011	$	308,577
2011	$	298,416
2012	$	308,577
2012	$	298,416
2013	$	297,105
2013	$	287,322
2014	$	296,450
2014	$	286,689
2015	$	294,747
2015 and thereafter	$	11,388,525
2016 and thereafter	$	11,481,544

Note 9 –10 ~~Investment~~-Short-term ~~in and sale of Tiens Yihai~~debt

On ~~April~~ October 20, ~~2004~~2010, ~~Tianshi~~Life ~~Holdings~~Resources entered ainto ~~Joint~~an ~~Venture~~agreement ~~Project~~ with ~~Tianshi Pharmaceuticals~~Construction toBank ~~establish~~of ~~Tiens~~China ~~Yihai.~~to Onobtain ~~September~~the 15loan of RMB20,000,000 ~~2004~~(US$3,024,800) for purchasing raw materials and other auxiliary materials at the ~~board~~term of ~~directors~~ one year. The weighted-average interest rate of ~~Tianshi~~the ~~Holdings~~short-term ~~ratified~~debt is the ~~Joint~~one-year ~~Venture~~benchmark ~~Project~~lending rate (The interest rate is 5.56% from October 20, 2010 to December 25, 2010 and 5.81% from December 26, 2010 to December 31, 2010). Under the agreement, Life Resources is required to take the following obligations:

~~In October 2004, the Company paid a 10% deposit totaling RMB 29,700,000 (or US$4,333,230) to Zhu Jia Jiao Industrial Park Economic Development Ltd~~1. ~~(representative~~ ofSubmit ~~the~~quarterly ~~local~~financial government, “Local Government”) to acquire the land use rights for approximately 263 acres of land located in Shanghai. In 2005, the Chinese central government issued its "Adjustment of Macro-Economic Policy" statement. ~~This~~within ~~policy~~fifteen ~~implemented~~days aafter ~~new~~each system of investment and use of state-owned assets, including land. Pursuant to this policy, local government organizations readjusted and re-allocated projects, including investment, construction and reconstruction of state-owned resources. As a result, projects and enterprises that had been affected, including Tiens Yihai, were required to wait for decisions by state and local government before proceeding with development.quarter;

~~On November~~2. ~~10,~~Submit ~~2006,~~any ~~Tianshi~~information Holdings and the Local Government entered into the Supplemental Agreement pursuant to which the parties agreed to the acquisition of land use rights by Tiens Yihai of a reduced 80 acre parcel of land. At that ~~time,~~ itsignificantly ~~was~~affect ~~not clear whether~~ the ~~remaining~~repayment ~~approximately~~ability ~~183 acres would be available for purchase in the future. Therefore, the Local Government agreed to refund to Tiens RMB 12,176,000 (or US $1,776,478)~~ of the original RMB 29,700,000 (or US $4,333,230) deposit at the time of receiving a construction license for the development. In order to proceed with the purchase of the property by Tiens Yihai, Tianshi Holdings was also required to provide a loan of RMB 50,000,000 (or US $7,295,000) to the Local Government for relocation costs for people living on the property. The loan was to be funded in two installments:Company;

·3. The ~~first~~condition ~~installment~~ of ~~RMB~~using ~~25,000,000~~the ~~(or~~fund USshould ~~$3,647,500)~~be ~~was~~fulfilled ~~paid~~the onenvironmental ~~November 27, 2006.~~law;

~~· The second installment of RMB 25,000,000 (or US $3,647,500) was to be paid after Tiens Yihai obtains a construction engineering license to develop the property~~4. ~~The~~No ~~parties~~utilization ~~have agreed to allow Tiens to reduce this second installment by the amount~~ of ~~the~~bank ~~RMB~~loans ~~12,176,000~~in ~~(or~~other USthan ~~$1,776,478) refund due to it.~~prescribed;

~~The loan accrues interest at a fixed rate of 6~~5.~~12%,~~ ~~which~~To ~~was~~inform the ~~interest~~bank ~~rate stipulated by the People’s Bank of China~~ for aany ~~loan~~related ofparty ~~the~~transaction ~~same~~with ~~level~~an ~~on November~~amount ~~27,~~over ~~2006.~~10% As of ~~November~~net ~~15, 2009, the Company had accrued $642,658 of interest receivable which was added to the loan~~asset.

InNote ~~return for~~11 ~~the~~-Long-term loan, Tiens Yihai was also to receive a tax credit equal to the amount of the loan, plus interest. As of December 31, 2009, Local Government had paid the Company RMB 4,777,773 (or US $ 699,944) for the loan and interest.debt

AsOn ~~of December~~October 319, ~~2008~~2010, ~~Tiens~~Life ~~Yihai~~Resources ~~had~~entered ~~obtained~~into ~~the~~a ~~land~~loan ~~use~~agreement ~~rights~~with ~~for approximately~~Agricultural 50Bank ~~acres.~~of ~~Due~~China to(Agricultural ~~the~~Bank), ~~decrease~~pursuant into ~~the~~which ~~size~~Agricultural ofBank ~~the~~loaned ~~property~~RMB200,000,000 ~~for which~~(or ~~Tiens~~US$30,248,000) ~~Yihai~~with ~~has~~the ~~received~~benchmark ~~land~~lending ~~use~~interest ~~rights~~rate ~~and~~of ~~continued~~The ~~uncertainty relating~~People’s toBank ~~the~~of ~~Tiens~~China ~~Yihai~~to ~~project,~~fund ~~the~~Life ~~Company~~Resources’ ~~decided~~construction toin ~~suspend~~progress ~~the development~~under of the ~~property~~guarantee asof anTiens ~~industrial park~~Group. OnUnder ~~September~~the 18agreement, ~~2008,~~Life ~~the board~~Resources ofis ~~directors~~required ofto ~~Tianshi~~take ~~Holdings approved~~ the ~~disposal~~following ~~of Tiens Yihai.~~obligations:

On the initial investment project, the total amount to be invested in Tiens Yihai would have amounted to $400 million, of which $200 million would have been registered capital. Tianshi Holdings would have contributed $198.8 million, representing approximately 99.4% of the registered capital of Tiens Yihai, and Tianshi Pharmaceuticals agreed to contribute $1.2 ~~million~~The ~~representing~~usage ~~0.6%~~ of the ~~registered~~ ~~capital~~loan ofis Tiens Yihai. A total of 15%, or approximately $30,000,000, of the registered capital was required to be contributed by the joint venture partners, within three months of when the business license was issued. In June 2004, Tianshi Pharmaceuticals finished its capital contributions totaling $1.2 million. In June and July 2004, Tianshi Holdings made capital contributions totaling $28,789,361 and the remaining registered capital was required to be contributed by May 27, 2007. Because of the significant reduction by the Local Government in ~~the~~accordance ~~number of acres approved for the Tiens Yihai project, the Company did not make the additional capital contribution of $170 million by May 27, 2007. After negotiating~~ with the ~~local~~laws ~~government~~and inregulations ~~Shanghai,~~or ~~the deadline of the payment was extended to May 2008.~~contracts;

2. Agree and actively cooperate with the lender and their agents on monitoring, inspecting of the construction of the project, financial activities, usage of loan and other related matters;

3. Submit information timely to the lender as the lender requested regarding the projects, usage of the loan, finance and other.

