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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

**[X]** ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: December 31, 2009

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ____________ to _____________

Commission File No.001-34566

CHINA BIOLOGIC PRODUCTS, INC.(Exact name of registrant as specified in its charter)

|DELAWARE                                                       | 75-2308816                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

No. 14 East Hushan Road, Taian City, Shandong People's
Republic of China 271000
(Address of
principal executive offices)

(+86) 538-620-2306(Registrants
telephone number, including area code)

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 $0.0001 | The
    NASDAQ Stock Market LLC                

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 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 Website, if any, every Interactive
Date 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 [   ]           No [   ]

---

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

|Large accelerated filer [   ] | Non-accelerated filer [   ] | Accelerated filer [   ] | Smaller reporting company
[X]
|----------------------------- | --------------------------- | ----------------------- | -----------------------------

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

As of June 30, 2009 (the last business day of the registrants
most recently completed second fiscal quarter), the aggregate market value of
the shares of the Registrants common stock held by non-affiliates (based upon
the closing price of such shares as quoted on the Electronic Bulletin Board
maintained by the National Association of Securities Dealers, Inc.) was
approximately $20.6 million. Shares of the Registrants common stock held by
each executive officer and director and each by each person who owns 10 percent
or more of the outstanding common stock have been excluded in that such persons
may be deemed to be affiliates of the Registrant. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

There were a total of 23,500,803 shares of the registrants
common stock outstanding as of March 19, 2010.

Documents Incorporated by Reference:None.

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TABLE OF CONTENTS

|            |                                                                                                                     |   
|----------- | ------------------------------------------------------------------------------------------------------------------- | --
|**PART I**  |                                                                                                                     |   
|ITEM 1.     | BUSINESS.                                                                                                           | 2 
|ITEM 1A.    | RISK FACTORS.                                                                                                       | 18
|ITEM 1B.    | UNRESOLVED STAFF COMMENTS.                                                                                          | 31
|ITEM 2.     | PROPERTIES                                                                                                          | 31
|ITEM 3.     | LEGAL PROCEEDINGS                                                                                                   | 31
|ITEM 4.     | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.                                                          | 34
|PART II     |                                                                                                                     |   
|ITEM 5.     | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
      STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. | 34
|ITEM 6.     | SELECTED FINANCIAL DATA                                                                                             | 36
|ITEM 7.     | MANAGEMENTS DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         | 36
|ITEM 7A.    | QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK.                                                   | 48
|ITEM 8.     | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                                                        | 48
|ITEM 9.     | CHANGES IN AND DISAGREEMENTS
      WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.                         | 48
|ITEM 9A(T). | CONTROLS AND PROCEDURES                                                                                             | 48
|ITEM 9B.    | OTHER INFORMATION.                                                                                                  | 50
|PART III    |                                                                                                                     |   
|ITEM 10.    | DIRECTORS, EXECUTIVE OFFICERS
      AND CORPORATE GOVERNANCE                                                        | 50
|ITEM 11.    | EXECUTIVE COMPENSATION                                                                                              | 55
|ITEM 12.    | SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                | 57
|ITEM 13.    | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
      AND DIRECTOR INDEPENDENCE                                     | 59
|ITEM 14.    | PRINCIPAL ACCOUNTING FEES AND
      SERVICES                                                                        | 60
|PART IV     |                                                                                                                     |   
|ITEM 15.    | EXHIBITS, FINANCIAL STATEMENT
      SCHEDULES.                                                                      | 61

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INTRODUCTORY COMMENTS

Special Note Regarding Forward Looking Statements

This Annual Report on Form 10-K, including the following
Managements Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements include, among others, those
concerning our expected financial performance and strategic and operational
plans, as well as all assumptions, expectations, predictions, intentions or
beliefs about future events. You are cautioned that any such forward-looking
statements are not guarantees of future performance and that a number of risks
and uncertainties could cause actual results of the Company to differ materially
from those anticipated, expressed or implied in the forward-looking statements.
The words believe, expect, anticipate, project, targets, optimistic,
intend, aim, will or similar expressions are intended to identify
forward-looking statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements. Risks and
uncertainties that could cause actual results to differ materially from those
anticipated include risks related to, among others: our potential inability to
raise additional capital that is necessary to fund our operations and our
expansion, including our intended acquisitions; the possibility that third
parties hold proprietary rights that preclude us from marketing our products;
the emergence of additional competing technologies; changes in domestic and
foreign laws, regulations and taxes; changes in economic conditions;
uncertainties related to Chinas legal system and economic, political and social
events in China; a general economic downturn; a downturn in the securities
markets; Securities and Exchange Commission regulations which affect trading in
the securities of penny stocks. Additional disclosures regarding factors that
could cause our results and performance to differ from results or performance
anticipated by this Report are discussed in Item 1A. Risk Factors.

Readers are urged to carefully review and consider the various
disclosures made by us in this Report and our other filings with the SEC. These
reports attempt to advise interested parties of the risks and factors that may
affect our business, financial condition and results of operations and
prospects. The forward-looking statements made in this Report speak only as of
the date hereof and we disclaim any obligation, except as required by law, to
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.

Use of Terms

Except as otherwise indicated by the context, all references in
this report to:

- BVI are to the British Virgin Islands;
- China Biologic, the Company, we, us, or our, are to the combined
  business of China Biologic Products, Inc., a Delaware corporation, and its
  direct and indirect subsidiaries;
- Dalin are to our majority owned subsidiary, Guiyang Dalin Biologic
  Technologies Co., Ltd., a PRC limited company;
- Exchange Act are to the Securities Exchange Act of 1934, as amended;
- Hong Kong are to the Hong Kong Special Administrative Region of the
  People's Republic of China;
- China or PRC are to the People's Republic of China;
- Huitian are to Xi'an Huitian Blood Products Co., Ltd., our minority
  owned PRC operating subsidiary;
- "Logic China" are to our wholly owned indirect PRC subsidiary Logic
  Management and Consulting (China) Co., Ltd.
- Logic Express are to our wholly owned subsidiary Logic Express Limited,
  a BVI company;
- Logic Holdings a to Logic Holdings (Hong Kong) Limited, our wholly-owned
  Hong Kong subsidiary;
- Qianfeng are to Qianfeng Biological Products Co., Ltd., Dalin's majority
  owned PRC operating subsidiary;
- RMB are to Renminbi, the legal currency of China; Securities Act are
  to the Securities Act of 1933, as amended;
- Taibang Medical are to Shandong Taibang's wholly owned PRC subsidiary,
  Shandong Taibang Medical Company;

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- Shandong Taibang are to our subsidiary Shandong Taibang Biological
  Products Co. Ltd., a sino-foreign joint venture incorporated in China; and
- U.S. dollar, $, USD and US$ are to the legal currency of the
  United States.