4. Submit any information that significantly affect the repayment ability of the Company;

Life Resources is permitted the full amount before October 8, 2011, and repay it before October 8, 2013. As of December 31, 2010, Life Resources has drawn RMB122,000,000 (or US$18,451,280) of the loan with three-year benchmark lending interest rate of The People’s Bank of China, which was adjusted twice, from 5.40% to 5.60% and to 5.85% since the Company received the first amount of the loan. The detail information of the obtained amount is as follows:

Obtained date		October 11, 2010				November 12, 2010				December 10, 2010
Amount		$	9,830,600			$	6,049,600			$	2,571,080

The amounts to be paid are as follows:

Date		October 8, 2011				October 8, 2012				October 8, 2013
Amount		$	4,537,200			$	9,074,400			$	16,636,400

Note 12 – Related party sale of property

On December 25, 2008, Biological and Tianshi Group entered into a Real Property Transfer Agreement (the “Transfer Agreement”). Under the Transfer Agreement, Biological transferred to Tianshi Group four buildings consisting of three workshops and a canteen, totaling 9,974.31 square meters, located at No. 6 Yuanquan Road, Wuqing Development Area, Tianjin New-Tech Industry Park, China. Pursuant to the Transfer Agreement, Tianshi Group paid Biological RMB32,800,000 (or US$4,797,328) to Biological. This transaction resulted in a loss of RMB1,912,983 (or US$274,762) for Biological.

On January 1, 2009, Biological and Life Resources entered two Lease Agreements with Tianshi Group, pursuant to which Biological and Life Resources had the right to use and occupy the workshop spaces being transferred under the Transfer Agreement. The leases are rent-free, but Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continue until the earlier of the date that Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the years ended December 31, 2010 and 2009, Biological and Life Resources recorded $330,708 and $303,056 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

F-13

~~In anticipation~~Table of the sale of Tiens Yihai, the Company reduced the registered capital requirement for Tiens Yihai from $200 million to $29,989,361, equal to then-current paid in capital. The decrease of the registered capital requirement for Tiens Yihai was approved by the local government on October 14, 2008. As a result, the share of Tiens Yihai owned by the Company was reduced from 99.4% to 96%, and Tianshi Pharmaceutical’s increased to 4%.Contents

InNote ~~March 2007,~~13 ~~the~~– ~~Company~~Other ~~decided~~related toparty ~~suspend~~transactions ~~the proposed development by Tiens Yihai. After negotiating with Tianshi Pharmaceuticals which is the minority shareholder of Tiens Yihai, Tianshi Holdings, Tianshi Pharmaceuticals~~ and Tianshi Group entered into a letter of intent on December 31, 2008. Pursuant to the letter of intent, Tianshi Holdings intended to sell its 96% share of Tiens Yiahi to Tianshi Pharmaceuticals, with Tianshi Group guaranteeing payment but the transaction was abandoned.balances

~~The assets~~During the years 2010 and ~~liabilities~~2009, the Company mainly conducted related party transactions with Tianshi Group, Tianshi Engineering, Tianshi Investment and overseas related companies of ~~Tiens~~Tianshi ~~Yihai~~Group. ~~have~~Tianshi ~~been~~Group ~~classified~~is asowned ~~assets~~90% ~~held~~by ~~for sale~~Jinyuan Li and ~~liabilities~~10% ~~directly~~by ~~associated~~his ~~with~~daughter, ~~assets~~Baolan ~~classified~~Li, aswho ~~held~~is ~~for~~also ~~sale respectively~~a indirector ~~2008~~of ~~annual~~the ~~report~~Company. ~~The~~Tianshi ~~assets~~Engineering is owned 51% by Tianshi Group and ~~liabilities~~49% ofby ~~Tiens~~Baolan ~~Yihai~~Li. ~~as of~~Tianshi ~~November~~Investment ~~15,~~is ~~2009~~100% ~~were~~owned asby ~~follows:~~Jinyuan Li. Jinyuan Li owns or controls the overseas related companies of Tianshi Group.

	November 15, 2009
Cash	$	24,027,957
Other receivables-third parties		10,742
Employee advances		1,612
Property, plant, and equipment,net		310,908
Construction In Progress		2,553,785
Intangible assets, net		2,559,242
Long-term prepaid Expense		5,388,998
Assets held for sale	$	34,853,244
Accounts payable		3,326
Wages and benefits payable		76,923
Other payables		36,143
Other payables - related parties		188
Liabilities directly associted with assets classified as held for sale	$	116,580

The Company’s related party transactions are required to be reviewed and approved or ratified by Board of Directors. No director that is a related person in a related party transaction may participate in any discussion, approval or ratification of the related party transaction except to provide information concerning it. The following tables are provided to facilitate an understanding of the transactions and outstanding balances between those related parties and the Company during 2010 and 2009.

On November 15, 2009, Tianshi Holdings entered a Contract for the Transfer of Equity Interest to sell all of the registered share capital of Tiens Yihai it owned to Tianshi Investment. Pursuant to the agreement, Tianshi Holdings agreed to sell its 96% equity interest in Tiens Yihai for $37.0 million. The first payment of $3,700,000 was settled during the first quarter of 2010, and the second and final payment of $33,300,000 is due on November 14, 2010. Tianshi Holdings recorded the gain of $2,474,931 from this transaction as paid in capital on the Company’s Consolidated Balance Sheet..

		2010				2009
Revenue-related parties		$	41,021,135			$	60,032,968

Note 10 – Related party sale of property

	December 31, 2010		December 31, 2009
Accounts receivable, trade – related parties, net of allowance for doubtful accounts of $3,869,617 and $1,419,178 as of December 31, 2010 and 2009, respectively	$	10,012,861	$	15,379,312
Other receivables – related parties	$	17,376,522	$	44,561,626
Advances from customers – related parties	$	8,688,877	$	4,426,751
Other payables – related parties	$	1,417,516	$	3,326,110

On December 25, 2008, Biological and Tianshi Group entered into a Real Property Transfer Agreement (the “Transfer Agreement”). Under the Transfer Agreement, Biological transferred to Tianshi Group four buildings consisting of three workshops and a canteen, totaling 9,974.31 square meters, located at No. 6 Yuanquan Road, Wuqing Development Area, Tianjin NewRevenue-~~Tech~~related ~~Industry Park, China.~~parties

Pursuant to the Transfer Agreement, Tianshi Group will pay Biological RMB 32,800,000 (or US $4,797,328) to Biological in 2009. This transaction resulted in a loss of RMB 1,912,983 (or $274,762) for Biological. In 2009, Tianshi Group paid RMB 15,000,000 ( or $2,193,900).

On January 1, 2009, Biological and Life Resources entered two Lease Agreements with Tianshi Group, pursuant to which Biological and Life Resources had the right to use and occupy the workshop spaces being transferred under the Transfer Agreement. The leases are rent-free, but Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continue until the earlier of the date that Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31, 2009, Biological and Life Resources recorded $303,056 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

Note 11 – Other related party transactions and balances

During the years 2009 and 2008, the Company mainly conducted related party transactions with Tianshi Group, Tianshi Engineering, Tianshi Investment and overseas related companies of Tianshi Group. Tianshi Group is owned 90% by Jinyuan Li and 10% by his daughter, Baolan Li. Tianshi Engineering is owned 51% by Tianshi Group and 49% by Baolan Li. Tianshi Investment is 100% owned by Jinyuan Li. Jinyuan Li owns or controls the overseas related companies of Tianshi Group.

F-14

The Company’s related party transactions are required to be reviewed and approved or ratified by Board of Directors. No director that is a related person in a related party transaction may participate in any discussion, approval or ratification of the related party transaction except to provide information concerning it. The following tables are provided to facilitate your understanding of the transactions and outstanding balances between those related parties and the Company during 2009 and 2008.

		2009				2008
Revenue-related parties		$	60,032,968			$	77,247,898

	December 31, 2009		December 31, 2008
Accounts receivable, trade – related parties, net of allowance for doubtful accounts of $1,419,178 and $1,108,789 as of December 31, 2009 and 2008, respectively	$	15,379,312	$	23,941,431
Other receivables – related parties	$	44,561,626	$	15,729,076
Advances from customers – related parties	$	4,426,751	$	3,239,650
Other payables – related parties	$	3,326,110	$	6,373,900
Current portion of long-term debt - related party	$	-	$	2,130,000
Long term debt – related party	$	-	$	2,137,742

Revenue -related parties

The details of revenue-related parties are as follows:

	2009		2008
	2010		2009
Tianshi Engineering	$	2524,~~298~~570,~~232~~887	$	3325,~~711~~298,~~474~~232
Overseas Related Companies		3416,~~734~~450,~~736~~248		4334,~~536~~734,~~424~~736
Total	$	6041,~~032~~021,~~968~~135	$	7760,~~247~~032,~~898~~968

The Company markets most of its products through various domestic and international business entities that are related to the Company through common ownership.

In China, the Company sells its products to Tianshi Engineering. Tianshi Engineering, in turn, markets and sells the products to customers through its branches and affiliated companies and at chain stores which are owned by individual distributors. Tianshi Engineering is solely responsible for all marketing and payments of sales commissions to independent distributors.

The Company has a sales contract with Tianshi Engineering which requires Tianshi Engineering to purchase all of the Company’s products to be sold in China. The Company sells its finished products to Tianshi Engineering at a price equal to 25% of the Chinese market price for the products. This 25% figure was negotiated between the parties in 2003, before the Company acquired Tianshi Holdings. The price of semi-finished goods sold to Tianshi Engineering was originally set at the beginning of 2006 to provide the Company with a 75% gross profit margin. However, based on fluctuations in the cost of raw materials and quantities produced, the gross profit margin percentage varies. The goal of this pricing policy was to try to maintain the Company’s gross margins on semi-finished goods at a similar level to historical gross margins for finished goods. All of Tianshi Engineering’s Chinese affiliated companies are owned in whole or in part by Jinyuan Li’s immediate family members. For the year ended 2010, the average gross profit margin of finished goods and semi-finished goods, which were sold to Tianshi Engineering, were approximately 72% and 69%, respectively.

Internationally, the Company sells its products directly to overseas affiliates. These overseas related companies re-package the Company’s products and then sell to overseas independent distributors or end users of the products. Due to the common ownership, there are no formal sales or administrative agreements among Biological and those overseas related companies. The business operations among these related entities are regulated through internal ordinances.

F-1514

~~Accounts~~Table ~~receivable,~~of ~~trade -related parties~~Contents

Accounts receivable, trade-related parties

The details of accounts receivable, trade-related parties are as follows:

	December 31, 2009			December 31, 2008
	December 31, 2010			December 31, 2009
Tianshi Engineering	$	51,~~035~~803,~~320~~688		$	45,~~362~~035,~~355~~320
Overseas Related Companies		1112,~~763~~078,~~170~~790			2011,~~687~~763,~~865~~170
Allowance for Doubtful Accounts		(13,~~419~~869,~~178~~617	)		(1,~~108~~419,~~789~~178	)
Total	$	1510,~~379~~012,~~312~~861		$	2315,~~941~~379,~~431~~312

On December 31, ~~2009~~2010, there are accounts ~~receivable~~receivables due from some overseas related companies outstanding over one year. The Company ~~made~~maintains ~~full~~a provision for the year end balance of accounts receivable due from those overseas related companies.

Other receivables-related parties

Other receivables - related parties are generated by the Company making various cash advances and short term loans, the allocation of various expenses to related parties, and amounts transferred from accounts receivable. The following table summarizes the other receivables- related parties balances:

	December 31,		December 31,
	2009		2008
	2010		2009
Tianshi Investment	$	37,000,000	$	-
Tiens Life Science Co., Ltd.	$	11,525,219	$	-
Tianshi Engineering		5,~~688~~603,~~926~~197		115,~~636~~688,~~208~~926
Tianshi Group		1,613,168		4,018,078
All-Legend Property Service (Tianjin) Co., Ltd.		155,798		77,612
Sego Property service(Tianjin) Co.,Ltd.		77,612		-
All-Legend Hotel Co., Ltd.		37,856		-
Tiens SmartFlow Logistics ( International) Group Ltd.		74,651		-
Tianshi Yinshi Hotel		37,810		36,566
Tianjin Tianshi Life Science Co., Ltd.		55,878		-
Tianshi Indonesia Logistic & Trade Co., Ltd.		9,902		9,873
Tianshi Yinshi Hotel		36,566		36,475
Tianshi Taijisheng Health management Co., Ltd		5,459		-
Tianshi Indonesia Logistic&Trade Co.,Ltd.		9,873		-
Shengshi Real Estate Development		1,072		634
Sego Hotel management Co.,Ltd.		2,730		-
Tianshi Pharmaceuticals		139		1,588
Tianshi Pharmaceuticals		1,588		5,922
All-Legend Hotel Management Co., Ltd.		70		2,730
Shengshi Real Estate Development		634		1,657
Tianshi Group		-		1,613,168
Tianjin Xingda Travel Co., Ltd		-		12,932
Tiens SmartFlow Logistics (International) Group Ltd.		-		74,651
Shanghai Tianshi Jinquan Investment Co.		-		1,846
Tianjin Tianshi Life Science Co., Ltd.		-		55,878
Beijin Xingda Travel Co., Ltd		-		1,195
Tianshi Investment		-		37,000,000
Others		-		14,763
Total	$	17,376,522	$	44,561,626
Total	$	44,561,626	$	15,729,076

On November 15, 2009, Tianshi Holdings entered into a ~~Contract~~contract for the ~~Transfer~~transfer of its 96% Equity Interests to sell all of the registered share capital of Tiens Yihai it owned to Tianshi Investment for $37.0 million. Pursuant to the ~~agreement~~Transfer Contract, ~~Tianshi~~the ~~Holdings~~purchase ~~agreed to~~price ~~sell~~of ~~its~~$37.0 ~~96%~~million ~~equity~~was ~~interest~~paid in ~~Tiens~~full ~~Yihai~~by ~~for~~November ~~$37.0~~12, ~~million~~2010. ~~The~~Payment ~~first payment~~ of $3,700,000 was ~~settled~~received ~~during~~in ~~the~~cash, ~~first~~$6,000,000 ~~quarter~~was ofoffset ~~2010,~~against ~~and~~payables ~~the second~~owed ~~and~~to ~~final~~Fuhong ~~payment~~Development, ofand $3327,300,000 iswas ~~due~~offset onagainst ~~November~~payables ~~14, 2010~~to Tianshi Engineering and Tianshi Group.