Throughout this report, we have converted RMB to USD as
follows:

|December 31, 2009                            |                          
|-------------------------------------------- | -------------------------
|Balance sheet                                | RMB 6.82 to
      US$1.00
|Statement of income and comprehensive income | RMB 6.82 to US$1.00      

|December 31, 2008                            |                          
|-------------------------------------------- | -------------------------
|Balance sheet                                | RMB 6.82 to
      US$1.00
|Statement of income and comprehensive income | RMB 6.94 to US$1.00      

As the result of foreign currency fluctuations the financial
statements if prepared as of the date of this report would present different
figures. The change of the foreign currency rate of USD to RMB as of March 18,
2010 would require a translation of amounts from RMB into USD according to the
following exchange rates:

|March 18, 2010                               |                          
|-------------------------------------------- | -------------------------
|Balance sheet                                | RMB 6.82 to
      US$1.00
|Statement of income and comprehensive income | RMB 6.82 to US$1.00      

PART I

ITEM 1.BUSINESS.

Overview of Our Business

We are a biopharmaceutical company and through our indirect
majority-owned Chinese subsidiaries, Shandong Taibang and Qianfeng and
minority-owned Chinese subsidiary, Huitian, we are principally engaged in the
research, development and manufacturing of plasma-based pharmaceutical products
in China. Shandong Taibang, our 82.8% majority owned subsidiary, operates from
our manufacturing facility located in Shandong Province, Qianfeng, the 54%
majority owned subsidiary of Dalin, our 90% majority owned subsidiary, operates
from facilities in Guizhou Province and Huitian, our 35% minority-owned
subsidiary operates from facilities from Shaanxi Province. The plasma-based
biopharmaceutical manufacturing industry in China is highly regulated by both
the provincial and central governments. Accordingly, the manufacturing process
of our products is strictly monitored from the initial collection of plasma from
human donors to finished products. Our principal products include our approved
human albumin and immunoglobulin products.

We are approved to sell human albumin 20%/10ml, 20%/25ml,
20%/50ml, 10%/10ml, 10%/25ml, 10%/50ml and 25%/50ml. Human albumin is our top-selling
product. Sales of these human albumin products represented approximately 49.7%
and 57.8% of our total revenues, respectively, for the each of the years ended
December 31, 2009 and 2008. Human albumin is principally used to increase blood
volume while immunoglobulin is used for certain disease preventions and cures.
Shandong Taibang's approved human albumin and immunoglobulin products use human
plasma as the basic raw material. Albumin has been used for almost 50 years to
treat critically ill patients by replacing lost fluid and maintaining adequate
blood volume and pressure. All of our products are prescription medicines
administered in the form of injections.

We sell our products to customers in the PRC, mainly hospitals
and inoculation centers. Our sales have historically been made on the basis of
short-term arrangements and our largest customers have changed over the years.
For the years ended December 31, 2009 and 2008, our top 5 customers accounted
for approximately 10.7% and 16.2%, respectively, of our total revenue. For the
years ended December 31, 2009 and 2008, our largest customer accounted for
approximately 4.0% and 6.4%, of our revenue, respectively. As we continue to
diversify our geographic presence, customer base and product mix, we expect that
our largest customers will continue to change from year to year.

We have product liability insurance covering all of our
products. Since our establishment in 2002, there has not been any product
liability claims nor has any legal action been filed against the Company brought
by patients related to the use of our products, except for two pre-existing
product liability claims against Qianfeng which are still pending and which we
believe to be immaterial.

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Our Corporate History

China Biologic Products, Inc. was originally incorporated on
December 20, 1989 under the laws of the State of Texas as Shepherd Food
Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its
corporate name to Shepherd Food Equipment, Inc. Acquisition Corp., or Shepherd.
Shepherd is the survivor of a May 28, 2003 merger between Shepherd and GRC
Holdings, Inc. or GRC. In the merger, the company adopted the Articles of
Incorporation and By-Laws of GRC and changed its corporate name to GRC Holdings,
Inc. On January 10, 2007, a Plan of Conversion became effective pursuant to
which GRC was converted into a Delaware corporation and changed its name to
China Biologic Products, Inc.

Our Acquisition of Logic Express

On July 19, 2006, we completed a reverse acquisition with Logic
Express, whereby we issued to the shareholders of Logic Express 18,484,715
shares of our common stock in exchange for 100% of the issued and outstanding
shares of capital stock of Logic Express and its majority-owned Chinese
operating subsidiary, Shandong Taibang. As a result of the reverse acquisition,
Logic Express became our 100% owned subsidiary and the former shareholders of
Logic Express became our controlling stockholders with 96.1% of our common
stock. Shandong Taibang became our 82.76% majority-owned indirect subsidiary and
is the operating company for all of our commercial operations. Shandong Taibang
is a sino-foreign joint venture company established on October 23, 2002 with a
registered capital of RMB80 million (then approximately $10.3 million).

The reverse acquisition is considered to be a recapitalization
(issuance of stock by Logic Express for our net monetary assets) in substance,
rather than a business combination. Logic Express is treated as the continuing
reporting entity that acquired the Company.

Acquisition of Plasma Stations

In December 2006, our subsidiary, Shandong Taibang, acquired
all the assets of five plasma stations in Shandong Province. We obtained the
permit to operate the stations in January 2007. In April 2007, Shandong Taibang
acquired certain assets of two plasma stations in Guangxi Province. The two
plasma stations obtained their operating permits in February and April 2007,
respectively.

We acquired the assets of these plasma stations through
separate Shandong Taibang subsidiaries, specially formed for this purpose. The
subsidiaries holding six of our new plasma stations are the Xia Jin Plasma
Company, the Qi He Plasma Company, the He Ze Plasma Company, the Huan Jiang
Plasma Company, the Yang Gu Plasma Company, and the Zhang Qiu Plasma Company.
The seventh plasma station is held in the Fang Cheng Plasma Company, which is
80% owned by Shandong Taibang and 20% owned by Lin Feng, an unrelated third
party. In January 2007, Shandong Taibang also signed a letter of intent to
acquire certain assets from a third plasma station in Guangxi Province. However,
we have not consummated this acquisition as the permit for this station is in
dispute, as described in Legal Proceedings.