Historically, Tianshi Engineering remitted payment to the Company upon sales to third party customers. However, to support Tianshi Engineering’s marketing efforts in anticipation of receiving a direct selling license in China, the Company agreed to allow Tianshi Engineering to defer payment. Balances not remitted to the Company within 90 days are converted to other receivables - related parties. ~~Beginning~~The ~~January 1, 2007, the~~ other receivables - related parties ~~became~~ become interest bearing. The stated interest rate is the interest rate for the same level of loan stipulated by the People’s Bank of China. On April 21, 2009, the Company entered into a loan agreement with Tianshi Engineering. Pursuant to that agreement, effective as of April 1, 2009, $2,562,017 of other receivables-related parties, which originated from Tianshi Engineering as accounts receivable, became interest bearing. The loan was due on June 30, 2009 and the stated interest rate was 4.86%. Both the principal of $2,562,017 and interest on the loan of $12,624 were paid off on May 7, 2009. For the year ended December 31, ~~2009~~2010 and ~~2008~~2009, the interest income from the other receivables - related parties amounted to $~~12,624~~0 and $ 012,624, respectively.

The Company and Tianshi Group use common meters at the company’s headquarters for electricity and water, and also use the same employee insurance account. When making payments to these outside parties, the Company usually pays the fees first and then is reimbursed by Tianshi Group. These pro-rated amounts relating to Tianshi Group are categorized as other receivables - related parties.

F-1615

~~On December~~Table ~~25, 2008, Biological entered into a Real Property Transfer Agreement with Tianshi Group, pursuant to which Biological transferred four buildings at the price~~ of ~~$4,797,328 (See Note 10). As of December 31, 2008, the remaining balance due from Tianshi Group for the purchase of the four buildings amounted to $2,603,428.~~Contents

InOn ~~order to~~December ~~avoid~~25, ~~exchange loss from the increasing value of the renminbi against the dollar over the past several years~~2008, ~~beginning~~Biological inentered ~~2007 the Company exchanged cash held in dollars~~ into ~~renminbi~~a ~~through~~Real ~~Tianjin~~Property ~~Xiongshi~~Transfer ~~Construction~~Agreement ~~and Decoration~~with ~~Co.,~~Tianshi ~~Ltd. (“Xiongshi Construction”)~~Group, apursuant ~~related~~to ~~party construction company,~~ which isBiological ~~100%~~transferred ~~owned~~four bybuildings at the ~~Company’s~~price ~~current~~of ~~Chairman~~$4, ~~Chief Executive Officer and President~~797,328 ~~Jinyuan Li~~. ~~For~~As ~~the~~of ~~years~~March ~~ended December~~ 31, ~~2009 and 2008~~2010, the ~~amounts~~amount ~~transferred~~was topaid ~~Xiongshi~~in ~~Construction~~full ~~and~~by ~~changed~~Tianshi ~~to RMB were $0 and $12,500,000, respectively~~Group.

A portion of the construction in progress at an amount of RMB83,263,708 (US$12,592,803), which is recorded and paid for by Life Resources is built on the land owned by Tianshi Life Science. In addition, a portion of the construction in progress at an amount of RMB5,245,839 (US$793,381), which is recorded and paid for by Tianshi Life Science is built on the land owned by Life Resources. Tianshi Life Science and Life Resources intend to reimburse each other for the cost of the above construction in progress. The agreement is currently being drafted. The balance of RMB78,017,869 (US$11,799,422) has been reclassified as other receivable-related party as of December 31, 2010, accordingly.

Advances from customers-related parties

These advances represented prepayments made to the Company to insure that overseas related companies could obtain enough of the Company’s products to meet their market demands. As of December 31, ~~2009~~2010 and December 31, ~~2008~~2009, advances from related party customers amounted to $~~4.4~~8,688,877 ~~million~~ and $~~3.2 million~~4, 426,751, respectively.

Other payables-related parties

The details of other payables-related parties are as follows:

	December 31, 2009		December 31, 2008
	December 31, 2010		December 31, 2009
Fuhong Development Co.Ltd.	$	3,000,000	$	-
Tiens Group	$	639,529	$	0
Tianshi Germany Co., Ltd.		107,326		105,553
Tianshi Engineering		431,400		40,805
Tianjin Tianshi Globlal International Trade Co., Ltd.		93,606		23,344
Tianshi Germany Co., Ltd.		99,759		107,326
Tianyuan Capital Development Co. Ltd. ("Capital")		84,359		84,359
Tianjin Tianshi Global International Trade Co., Ltd.		96,794		93,606
Tianshi Engineering		40,805		-
Tianyuan Capital Development Co. Ltd.		84,359		84,359
Tianshi Administrative Committee of Industrial Park		14		14
Bejing All-legeng travel Co., lTd		65,660		0
Tianshi Investment		-		6,080,385
Tianshi Administrative Committee of Industrial Park		15		14
Beijin Xingda Travel Co., Ltd.		-		80,245
Fuhong Development Co.Ltd.		0		3,000,000
Total	$	31,~~326~~417,~~110~~516	$	63,~~373~~326,~~900~~110

These amounts arose primarily from previous cash advances from related parties such as management fees due to related parties and various non-operational transactions incurred with related parties.

On January 21, 2008, Life Resources and Tianshi Investment entered into a loan agreement, pursuant to which Tianshi Investment agreed to provide a loan to Life Resources of $6.5 million without interest. The loan was originally due on June 30, 2008, but subsequently extended, most recently to June 30, 2009 by the parties on December 31, 2008. On June 30, 2009, the loan was paid in full by the Company.

On November 10, 2009, Tianshi Holdings borrowed $3,000,000 from Fuhong Development Co.,Ltd., a British Virgin Islands Company which is 100% owned by Jinyuan Li, to fund its capital contribution to Life Resources. On the February 10, 2010, the loan was paid in full by cancelling the same amount Tianshi Investment owed to the Company.

~~Long~~On ~~term~~March ~~debt~~3, -2010, ~~related party~~Tianshi Holdings borrowed another $3,000,000 from Fuhong Development to fund its capital contribution to Life Resources. On June 11, 2010, the loan was paid in full by canceling the same amount Tianshi Investment owed to the Company.

~~On September~~During ~~10,~~the ~~2004,~~third ~~Tianshi~~quarter ~~Holdings~~of ~~entered~~2010, athe ~~loan~~Company ~~agreement~~received ~~with Tianyuan Capital to borrow~~ $~~10.65~~7,614,300 and $6,270,600 from ~~million~~Tianshi toGroup ~~fund~~and Tianshi ~~Holdings'~~Engineering, ~~contribution~~respectively, ~~due~~in order to ~~Tiens~~ ~~Yihai.~~fund ~~Jinyuan Li is~~ a ~~director~~portion of ~~Tiens~~the ~~Yihai~~construction ~~and~~in aprogress. ~~director~~As of ~~Tianyuan Capital.~~December ~~Jinyuan~~31, Li2010, ~~owns~~the ~~100%~~amounts had ofbeen ~~Tianyuan~~returned ~~Capital~~in full.

~~The principal~~On ofNovember ~~the~~12, ~~loan~~2010, isTianshi ~~being~~Investment, ~~paid~~Tianshi inEngineering, ~~consecutive~~Tianshi ~~semi-annual~~Group ~~installments~~and ~~of $1,065,000 on~~ the ~~last~~Company ~~day~~entered ofinto ~~June~~an ~~and December~~agreement, ~~commencing~~pursuant ~~June~~to ~~2006~~which ~~and~~the ~~ending June~~Company’s ~~31,~~other ~~2011.~~receivables ~~Interest~~from Tianshi Investment of $~~186~~27,~~543~~300,000 ~~and~~were ~~$266,273~~offset ~~was~~against ~~paid~~advances ~~for~~from ~~the~~Tianshi ~~years~~Engineering ~~ended December~~of 31$11,767,357, ~~2009~~short-term ~~and~~debt ~~2008,~~from ~~respectively,~~Tianshi ~~and~~Engineering ~~the~~of ~~loan~~$9,077,156 ~~was~~and ~~paid~~other inpayable ~~full~~to byTianshi ~~the Company~~Group onof ~~December 31~~$6, ~~2009~~455,487.

The loan balance at December 31, 2009 and 2008 consisted of the following:

	December 31, 2009		December 31, 2008
Note payable to Tianyuan Capital
Development Corp. Ltd., related party	$	-	$	4,267,742
Less current portion of long term debt		-		(2,130,000	)
Total	$	-	$	2,137,742

Other transactions with Tianshi Engineering

On ~~December~~ October 31, ~~2005~~2007, Biological entered ~~four~~into two lease agreements with Tianshi Engineering ~~which~~that ~~enabled~~enable Tianshi Engineering to share the use of certain of Biological’s production ~~workshops~~equipment ~~and~~to ~~equipment~~manufacture products which Tianshi Engineering owns, or jointly owns, with Biological. Each ~~for~~of ~~one~~the ~~year~~two ~~beginning~~agreements was effective as of January 1, ~~2006.~~2008 ~~These four~~and ~~lease~~expired ~~agreements~~on ~~were renewed in~~ December ~~2006~~31, ~~for~~2009. ~~the~~On ~~2007~~November ~~fiscal~~20, ~~year~~2009, ~~and in~~the ~~October~~lease ~~2007~~agreement for ~~the~~health ~~2008~~products ~~and~~production ~~2009~~equipment ~~fiscal~~and ~~year.~~the Onlease ~~December~~agreement ~~25,~~for ~~2008, Biological~~personal ~~entered~~care ~~into the~~product ~~2008~~production ~~Transfer~~equipment ~~Agreement~~were ~~with~~renewed ~~Tianshi~~by ~~Group, pursuant~~Biological toand ~~which~~Tianshi ~~Biological~~Engineering ~~transferred~~for to2010. ~~Tianshi~~Following ~~Group~~is ~~four~~a ~~buildings~~summary ~~subject to~~of the ~~above~~monthly ~~described~~rent ~~lease~~payable ~~agreements.~~to ~~Accordingly,~~Biological under the two ~~production workshop~~ leases ~~expired~~ atBiological ~~the~~entered ~~end~~into ofon ~~2008~~November 20, 2009. Rent revenue accrued from these leases amounted to $~~219~~209,~~605~~770 and $~~326~~219,~~956~~605 for the ~~years~~year ended ~~2009~~December 31, 2010 and ~~2008~~2009, respectively.

F-17

Other transactions with Tianshi Group

On ~~June 30~~January 1, ~~2002~~2009, ~~the~~Biological ~~Company~~ entered into an office and facilities lease agreement with Tianshi Group. Under the terms of the ~~five year~~ agreement, ~~the Company~~Biological’s annual rent is equal to 1% of its gross revenues. In addition, ~~the~~Biological ~~Company~~ is obligated to pay insurance, maintenance and other expenses related to the premises. This agreement ~~expired~~expires on December 31, ~~2007~~2010. ~~and~~On ~~was renewed, effective as of~~ January 1, ~~2008~~2010, ~~for~~Life ~~the~~Resources ~~2008~~entered ~~fiscal~~an ~~year~~office and ~~again,~~facilities ~~effective~~lease asagreement ofwith ~~January~~Tianshi 1,Group ~~2009, for~~on the ~~2009~~same ~~fiscal~~terms ~~year~~as Biological’s lease agreement with Tianshi Group. ~~Rent~~The ~~expense~~Company ~~totaled~~paid rent under these leases in the amount of $~~458~~500,~~382~~361 and $~~545~~458,~~192~~382 for the ~~years~~ year ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

~~Other transactions~~On January 1, 2009, each of Biological and Life Resources entered a Lease Agreement with Tianshi ~~Investments~~Group pursuant to which Biological and Life Resources will have the right to use and occupy the workshop spaces being transferred under the Property Transfer Agreement. The leases are rent-free, except that Biological and Life Resources are required to pay Tianshi Group for utility charges and maintenance costs on the buildings. The leases continues until the earlier of the date that Biological and Life Resources acquire use of alternate facilities or the land use rights on the underlying property expire. For the year ended December 31, 2010, Biological and Life Resources recorded $330,708 of the rent expense, which is not paid to Tianshi Group, but recorded as paid in capital based upon market price.

On December 20, 2007, Tianshi Holdings entered a Sale and Purchase Agreement with Tianshi Investment, Biological and Tianshi Engineering. Pursuant to the Sale and Purchase Agreement, Tianshi Holdings agreed to buy all of the registered share capital of Life Resources from Tianshi Investment for RMB474,674,415 ($64,247,182). The closing of the transaction was subject to government approval of the transfer of Life Resources to Tianshi Holdings. On March 13, 2008, the government approved the transfer.F-16

~~Pursuant~~Table ~~to the Sale and Purchase Agreement, Tianshi Holdings advanced a deposit~~ of ~~$64,247,182 to Tianshi Investment on December 20, 2007. This acquisition deposit was settled as follows:~~Contents

· $28,592,743 was paid by canceling a loan due to Biological from Tianshi Engineering in the principal amount of RMB200,000,000 together with interest accrued;

· $16,557,914 was paid by canceling other receivables due to Biological from Tianshi Engineering; and

· $19,096,525 was paid in cash.

On January 14, 2008, Tianshi Holdings and Tianshi Investment entered a loan agreement pursuant to which Tianshi Holdings loaned Tianshi Investment $4.1 million without interest. The loan was required to be used by Tianshi Investment to increase the registered share capital of Life Resources. The loan was due on March 31, 2008, provided however, that if the government approved the transfer of the shares of Life Resources to Tianshi Holdings prior to that date, the loan would be cancelled, as Life Resources would then be a wholly-owned subsidiary of Tianshi Holdings. The approval was received on March 13, 2008, and therefore, the loan was cancelled on the same date.

On November 15, 2009, Tianshi Holdings entered a Contract for the Transfer of Equity Interests to sell all of the registered share capital in Tiens Yihai it owned to Tianshi Investment. Pursuant to the agreement, Tianshi Holdings agreed to sell its 96% equity interest in Tiens Yihai for $37.0 million.. The first payment of $3,700,000 was settled during the first quarter of 2010, and the second and final payment of $33,300,000 is due on November 14, 2010.

Other transactions with Tianshi Pharmaceutical

On December 15, 2009, the Company entered into a one-year lease agreement with Tianshi Pharmaceutical. Under the terms of the lease agreement, the Company leased ~~equipments~~equipment atfor the ~~lease~~ fee of RMB25,383 (or US$3,755) per month. In addition, the Company is obligated to pay insurance, maintenance and other expenses related to on the ~~premises~~equipment. This agreement is effective from January 1, 2010 and ~~expired~~expires on December 31, 2010. The Company has rent expense of $45,062 for the twelve months ended December 31, 2010. The lease agreement was extended for an additional one year period.