In June 2008, we received approval from the Guangxi Province
Bureau of Health to set up a new plasma collection station in Pu Bei County,
Guangxi Province. The new plasma collection station will be located in the
Centralized Industry Zone of Pu Bei County and when it becomes operational, it
will replace CBP's existing Fang Cheng Plasma Collection Station, or Fang Cheng.
We decided to relocate Fang Cheng to a more strategic location, also in Guangxi,
to increase collection volumes.

Establishment of Taibang Medical

In September 2006, Shandong Taibang applied to establish a
wholly owned subsidiary, Shandong Missile Medical Co., Ltd., or Shandong
Medical, with registered capital of $384,600, fully paid on March 1, 2007. On
February 7, 2007, Shandong Medical obtained a distribution license for
biological products, except for vaccine, from the Shandong Food and Drug
Administration, for a license period of five years from the date of obtaining
the license. The registration of Shandong Medical was ultimately approved by
Shandong Provincial Department of Foreign Trade and Economic Cooperation on July
4, 2007 and Shandong Medical was formally registered on July 19, 2007. The scope
of business is wholesale of biological products, except vaccines, with a license
period of 25 years from the date of registration.

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On August 14, 2009, we changed Shandong Medicals name to
Shandong Taibang Medical Company, or Taibang Medical. In addition, the
registered capital of Taibang Medical was increased by RMB 2,000,000
(approximately $293,400) to $733,500.

Formation of Hong Kong Subsidiary

On December 12, 2008, we established Logic Holdings (Hong Kong)
Limited, or Logic Holding, our wholly-owned Hong Kong subsidiary, for the
purpose of being a holding company for our majority interest in Dalin.

Dalin Acquisition and Entrustment Agreement

We completed the acquisition of 90% interest in Dalin in April
2009 upon payment of 90% of the purchase price. We are obligated to pay the
remaining 10% of the purchase price, RMB 19,440,000 (approximately $2,847,960),
on or before April 9, 2010, the one-year anniversary of the local Administration
for Industry and Commerce's approval of the equity transfer.

On April 6, 2009, Logic Express entered into an equity transfer
and entrustment agreement, or Entrustment Agreement, among Logic Express,
Shandong Taibang, and the Shandong Institute of Biological Products, or the
Shandong Institute, the holder of the minority interests in Shandong Taibang,
pursuant to which, Logic Express agreed to permit Shandong Taibang and the
Shandong Institute to participate in the indirect purchase of Qianfeng's equity
interests. Under the terms of the Entrustment Agreement, Shandong Taibang agreed
to contribute 18% or RMB 35,000,000 (approximately $5,116,184) of the Dalin
purchase price and the Shandong Institute agreed to contribute 12.86% or RMB
25,000,000 (approximately $3,654,917) of the Dalin purchase price. Logic Express
is obligated to repay to Shandong Taibang and the Shandong Institute their
respective investment amounts on or before April 6th, 2010, along with their pro
rata share, based on their percentage of the Dalin purchase price contributed,
of any distribution on the indirect equity investment in Qianfeng payable to
Logic Express during 2009. Logic Express has agreed that if these investment
amounts are not repaid within five days of the payment due date, then Logic
Express is obligated to pay Shandong Taibang and the Shandong Institute
liquidated damages equal to 0.03% of the overdue portion of the amount due until
such time as it is paid. Logic Express has also agreed to pledge 30% of its
ownership in Shandong Taibang to the Shandong Institute as security for
nonpayment. If failure to repay continues for longer than 3 months after the
payment due date, then the Shandong Institute will be entitled to any rights
associated with the pledged interests, including but not limited to rights of
disposition and profit distribution, until such time as the investment amount
has been repaid. Logic Express also provided a guarantee that Shandong Taibang
and the Shandong Institute will receive no less than a 6% return based on their
original investment amount. The Company intends to and has set aside the funds
to repay Shandong Taibang and Shandong Institute on or before April 6, 2010.

As part of our due diligence investigation into Dalin and
Qianfeng, we discovered that our indirect interest in Qianfeng acquired under
the equity transfer agreement may be diluted to as low as 41.3% . The local AIC
records show Dalin as a 54% shareholder of Qianfeng; however, the AIC records do
not reflect a May 2007 issuance of Qianfeng's equity interests to certain
investors, pursuant to a capital increase agreement. Qianfeng received the
consideration for the equity interests, but the increase in registered capital
and the related issuance of the equity interest has not yet been registered with
the local AIC, pending the outcome of a minority shareholder suit against
Qianfeng and its shareholders, alleging violation of the shareholder's right of
first refusal in connection with the May 2007 equity issuance. For details
regarding the Qianfeng shareholder suit and our position with respect to the May
2007 equity issuance of Qianfeng's equity interests, see our disclosure under
Legal Proceedings herein.

Qianfeng is one of the largest plasma-based biopharmaceutical
companies in China and is the only manufacturer currently operating in Guizhou
Province. With a population of 39 million, Guizhou Province has historically
produced the highest volumes of plasma collection in China, because a higher
proportion of its population has been willing to engage in the collection
process. Guizhou Province has a total of 19 plasma collection stations in
operation, collecting approximately 1,200 tons of plasma supply every year.
Qianfeng owns seven of these plasma collection stations, of which five are
currently in operation and collecting approximately 300 tons of plasma supply
per year, with an annual capacity of 400 tons. We intend to employ more advanced
collection techniques at these stations to improve yields and generate
additional plasma supply. We believe that Qianfeng currently controls
approximately 9.5% of the market for plasma-based biopharmaceutical products in
China. Qianfeng is in compliance with Good Manufacturing Practices, or GMP,
standards, and has been approved by the SFDA to produce six types of
plasma-based products including Human Albumin, Human Immunoglobulin, Human
Intravenous Immunoglobulin, Human Hepatitis B Immunoglobulin, Human Tetanus
Immunoglobulin and Human Rabies Immune Globulin.

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Huitian Acquisition

We purchased a 35% interest in Huitian at a purchase price of
RMB 44,000,000 (approximately $6,446,000) in June 2009. Huitian is a
manufacturer of plasma-based biopharmaceutical products in Shaanxi Province and
is one of only 32 such manufacturers in China which are government approved.
Shaanxi Province, which has a population of 37 million, has had a historically
high collection volume with approximately ten plasma collection stations in
operation, collecting approximately 300 tons of plasma supply each year. Only
four of the collection stations in Shaanxi Province are government approved and
three of these are owned by Huitian. Huitian produces about 80 tons of
plasma-based products per year and has 200 tons of annual production capacity.
Huitian believes that it currently controls approximately 1.2% of the market for
plasma-based biopharmaceutical products in China; a factor which we believe
provides strong long-term growth potential. Huitian is in compliance with GMP
standards and it is also approved by the SFDA for the production of Human
Albumin, Human Immunoglobulin, Human Immunoglobulin for Intravenous Injection,
and Human Hepatitis B Immunoglobulin products.

Formation of PRC Subsidiary

On December 21, 2009, our Hong Kong subsidiary, Logic Holdings,
established Logic Management and Consulting (China) Co., Ltd., or Logic China,
for the purpose of holding our majority interest in Dalin and to facilitate our
Chinese operations at the holding company level. On December 28, 2009, the
Company transferred its 90% equity interest in Dalin from Logic Holdings to
Logic China to complete this process.

Our Corporate Structure

The following chart reflects our current corporate
organizational structure:

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Our principal executive offices are located at No. 14 East
Hushan Road, Tai'an City, Shandong, the People's Republic of China 271000. Our
corporate telephone number is (86)538-620-2306 and our fax number is
(86)538-620-3895. We maintain a website at http://www.chinabiologic.com
that contains information about our operating company, but that information is
not part of this report.

Our Industry

Plasma Collection in China

The collection of human plasma in China is generally influenced
by factors such as government regulations, geographical locations of collection
stations, sanitary conditions of collection stations, living standards of the
donors, and cultural and religious beliefs. Until recently, only licensed
Plasmapheresis stations owned and operated by the government could collect human
plasma. Furthermore, each collection station was only allowed to supply plasma
to the one manufacturer that had signed the Quality Responsibility statement
with them. However, in March 2006, the Ministry of Health promulgated certain
Measures on Reforming Plasma Collection Stations, or the Blood Collection
Measures, whereby the ownership and management of PRC plasma stations are
required to be transferred to plasma-based biopharmaceutical companies while
the regulatory supervision and administrative control remain with the PRC
government. Plasma stations that did not complete their reform by December 31,
2006 risked revocation of their license to collect plasma.

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The supply of plasma for plasma-based products in the PRC has
been on the decline since 2003 from the historical high of annual supply of
approximately 7,000 tons to approximately 4,000 tons. We believe that this
decline is a direct result of the government's industry reforms of the country's
collection practices which led to the closure of many stations that did not meet
the new industry standards. Based on reports promulgated by the PRC Ministry of
Health, we estimate that the current annual supply of plasma in China amounts to
approximately 4,000 tons, as compared to 30,000 tons in the global market, with
the six largest manufacturers of plasma products accounting for approximately
50% of the annual plasma collection. In 2008, revenues from the sale of plasma
products in China amounted to approximately $700 million and revenues from the
sale of human albumin products amounted to about $400 million. We expect that
the plasma derivatives market to grow at 15% per year through 2011.

We believe that these regulatory changes have improved the
quality of blood and plasma by increasing cleanliness standards at blood
collection stations and instituting measures which limit illegal selling of
blood. As the operation of the plasma stations become more regulated and the
donor population expands, we believe that the overall quality of raw materials,
such as human albumin will continue to increase, leading to a safer, more
reliable finished product.

Plasma-Based Products Industry in China

We produce approved human albumin and immunoglobulin products,
with human plasma as the main ingredient. In addition to the low usage ratio of
such products in China as compared to other more developed countries, there is a
significant difference in the make up and range of the plasma-based
pharmaceutical products. Based on our analysis, in most developed countries like
the United States, clotting factor products accounts for the majority of the
plasma-based biopharmaceutical products, while in China, human albumin products
accounts for the vast majority of such products. Specifically, total clotting
factor products and human albumin products, account for approximately 40% and
25%, respectively, of United States' total annual plasma-derived products, and
account for approximately 3% and 59%, respectively, of Chinas.

Our Business Strategy

Our mission is to become a first-class biopharmaceutical
enterprise in China. To achieve this objective, we have implemented the
following strategies:

- Securing the supply of plasma Due to the shortage of
  plasma and the reform of the ownership of plasma stations, our immediate
  strategy is to negotiate and acquire plasma stations in order to secure our
  plasma supply. In June, 2006, we entered into letters of intent with five of
  the plasma stations in Shandong Province to acquire certain of their assets
  and we acquired those plasma stations in December 2006. Furthermore, in
  January 2007, we entered into three letters of intent to acquire certain
  assets of three additional plasma stations in Guangxi Province, two of which
  we have acquired. See Raw Materials  Plasma below. In June 2008, we
  received approval from the Guangxi Province Bureau of Health to set up a new
  plasma collection station in Pu Bei County, Guangxi Province. The new plasma
  collection station will be located in the Centralized Industry Zone of Pu Bei
  County and when it becomes operational, it will replace CBP's existing Fang
  Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate Fang
  Cheng to a more strategic location to increase collection volumes. During the
  construction period, Fang Cheng will still continue with its normal
  operations. With the approval of the Centralized Industry Zone of Pu Bei
  County, once Pu Bei becomes operational, we hope to expand its coverage area
  to secure higher collection volumes in the future.
- Acquisition of competitors and/or other biologic related companies In addition to organic growth, acquisition is an important part of
  our expansion strategy. Although there are about 32 approved plasma- based
  biopharmaceutical manufacturers in the market, we believe that there are only
  26 manufacturers in operation, only about half of whom will be competitive.
  The top seven manufacturers in China account for more than 50% market share.
  Furthermore, we believe that the regulatory authorities are considering
  further reforming the industry and those smaller, less competitive
  manufacturers will face the possibility of having their manufacturing permits
  revoked by the regulators, making them potential targets for acquisition.
  Also, if we are presented with appropriate opportunities, we may acquire
  additional companies, products or technologies in the biologic related sectors
  (including but not limited to medical, pharmaceutical and biopharmaceutical).

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- Further strengthening of research and development capability We believe that, unlike other more developed countries like the U.S.,
  China's plasma-based biopharmaceutical products are at the initial stage of
  development. There are many other plasma-based products that are being used in
  the U.S. which are not currently being manufactured in China. We intend to
  strengthen our research and development capability so as to expand our product
  line to include higher-margin, technologically more advanced plasma-based
  biopharmaceutical products. We believe that our increased focus on research
  and development will give us a competitive advantage over our competitors
- Market development and network expansion Leveraging on the
  high quality and excellent safety record of our products, we intend (i) to
  enhance our product penetration with our existing customers by introducing new
  products and (ii) to extend the reach of our products from our current market
  to include other provinces, as well as abroad, where we envision significant
  market potential.