Note 12 14 – Commitments and contingencies

Capital commitments

Capital commitments not provided for in the consolidated financial statements include the followings:

	2009		2008
	2010		2009
Purchases of machinery and equipment	$	2810,~~134~~338,~~098~~915	$	8928,~~524~~134,098
Construction of premises	$	3336,~~627~~851,~~022~~228	$	5433,~~685~~627,~~540~~022
Total	$	6147,~~761~~190,~~120~~143	$	5461,~~775~~761,~~064~~120

Operating lease commitments ~~and long-term debt obligations~~

The following table sets forth payments due by period for fixed contractual obligations as of December 31, ~~2009~~2010.

F-18

	Payments due by period
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Operating Lease Obligations	$	46,067	$	-	$	-	$	-	$	46,067
Total fixed contractual obligations	$	46,067	$	-	$	-	$	-	$	46,067

	Payments due by period
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Operating Lease Obligations	$	44,527	$	-	$	-	$	-	$	44,527
Long-term Debt Obligations	$	-	$	-	$	-	$	-	$	-
Total fixed contractual obligations	$	44,527	$	-	$	-	$	-	$	44,527

The Company leases its office building and manufacturing facilities in Tianjin, China from Tianshi Group, a related party, through common ownership. On June 30, 2002, the Company entered into a written lease agreement with Tianshi Group to pay annual rent at 1% of its total gross revenues. This agreement expired on December 31, 2007. The Company entered into a new one-year lease agreement with Tianshi Group for the fiscal year of 2008 and renewed in January 2009 and 2010 for the fiscal year of 2009 and 2010 with the same terms. Because the rent is based upon a percentage of its gross total revenues, the Company is not able to include a fixed figure in the table relating to this obligation. The total amount paid in 2010 and 2009 under this lease was $500,361 and $458,382.

~~The Company~~On ~~leases~~December ~~its office building and manufacturing facilities in Tianjin~~15, ~~China~~ ~~from Tianshi Group~~2009, ~~a related party, through common ownership. On June 30, 2002,~~ the Company entered into a ~~written~~one-year lease agreement with Tianshi ~~Group~~Pharmaceutical. ~~to pay~~Under ~~annual~~the ~~rent~~terms ~~at 1%~~ of ~~its~~the ~~total~~lease ~~gross revenues. This~~ agreement ~~expired on December 31~~, ~~2007.~~the ~~The~~ Company ~~entered~~leased ~~into~~equipments ~~a new one-year lease agreement with Tianshi Group~~ for ~~the~~RMB25,383 ~~fiscal~~(US$3,755) ~~year~~per ofmonth ~~2008~~from ~~and renewed in~~ January ~~2009~~1, ~~for~~2010. ~~the fiscal~~In ~~year~~addition, ~~of 2009 with~~ the ~~same~~Company ~~terms. Because the rent~~ is ~~based~~obligated ~~upon~~to ~~a percentage~~pay ~~of its gross total revenues~~insurance, ~~the~~maintenance ~~Company~~and isother ~~not~~expenses ~~able~~related to ~~include~~the ~~a fixed~~premises. ~~figure~~This inlease ~~the~~agreement ~~table~~expired ~~relating~~on toDecember ~~this~~31, ~~obligation.~~2010 ~~The~~and ~~total~~was ~~amount~~extended ~~paid~~for ~~in 2009~~an ~~under~~additional ~~this~~one ~~lease~~year ~~was $458,382~~period.

~~On September~~Note 4,15 –Noncontrolling ~~2008,~~interest the Company entered into a one-year lease agreement (the “Lease Agreement”) with Tianjin Baofeng Construction & Engineering Co., Ltd., an unrelated party company. Under the Lease Agreement, Biological leased a warehouse of 6,745.28 square meters located in Wuqing New-tech Industrial Park, Tianjin, China at the lease fees of RMB 87,688.64 per month. The total amount paid in2009 and ~~2008 under this lease was $115,365 and $37,784, respectively.~~distribution

On December 15, 2009, the Company entered into a one-year lease agreement with Tianshi Pharmaceutical. Under the terms of the lease agreement, the Company leased equipments at the lease fee of RMB25,383 per month. In addition, the Company is obligated to pay insurance, maintenance and other expenses related to the premises. This agreement effective from January 1, 2010 and will expire on December 31, 2010.

Note 13 –Noncontrolling interest and distribution

Effective from January 1, 2009, the share of Tiens Yihai held by minority shareholder increased from 0.6% to 4%. On November 15, 2009, Tianshi Holdings entered a Contract for the Transfer of Equity Interests to sell all of the registered share capital in Tiens Yihai it owned to Tianshi Investment. The share of Tiens Yihai held by noncontrolling shareholder decreased from 4% to 0% effective from November 16, 2009.

Dividends declared by Biological are split pro rata between the shareholders according to their ownership interests. The payment of the dividends to the shareholders may occur at different times, resulting in distributions which do not appear to be reflective of the noncontrolling ownership percentages. The table below shows the outstanding dividends payable of Biological which are ~~elimination~~eliminated upon ~~consolidated~~ consolidation, as well as the allocation of dividends between Tianshi Holdings and the noncontrolling shareholder.

	Tianshi			Noncontrolling
Date	Holding			Shareholder			Totals
Dividends outstanding, December 31, 2007 Balance	$	8,429,632		$	4,902,629		$	13,332,261
Dividends declared		-			-			-
Dividends paid		(2,098,611	)		(5,070,091	)		(7,168,702	)
Accumulated Other Comprehensive Income (loss)		542,974			167,462			710,436
Dividends outstanding, December 31, 2008 Balance	$	6,873,995		$	-		$	6,873,995
Dividends declared		-			-			-
Dividends paid		(3,945,510	)		-			(3,945,510	)
Accumulated Other Comprehensive Income (loss)		13,452			-			13,452
Dividends outstanding, December 31, 2009 Balance	$	2,941,937		$	-		$	2,941,937

F-17

~~As Biological~~Table ~~declares~~of dividends in RMB, and the RMB has appreciated against the dollar since 2005, dividends outstanding generated comprehensive income to Tianshi Holdings and the noncontrolling shareholder. Comprehensive income to Tianshi Holdings for the years ended December 31, 2009 and 2008 amounted to $13,452 and $542,974 respectively. Comprehensive income to noncontrolling shareholders for the years ended December 31, 2009 and 2008 amounted to $0 and $167,462, respectively.Contents

F-19

	Tianshi
Date	Holding			Totals

Dividends outstanding, December 31, 2008 Balance	$	6,873,995		$	6,873,995
Dividends declared		-			-
Dividends paid		(3,945,510	)		(3,945,510	)
Accumulated Other Comprehensive Income (loss)		13,452			13,452
Dividends outstanding, December 31, 2009 Balance	$	2,941,937		$	2,941,937
Dividends declared		-			-
Dividends paid		-			-
Accumulated Other Comprehensive Income (loss)		100,170			100,170
Dividends outstanding, December 31, 2010 Balance	$	3,042,107		$	3,042,107

~~Note 14~~As –Biological ~~Accumulated~~declares ~~other~~dividends in RMB, and the RMB has appreciated against the dollar since 2005, dividends outstanding generated comprehensive income ~~(loss)~~to Tianshi Holdings. Comprehensive income to Tianshi Holdings for the years ended December 31, 2010 and 2009 amounted to $100,170 and $13,452 respectively.