Our Products

Our principal products are our approved human albumin and
immunoglobulin products. We are currently approved to produce 16
biopharmaceutical products in eight major categories as follows:

Approved Products(1)(2)
    Cure/UseHuman Albumin: - 20%/10ml, 20%/25ml,
      20%/50ml, 10%/10ml, 10%/25ml, 10%/50ml and 25%/50ml
    Shock caused by blood loss
      trauma or burn; raised intracranial pressure caused by hydrocephalus or
      trauma; Oedema or ascites caused by hepatocirrhosis and nephropathy;
      prevention and cure of low-density- lipoproteinemia; and Neonatal
      hyperbilirubinemia.Human Hepatitis B Immunoglobulin  100 International Units,
      or IU, 200IU, 400IU
    Prevention of measles and contagious hepatitis.
      When applied together with antibiotics, its curative effect on certain
      severe bacteria or virus infection may be improved.Human Immunoglobulin  10%/3ml and
      10%/1.5ml
    Original immunoglobulin
      deficiency, such as X chain low immunoglobulin, familiar variable immune
      deficiency, immunoglobulin G secondary deficiency; Secondary
      immunoglobulin deficiency: such as severe infection, newborn sepsis; and
      Auto-immune deficiency diseases, such as original thrombocytopenia purpura
      or kawasaki disease.Human Immunoglobulin for Intravenous Injection  5%/25ml
    and 5%/50ml
    Same as aboveHuman Immunoglobulin-5g/vial
    Same as aboveThymopolypeptides Injection  20mg/2ml,5mg/2ml
    Cure for various original and secondary T-cell
      deficiency syndromes, some auto-immune deficiency diseases and various
      cell immunity deficiency diseases, and assists in the treatment for
      tumors.Human Rabies Immunoglobulin  100IU, 200IU
      and 500IU
    Mainly for passive immunity
      from bites or claws by rabies or other infected animals. All patients
      suspected of being exposed to rabies will be treated with a combined dose
      of rabies vaccine and human rabies immunoglobulin.Human Tetanus Immunoglobulin  250IU
    Mainly used for the prevention and therapy of
      tetanus. Particularly applied to patients who have allergic reactions to
      Tetanus Antitoxin. (3)


1. % represents the degree of dosage concentration for the
product and each product has its own dosage requirement. For example, Human
Albumin 20%/10ml means 2g of Human Albumin is contained in each 10ml packaging
and Human Immunoglobulin 10%/3ml means 300mg of Human Immunoglobulin is
contained in each 3ml packaging. Under PRC law, each variation in the packaging,
dosage and concentration of medical products requires registration and approval
by the SFDA. During this process the altered product is not commercially
available for sale. For example, among our Human Albumin products only Human
Albumin 20%/10ml, 20%/25ml, 20%/50ml, 10%/10ml, 10%/25ml, 10%/50ml, and 25%/50ml products are currently approved and are
commercially available.

2. IU means International Units, or IU. IU is a unit used to
measure the activity of many vitamins, hormones, enzymes, and drugs. An IU is
the amount of a substance that has a certain biological effect. For each
substance there is an international agreement on the biological effect that is
expected for 1 IU. In the case of Immunoglobulin, it means the number of
effective units of antibodies in each package. When exposed to an antigen, the
body views it as foreign material, and takes steps to neutralize the antigen.
Typically, the body accomplishes this by making antibodies, which are intended
to defend the body from invasion by potentially dangerous substances. These antibodies
can be beneficial, as is the case when the body learns to fight a virus, or they
can be harmful, in the instance of allergies. In a situation when the body
cannot effectively react with these antigens, injection of our product will
provide sufficient antibodies to neutralize the antigens.

3. Tetanus Antitoxin is a cheaper injection treatment for
tetanus. However it is not widely used because most people are allergic to it.
______________________

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Human albumin is principally used to increase blood volume
while immunoglobulin is used for certain disease preventions and cures. Albumin
is also used to treat critically ill patients by replacing lost fluid and
maintaining adequate blood volume and pressure. Our approved human albumin and
immunoglobulin products use human plasma as the basic raw material. All of our
approved products are prescription medicines administered in the form of
injections.

Under PRC law, each variation in the packaging, dosage and
concentration of medical products requires registration and approval by the
SFDA. During this process the altered product is not commercially available for
sale. For example, among our human albumin products only Human Albumin 20%/10ml,
20%/25ml, 20%/50ml, 10%/10ml, 10%/25ml, 10%/50ml, and 25%/50ml  products
are currently approved and are commercially available. Accordingly, all
references, in this report, to our manufacture and sale of human albumin relate
to our approved human albumin products.

We have two product liability insurances covering Shandong
Taibang and Qianfengs products in the amount of approximately $2,934,000 (RMB
20,000,000) each. Since our establishment in 2002, there has not been any
product liability claims nor has any legal action been filed against us by
patients related to the use of our products, except for two pre-existing product
liability claims against Qianfeng. We do not believe the two claims to have a
material adverse impact on the Company.

Raw Materials

Plasma

Plasma is the principal raw material for our biopharmaceutical
products. Until the end of 2006, all plasma collection stations were owned by
the PRC government. Following the mandated privatization of plasma stations
resulted from the Ministry of Health's Blood Collection Measures, we acquired
our stable of plasma collection stations. We believe that the acquisitions of
plasma stations will give us a controlled source of plasma and better control
over the quality and quantity produced. We will also be able to have increased
control over the cost of plasma. Finally, we believe that we will enjoy benefits
of economies of scale with respect to the administration and management expenses
of our several plasma stations.

We spent $35.6 and $14.0 million on plasma in 2009 and 2008,
respectively. Currently, we own five operating plasma collection stations in
Shandong, two in Guangxi and five in Guizhou and one under construction in Guangxi.
We currently maintain sufficient plasma supply for approximately 6 months of
production. In March 2007, the PRC Food and Drug Administration implemented new
measures on biopharmaceutical industry effective as of July 1, 2008, requiring
plasma raw material to be kept for at least 90 days before being put into
production. In view of the new measures, in due course we will extend our plasma
supply for approximately four months. We have not experienced any interruptions
to our production due to shortage of plasma.

Other Raw Materials and Packaging Materials

Other raw materials used in the production of our
biopharmaceutical products include: reagents, consumables and packaging
materials. The principal packaging materials we use include glass bottles for
our injection products, external packaging and printed instructions for our
biopharmaceutical products. We acquire our raw materials and packaging materials
from our approved suppliers in China and overseas. We select our suppliers based
on quality, consistency, price and delivery of the raw materials which they
supply.

We have not experienced any shortage of supply on these raw
materials and packaging materials and there has not been any significant problem
with the quality of materials supplied by these suppliers.

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Our Major Suppliers

The table below lists our major suppliers as of December 31,
2009, showing the cumulative dollar amount of raw materials and supplies
purchased from them during the fiscal year ended December 31, 2009, and the
percentage of purchases from each supplier as compared to procurement of all raw
materials.

Rank
    Supplier's name
    Cumulative Amount Purchased
      During Fiscal Year 2009(US$)
    Percentage of Total
      Purchases During Fiscal Year 20091
    Sansui Plasma
      Station
    $2,734,903
    28.0%2
    Chongqing Sanda Weiye
      Pharmaceutical Products
    1,137,400
    11.7%3
    Sichuan Nangeer
      Biological Medical Company
    472,259
    4.8%4
    Zibo Zhong Bao Kang Medical
      Equipment Company
    416,079
    4.3%5
    Tai'an City
      Ruifeng Company
    411,777
    4.2%6
    Beijing Wantai Biological
      Pharmacy Enterprise
    353,563
    3.6%7
    Guizhou Sanling
      Chemical Technology Service Company
    326,308
    3.3%8
    Shandong Medical Bottling Company
    225,152
    2.3%9
    Beijing
      Zhongtianbaiyi Technology Development Company
    199,193
    2.0%10
    Wenzhou City Jiacheng Printing
      Company
    156,173
    1.6%Total
    $6,432,807
    65.9%


Except for Sansui Plasma Station, none of the above suppliers
are plasma raw material suppliers. Majority of our plasma raw materials were
collected through our majority owned plasma stations. Prior to our acquisition
of the assets of Qi He, Xiajin and Zhang Qiu, we had entered into material
supply agreements with them for the purchase of raw materials. We have replaced
these material supply agreements with plasma processing agreements, dated
January 2, 2007, between Shandong Taibang and each of Qi He, Xia Jin and Zhang
Qiu, pursuant to which we formally appointed each of these stations as our agent
to purchase, collect, examine and deepfreeze plasma on behalf of Shandong
Taibang, subject to rules and specifications that meet the Provincial SFDA's
requirements for quality, packaging and storage. Pursuant to the plasma
processing agreements, the stations must only collect plasma from healthy donors
within their respective districts and in accordance with a time table set by
Shandong Taibang. The plasma must: be negative HbsAg, anti-HCV, anti-HIV and
reaction of serum to RPR; contain an ALT ≤25 units (ALT), plasma protein ≥55g/l;
contain no virus pollution or visible erythrolysis, lipemia, macroscopic red
blood cell or any other irregular finding. In addition, the plasma must be
packaged in 25 separate 600g bags, boxed with a packing list and labeled to be
consistent with computer records and must be stored at -20°C as soon as possible
after collection to ensure that it will congeal within 6 hours. Shandong Taibang
is fully responsible for the overall technical guidance and quality supervision.
Shandong Taibang pays each of the stations an average rate of RMB37.50
(approximately $5.50) per bag of plasma collected, with the payment for each
batch due within 10 days after the delivery of the following batch of plasma.
Each of the plasma processing agreements with Qi He, Xia Jin and Zhang Qiu, will
all expire on December 31, 2011.

Our Major Customers

Due to the nature of our products and the current regulations,
all of our customers, except for our export customers in southeast Asia, are
located in China. We have established relationships with most of our key
customers since our establishment in 2002. For the fiscal year ended December
31, 2009, our top five customers, based on sales revenue and the percentage of
their contribution to our revenues, were as follows:

Customer
    Revenues During Fiscal Year
      2009 (US$)
    Percentage of Total Sales
      During Fiscal Year 2008Handan Zhiying Medical Company
    $4,703,162
    4.0%Guizhou Guotai Medical Company
    2,367,979
    2.0%Sichuan Shannuoyi Medical Company
    2,003,826
    1.7%Zibo KangHua Medical Supply Company
    1,695,337
    1.5%Synergy Diagnostics PVT Limited
    1,689,973
    1.5%Total
    $12,460,277
    10.7%


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Sales, Marketing and Distribution

Because all of our products are prescription drugs, we can only
sell to hospitals and inoculation centers directly or through approved
distributors. For the years ended December 31, 2009 and 2008, direct sales to
distributors represented approximately 67.3% and 65.6%, respectively, of our
revenues. Our five largest customers in the aggregate accounted for
approximately 10.7% and 16.2% of our total revenues for the years ended December
31, 2009 and 2008, respectively. Our largest customer accounted for
approximately 4.0% and 6.2% of our total revenues for the years ended December
31, 2009 and 2008, respectively.

As part of our effort to ensure the quality of our
distributors, we conduct due diligence to verify whether potential distributors
have obtained necessary permits and licenses and facilities (such as cold
storage) for the distribution of our biopharmaceutical products. We also assess
the distributors' financial condition before appointing them as distributors. We
normally enter into annual supply contracts with our hospital customers and
regional distributors. Certain of our regional distributors are appointed on an
exclusive basis within a specified area. The supply contracts normally set out
the quantity and price of products. For distributors, they also contain
guidelines for the sale and distribution of our products, including restrictions
on the geographical area to which the products could be sold. We provide our
distributors with training in relation to our products and on sales techniques.
We have implemented a coding system for our products for easy tracking.
Depending on the relationship and the creditability of the distributors, we
generally grant a credit period of no longer than 30 days to distributors with
some exceptions. For hospitals and clinics, we generally grant a credit period
of no longer than 90 days. We have bad debt expense of $0.3 million for 2009 and
bad debt credit of $0.1 million for 2008 related to the sales of our products.
The $0.1 million bad debt credit for 2008 is due to recovery of bad debt
previously reserved.

Our current key market is in Shandong province, representing
approximately 25.5% and 48.1% of our total revenues for the years ended December
31, 2009 and 2008, respectively. Prior to the acquisition of Dalin and Huitian,
our strategy has been to focus our marketing efforts in Jiangsu, Zhejiang, Henan
and the northeastern part of China. With the advantage of the scale of economy,
the Company has been expanding its sales efforts in 2009 into 30 provinces and
municipal cities, especially those provinces that were untapped by Shandong Taibang
previously, with Shandong and Guangdong provinces accounting for more than 10%
of the total sales during the period.