						Life		Tianshi
	Biological		Tiens Yihai			Resources		Holdings		Total
Balance as of January 1, 2007, as adjusted	$	2,109,074	$	1,727,692		$	329,316	$	1,878,222	$	6,044,304
Increase during the year		2,358,133		2,007,211			1,650,382		3,900,014		9,915,740
Balance as of December 31, 2007	$	4,467,207	$	3,734,903		$	1,979,698	$	5,778,236	$	15,960,044
Increase during the year		1,744,406		2,158,515			3,445,181		542,916		7,891,018
Balance as of December 31, 2008	$	6,211,613	$	5,893,418		$	5,424,879	$	6,321,152	$	23,851,062
Increase during the year		89,014		(5,893,418	)		202,022		13,443		(5,588,939	)
Balance as of December 31, 2009	$	6,300,627	$	-		$	5,626,901	$	6,334,595	$	18,262,123

Note 16 – Accumulated other comprehensive income (loss)

						Life		Tianshi
	Biological		Tiens Yihai			Resources		Holdings		Total
Balance as of January 1, 2008,	$	4,467,207	$	3,734,903		$	1,979,698	$	5,778,236	$	15,960,044
Increase during the year		1,744,406		2,158,515			3,445,181		542,916		7,891,018
Balance as of December 31, 2008	$	6,211,613	$	5,893,418		$	5,424,879	$	6,321,152	$	23,851,062
Increase during the year		89,014		(5,893,418	)		202,022		13,443		(5,588,939	)
Balance as of December 31, 2009	$	6,300,627	$	-		$	5,626,901	$	6,334,595	$	18,262,123
Increase during the year		1,367,015		-			3,664,396		100,092		5,131,503
Balance as of December 31, 2010		7,667,642	$	-		$	9,291,297	$	6,434,687	$	23,393,626

Accumulated other comprehensive income recorded in Biological, Tiens Yihai and Life Resources are due to foreign currency translation adjustments. Accumulated other comprehensive income recorded in Tianshi Holdings is due to the effect of foreign exchange rates on dividend receivables from Biological.

Note 15 17 – Statutory reserves

The laws and regulations of the People’s Republic of China require that before a Sino-foreign cooperative joint venture enterprise distributes profits to its partners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations, in proportions determined at the discretion of the board of directors, after the statutory reserve. The statutory reserves include the surplus reserve fund, the common welfare fund, and the enterprise fund.

Statutory reserve fund

Each of the Company’s Chinese subsidiaries is required to transfer 10% of its net income, as determined in accordance with the PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of that entity’s registered capital. During 2005, Biological’s statutory reserve fund had reached 50% of its registered capital, so no statutory reserve was required thereafter. Life Resources, as a newer operating subsidiary which has not reached its statutory reserve fund level, is currently required to make this transfer. On June 2521, ~~2009~~2010, Life Resources transferred $2,~~530~~165,~~956~~285, representing 10% of its ~~2008~~2009 net income, as determined in accordance with PRC accounting rules and regulations, to this reserve.

The transfer to this reserve must be made before distribution of any dividend to shareholders. For the years ended December 31, ~~2009~~2010 and ~~2008~~2009, the amounts of the statutory reserve fund were $47,~~986~~151,~~225~~510 and $24,~~455~~986,~~269~~225, respectively.

The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

F-18

Table of Contents

Common welfare fund

Each of the Company’s Chinese subsidiaries is required to transfer part of its net income in accordance with the PRC accounting rules and regulations, which is determined by its board of directors, to a statutory common welfare fund until the statutory reserve fund reaches 50% of that entity’s registered capital. Beginning 2005, Biological was not required to transfer any additional net income to the statutory reserve fund, so no transfer to the common welfare fund was required thereafter. As a newer operating subsidiary which has not reached its statutory reserve fund level, Life Resources is still required to ~~made~~make this transfer accompanying the transfer of statutory reserve. On June 2521, ~~2009~~2010, Life Resources transferred $1,~~265~~082,~~478~~642, representing 5% of its ~~2008~~2009 net income, as determined by its board of directors, to this fund.

This fund can only be utilized on capital items for the collective benefit of the Company’s employees, such as construction of dormitories, cafeteria facilities, and other staff welfare facilities. This fund is non-distributable other than upon liquidation. The transfer to this fund must be made before distribution of any dividend to shareholders. For the years ended December 31, ~~2009~~2010 and ~~2008~~2009, the amounts of the Company’s common welfare fund were $57,~~974~~057,~~977~~619 and $45,~~709~~974,~~499~~977, respectively.

Enterprise fund

The enterprise fund may be used to acquire fixed assets or to increase the working capital to expend on production and operation of the business. No minimum contribution is required. For the years ended December 31, ~~2009~~ 2010 and ~~2008~~2009, the board of directors determined, subject to shareholders’ approval, that no funds be transferred to this reserve. The amount of the enterprise fund reserve at December 31, ~~2009~~2010 was $2,256,015.

The Chinese government restricts distributions of registered capital and the additional investment amounts required by the Chinese joint ventures. Approval by the Chinese government must be obtained before distributions of these amounts can be returned to the shareholders.

~~Note 16~~ Note18 – Additional product sales information

The Company has a single operating segment. Most of the Company's revenues were generated from related parties for the years ended December 31, ~~2009~~2010 and ~~2008~~2009. Summarized enterprise-wide financial information concerning the Company’s revenues based on geographic area and product groups is shown in the following tables:

Revenue by Geographic Area:

F-20

	2010		2009
China	$	24,894,472	$	27,241,333
Europe-Asia		8,053,906		10,054,640
Africa		4,339,087		6,838,377
Asia-Pacific		2,741,258		11,805,899
America		1,248,965		4,728,925
Europe		67,032		1,306,895
Total	$	41,344,720	$	61,976,069

	2009		2008
China	$	27,241,333	$	33,711,474
Asia-Pacific		11,805,899		19,837,968
Europe-Asia		10,054,640		15,430,118
Africa		6,838,377		4,903,617
America		4,728,925		1,413,444
Europe		1,306,895		1,951,277
Total	$	61,976,069	$	77,247,898

Revenue by Product Group:

	2009		2008
	2010		2009
Wellness products	$	5737,~~474~~357,~~154~~998	$	7057,~~772~~474,~~304~~154
Dietary supplement products		43,~~478~~986,~~222~~722		64,~~432~~478,~~355~~222
Personal care products		~~23,693~~0		4323,~~239~~693
Total	$	6141,~~976~~344,~~069~~720	$	7761,~~247~~976,~~898~~069

Note 17 19 - Income taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. The Company's subsidiary, Tianshi Holdings, was incorporated in the British Virgin Islands and is not liable for income taxes.

The Company's subsidiaries, Biological, ~~Tiens Yihai~~ and Life Resources, are Sino-Foreign Joint Ventures incorporated in the PRC. According to US GAAP, the following are the income tax credits granted by the Chinese government, which are significant components of income taxes associated with continuing operations required to be disclosed.