Our marketing and after-sales services department currently
employs approximately 62 employees.

We believe that due to the unique nature of our products, the
key emphasis on our marketing efforts centers on product safety, brand
recognition, timely availability and pricing. As all of our products are
prescription medicines, we are not allowed to advertise our products in the mass
media. For the years ended December 31, 2009 and 2008, total sales and marketing
expenses amounted to approximately $3.5 million and $2.2 million, respectively,
representing approximately 4.4% and 4.7%, respectively, of our revenues.

Our Research and Development Efforts

The Shandong Institute was established in 1971. The Shandong
Institute is the research arm established by and directly administrated by the
Shandong Provincial health department. It was the only entity approved for the
research, development and production of biological and plasma-based
biopharmaceutical products in Shandong Province, the second largest province in
China. Since 1998, it promoted GMP management in the production process of blood
products and became one of the first blood products manufacturing enterprises to
obtain GMP Certification in China. In 2002, the Shandong Institute transferred
all of its business and the licenses necessary to carry on its business and
seconded certain of its employees to our subsidiary, Shandong Taibang. We were
awarded the advanced high-tech enterprise certification by the Department of
Science and Technology of Shandong Province in 2005 and 2008 and by the Ministry
of Science and Technology of China in 2006. In 2007, we were admitted as a
member of the Shandong Institute of Medicine and awarded the Advanced
Enterprise accolade by the Shandong Blood Center. We were also awarded the
Advanced Technology Certification for Foreign Funded Enterprises by the
Department of Foreign Trade and Economic Cooperation of Shandong Province in
2008.

We employ a market driven approach to initiate research and
development projects including both product and production technique
development. We believe that the key to the industry revolves around (i) safety
of products and (ii) maximizing the yield per unit volume of plasma. Our
research and development efforts are focused around the following areas:

- Broaden the breadth and depth of our portfolio of plasma-based
  biopharmaceutical products;
- Enhance the yield per unit volume of plasma through new collection
  techniques;
- Maximize manufacturing efficiency and safety;

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- Promote product safety through implementation of new technologies; and
- Refine production technology for existing products.

Our research center is located on the same premises as the
factory, which is located in Tai'an City, Shandong Province. The research center
is equipped with specialized equipment including advanced testing and analytical
equipment, such as atomic absorptimeter, fully automated blood coagulation
analyzer, high performance liquid chromatograph, gas chromatograph,
radioimmunoassay analyzer, ultraviolet-visible spectrophotometer, and protein
chromatograph, most of which have been imported from the US, Japan, Italy,
Germany and Australia. Our research and development department is comprised of
about 30 researchers. All of them hold degrees in areas such as medicine,
pharmacy, biology, and biochemistry. Our research center carries out development
and registration of our products.

All the products we currently manufacture have been developed
in-house. The following table outlines our research and development work in
progress:

Products Currently in Development
    Cure/Use
    Status of Product Development
    Stage **Human Prothrombin Complex Concentrate
    Used for the prophylaxis and
    treatment of bleeding in patients with single or multiple congenital
    deficiencies of factor II or X and in patients with single or multiple
    acquired prothrombin complex factor deficiency requiring partial or complete
    reversal.
    Approved to commence clinical
      trial Commercial production expected in 2010
    9Human Coagulation Factor VIII
    Use for coagulopathie such as Hemophilia A and
      increase concentration of coagulation factor VIII.
    Approved to commence clinical trial Commercial
      production expected in 2010
    9Human Hepatitis B Immunoglobulin (PH4) for
      Intravenous Injection
    Prevention of measles and
    contagious hepatitis. When applied together with antibiotics, its curative
    effect on certain severe bacteria or virus infection may be improved.
    Approved to commence clinical
      trial Commercial production expected in 2011
    8Human Fibrinogen
    Cure for lack of fibrinogen and increase human
      fibrinogen concentration.
    Commenced laboratory studies on the
      manufacturing procedure Commercial production in 2011
    7Varicella Hyperimmune Globulins
    Used for treatment of eczema
      vaccinatum, vaccinia necrosum, and ocular vaccinia
    Develop scope and technique for
      testing the new medicine
    3Human Immunoglobulin for Intravenous Injection  10%
    Cure for original immunoglobulin deficiency;
    secondary immunoglobulin deficiency and Auto-immune deficiency diseases
    About to begin a technical feasibility study
      and laboratory study on the manufacturing procedure
    2


____________* Under PRC law, each variation in the
packaging, dosage and concentration of medical products requires registration
and approval by the SFDA. During this process the altered product is not
commercially available for sale. For example, among our Human Albumin products
only Human Albumin 20%/10ml, 20%/25ml, 20%/50ml, 10%/10ml, 10%/25ml, 10%/50ml, and 25%/50ml products are currently
approved and are commercially available. Our Human Albumin 12.5g/vial product is
at Stage 9 of the drug approval process, i.e. we are awaiting the SFDA's
approval. Accordingly, all references, in this report, to our manufacture and
sale of Human Albumin relates to our approved Human Albumin products.

** These stages refer to the stages in the regulatory approval
process for our products disclosed under the heading Regulation in this
report.

For the fiscal years ended December 31, 2009 and 2008, total
research and development expenses amounted to approximately $1.7 million and
$1.2 million, respectively, representing approximately 1.4% and 2.5%,
respectively, of our revenues.

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Our Competition

We are subject to intense competition. There are both local and
overseas pharmaceutical enterprises that are engaged in the manufacture and sale
of potential substitute or similar biopharmaceutical products as our products in
the PRC. These competitors may have more capital, better research and
development resources, manufacturing and marketing capability and experience
than we do. In our industry, we compete based upon product quality, product
cost, ability to produce a diverse range of products and logistical
capabilities.

We believe that we have strengthened our position in the
marketplace with our recent acquisition of a 90% equity interest in Dalin and
its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest
in Huitian, Xi'an-based biopharmaceutical company. In accordance with terms of
the Dalin equity transfer agreement, as of January 1, 2009, we were entitled to
all the rights and privileges of a Dalin shareholder, including the right to
receive a pro rata share of the profits generated by Qianfeng, and pursuant to
the terms of the Huitian equity transfer agreement, we are now entitled to all
the rights and privileges of a 35% shareholder in Huitian, including the right
to receive our pro rata share of the profits generated.

Our profitability may be adversely affected if (i) competition
intensifies; (ii) competitors drastically reduce prices; or (iii) competitors
develop new products or product substitutes having comparable medicinal
applications or therapeutic effects which are more effective and /or less costly
than those produced by us.