~~Prior~~Beginning to January 1, 2008, ~~pursuant~~the tonew ~~the~~Enterprise ~~income~~Income ~~tax~~Tax ~~laws~~(“EIT”) oflaw replaced the ~~PRC~~laws ~~concerning~~for ~~Foreign~~Domestic ~~Investment~~ Enterprises (“DES”) and Foreign Invested Enterprises ~~and~~(“FIEs”). ~~various~~The ~~local~~new ~~income~~standard ~~tax~~EIT ~~laws~~rate (of 25% will replace the ~~"Income~~ ~~Tax~~33% ~~Law"),~~rate ~~Sino-foreign~~currently ~~joint~~applicable ~~venture~~to ~~enterprises~~both ~~generally~~DES ~~were~~and ~~subject~~ FIEs. According to ~~income~~the ~~tax~~new atEIT, anhigh-tech ~~effective~~companies ~~rate~~could ofbe ~~33%~~subject ~~(30%~~to ~~state~~a ~~income~~special ~~taxes~~reduced ~~plus~~tax 3rate of 15%. ~~local income~~The ~~taxes)~~qualification onof ~~income~~a ashigh-tech ~~reported~~company inis ~~their~~to ~~statutory~~be ~~financial~~reviewed ~~statements unless~~annually. ~~the~~Biological ~~enterprise~~currently isqualifies ~~located~~as ina ~~specially~~high-~~designated~~tech ~~regions~~company. orHowever, ~~cities~~as ~~for which~~there ~~more~~is ~~favorable~~no ~~effective~~detailed ~~rates~~regulation ~~apply.~~regarding Asthe ~~Biological~~implementation of the new EIT, ~~Tiens~~for ~~Yihai~~the ~~and~~year ~~Life Resources~~of ~~are~~2009 ~~80%,~~and ~~96%~~2010, ~~100%,~~Biological ~~owned~~was required by ~~Tianshi~~the ~~Holdings,~~local ~~respectively,~~tax ~~pursuant~~ authority to USprepay ~~GAAP,~~income ~~there~~tax isat noa ~~temporary~~tax ~~difference~~rate ~~between~~of ~~consolidated~~25%. ~~pretax~~In ~~income and~~June, ~~taxable~~2010, the prepaid income tax $582,480 for the year of 2009 was fully refunded.

~~Biological is~~According ~~located~~to inthe ~~Tianjin Wuqing Development Area, a~~ new ~~technology~~EIT ~~development zone~~law, ~~and~~Life isResources ~~subject~~could tostill ~~the~~be ~~special reduced income tax rate of 15%. Pursuant to the approval of the relevant PRC tax authorities, Biological is~~ fully exempt from PRC income taxes for two years starting from ~~the~~January ~~year~~1, ~~profits are first made~~2008, followed by a 712.5% reduced tax rate for the next three years.

~~Biological~~Provisions ~~started generating taxable profits in the year ended December 31, 2003. Effective January 1, 2005, the two-year 100% exemption~~ for income taxes ~~expired~~were ~~for~~all ~~Biological~~current ~~and it became subject to~~ income tax atexpenses aand ~~reduced~~for ~~rate~~the ofyears ~~7.5%~~ended December, ~~which~~2010 ~~expired~~and on2009 ~~January~~were $1, ~~2008~~469,548 and $930,703, respectively.

Tiens Yihai is located in a Special Industry Zone and is subject to a special reduced income tax rate of 15%. Pursuant to the approval of the relevant local Chinese tax authorities, Tiens Yihai was fully exempt from PRC income taxes for two years starting from the first year profits were made, followed by a 7.5% reduced tax rate for the next three years. In addition, in order to encourage Tiens Yihai to do business in the Special Industry Zone, the local Chinese tax authorities agreed to refund 50% of the total income tax after the fiveF-~~year tax break. As of December 31, 2008, Tiens Yihai was in the developmental stage of its organization and did not have any operating income.~~19

~~Life~~Table ~~Resources is located in Tianjin Wuqing Development Area, a national new technology development zone. Pursuant to the approval~~ of the relevant PRC tax authorities, Life Resources was fully exempt from PRC income taxes for two years starting from the year profits are first made, followed by a 7.5% reduced tax rate for the next three years.Contents

Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% will replace the 33% rate currently applicable to both DES and FIEs. According to the new EIT, high-tech companies could be subject to a special reduced tax rate of 15%. The qualification of a high-tech company is to be reviewed annually. Biological currently qualifies as a high-tech company. However, as there is no detailed regulation regarding the implementation of the new EIT, for the year of 2008 and 2009, Biological was required by the local tax authority to prepay income tax at a tax rate of 25%. On December 17, 2009, the prepaid income tax $1,562,168 for the year of 2008 was fully refunded.

According to the new EIT, Life Resources could still be fully exempt from PRC income taxes for two years starting from January 1, 2008, followed by a 12.5% reduced tax rate for the next three years. However, before the tax exemption qualification of Life Resources was approved by the tax authority, Life Resources was required by local tax authority to prepay income tax at a tax rate of 25%. On October 10, 2008 the approval was issued and the prepaid income tax $685,475 in Life Resources was refunded in 2009.

Provisions for income taxes were all current income tax expenses and for the years ended December, 2009 and 2008 were $930,703 and $2,345,474, respectively.

The following table reconciles the U.S. statutory rates to the Company's effective tax rate:

F-21

	2010			2009
U.S. Statutory rate		34.0	%		34.0	%
Foreign income not recognized in USA		(34.0	)		(34.0	)
China income taxes		25.0			25.0
Effect of reduced tax rate		(2.8	)		(20.60	)
Total provision for income taxes		22.2	%		4.4	%

	2009			2008
U.S. Statutory rate		34.0	%		34.0	%
Foreign income not recognized in USA		(34.0	)		(34.0	)
China income taxes		25.0			25.0
Effect of reduced tax rate		(20.6	)		-
Total provision for income taxes		4.4	%		25.0	%

The estimated tax savings due to the reduced tax rate for the years ended December 31, 2010 and 2009 amounted to $1,228,667 and $4,311,490, respectively. The net effect on earnings per share if the income tax had been applied would decrease earnings per share for the years ended December 31, 2010 and 2009 by $0.02 and $0.06, respectively

~~The estimated~~Note ~~tax~~20 – ~~savings~~Retirement due to the reduced tax rate for the years ended December 31, 2009 and 2008 amounted to $4,311,490 and $8,052,908, respectively. The net effect on earnings per share if the income tax had been applied would decrease earnings per share for the years ended December 31, 2009 and 2008 by $0.06 and $0.11, respectivelyplan

Note 18 – Retirement plan

Regulations in the PRC require the Company to contribute to a defined contribution retirement plan for all employees. All employees are entitled to a retirement pension amount calculated based upon their salaries at their dates of retirement and their length of service in accordance with a government managed pension plan. The PRC government is responsible for the pension liability to the retired staff.

The company is required to make contributions to the state retirement plan at 20% of the employees' monthly salary. Employees are required to contribute 8% of their salary to the plan. Total pension expense incurred by the Company amounted to $1,~~505.954~~085,547 and $~~795~~1,~~419~~505.954 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

The Company also has an unemployment insurance plan for its employees. The plan requires each employee to contribute 1% of his or her salary to the plan. The Company matches the contributions in an amount equal to two times the contribution of each participant. The Company made contributions to the unemployment insurance plan of $~~149~~104,~~206~~840 and $79149,~~976~~206 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively. All contributions are paid to a PRC insurance company, which in turn, is responsible for the unemployment liability. On January 1, 2002, the Company introduced a basic medical insurance plan for its employees. Pursuant to that medical insurance plan, the Company is required to pay an amount equal to 10% of its employees' salary to a PRC insurance company, which amounted to $~~761~~545,~~901~~600 and $~~407~~761,~~992~~901 for the years ended December 31, ~~2009~~ 2010 and ~~2008~~2009, respectively.

F-2220

Filing Compare · TIENS BIOTECH GROUP USA INC