Other approved biopharmaceutical manufacturers in the PRC are
entitled to produce many of the products produced by us. There are currently
about 32 approved manufacturers of plasma-based pharmaceutical products in
China. Many of these manufacturers are essentially producing the same type of
products that we produce: human albumin and various types of immunoglobulin.
However, due to recent Ministry of Health regulations, we believe that it is
difficult for new manufacturers to enter into the industry. We believe that our
major competitors in the albumin and immunoglobulin market in China are Hua Lan
Biological Engineering, Shanghai Institute of Biological Products, Shanghai RAAS
Blood Products Co. Ltd., Beijing Tiantan Biological Products, and Sichuan Yuanda
Shuyang Pharmaceutical Co.

In addition, competition from imported products and China's
admission as a member of the WTO creates increased competition. The PRC became a
member of the WTO in December 2001. Competition in the biopharmaceutical
industry in the PRC will intensify generally in two respects. With lower import
tariffs, we anticipate that imported biopharmaceutical products manufactured
overseas may become increasingly competitive with domestically produced products
in terms of pricing. We also believe that well-established foreign
biopharmaceutical manufacturers may set up production facilities in the PRC and
compete with domestic manufacturers directly. With the expected increased supply
of competitively priced biopharmaceutical products in the PRC, we may face with
increased competition from foreign biopharmaceutical products, including the
types of products manufactured by US manufacturers and other manufacturers. In
the year of 2009, we have seen a substantial increase in volume of imported
human albumin. If the trend of importation of human albumin continues, we may
face more fierce competition in domestic human albumin market.

We believe that we have
secured better ranking in 2009 based on our analysis of data regarding the
approval for sales of plasma-derived products published by China National
Institute for the Control of Pharmaceutical and Biological Products throughout
of the year. Our past financial performance is attributable to our market
position in the industry. Furthermore, while each of the plasma products related
companies have their own product composition which include 3 main categories
namely human albumin, human immunoglobulin and lyophilized human factor, we are
currently developing lyophilized human factor products which we expect to launch
in 2010. We will continue to meet challenges and secure our market position by
enhancing our existing products, introducing new products to meet customer
demand, delivering quality products to our customers in a timely manner and
maintaining our established industry reputation.

Our Intellectual Property

Pursuant to a Trademark License Agreement with the Shandong
Institute, we hold the exclusive license to a Trademark Registration Certificate
(No.3375484) issued by the PRC Industry and Commerce Administration Trademark
Bureau. The class of goods on which the trademark has been approved to use
include: drug for human beings, serum, microorganism products for medicine and
veterinary medicine, plasma, medical blood, and medical biological product. The
registration will expire in June 2014, the Shandong Institute has allowed us to
use the trademark for free until May 2011. We expect to develop and register our
own trademark before the termination of this license.

In addition, we have registered the following domain name:
www.chinabiologic.com and www.ctbb.com.cn.

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Regulation

Due to the nature of our products, we are supervised by various
levels of the PRC Ministry of Health and/or Food and Drug Administration. Such
supervision includes the safety standards regulating our source supplies (mainly
plasma), our manufacturing process through the issuance of our GMP Certification
and the inspection of our finished products.

Plasma Collection

Substantially all plasma donations for commercialized
plasma-based biopharmaceutical products are done through plasmapheresis donation
stations. Plasmapheresis donation means donors give only selected blood
components platelets, plasma, red cells, infection-fighting white cells called
granulocytes, or a combination of these, depending on donors blood type and the
needs of the community. Plasmapheresis stations in China are commonly used to
collect plasma. In China, current regulations only allow an individual donor to
donate blood in 14-day intervals, with a maximum quantity of 580ml (or about 600
gram) per donation.

The following are the regulatory requirements to establish a
plasmapheresis station in China:

- meet the overall plan in terms of the total number, distribution, and
  operational scale of plasmapheresis stations;
- have the required professional health care technicians to operate a
  station;
- have the facility and a hygienic environment to operate a station;
- have an identification system to identify donors;
- have the equipment to operate a station; and
- have the equipment and quality control technicians to ensure the quality
  of the plasma collected.

As a result of the overhaul by the four ministries of the State
Council in May 2004, we estimate that the number of collection stations
(including plasma stations) that meet the standards imposed by the PRC has been
reduced from approximately 156 to approximately 120. Plasma stations were
customarily owned and managed by the PRC health authorities. In March 2006, the
Ministry of Health promulgated the Blood Collection Measures whereby the
ownership and management of the plasma stations must be transferred to
plasma-based biopharmaceutical companies while the regulatory supervision and
administrative control remain with the government. For those plasma stations
which did not complete their reform by December 31, 2006, their license to
collect plasma will be revoked. As a result, all plasma stations are now having
direct supply relationship with their parent fractionation facilities.

Set out below are some of the safety features at China's
collection stations:

- Collection stations can only source plasma from donors within the assigned
  district approved by the provincial health authorities.
- Collection stations must perform a health check on the donor. Once the
  donor passes the health check, a donor permit is issued to the donor. The
  standards of the health check are established by the health authorities at the
  State Council level.
- The design and printing of the donor permit is administrated by the
  provincial health authorities, autonomous region or municipality government,
  as the case maybe. The donor permit cannot be altered, copied or assigned.
- Before donors can donate plasma, the station must verify their identities
  and the validity of their donor permits. The donors must pass the
  verification procedures before they are given a health check and blood test.
  For those donors who have passed the verification, health check and blood test
  and whose plasma were donated according to prescribed procedures, the station
  will setup a record.
- All collection stations are subject to the regulations on transmittable
  diseases prevention. They must strictly adhere to the sanitary requirements
  and reporting procedures in the event of an epidemic situation.

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The operation of plasma collection stations is strictly
regulated by the PRC government. With the restarts of previous stations and
newly built stations, the Company estimated that there are approximately 140
plasma stations in operation in China.

Importation of Blood Products

According to current Chinese regulations, the following blood
products are banned from importation to China:

- Plasma  frozen, liquid and freeze-dried Human Plasma;
- Immunoglobulin  Human Normal Immunoglobulin, Specific Immunoglobulin,
  Human Anti-Tetanus Immunoglobulin, Human Anti-hemophilia Globulin, Human
  Anti-HBs Immunoglobulin, Human Anti- D(Rho) Immunoglobulin and Immunoglobulin
  For Intravenous Administration;
- Factor VIII  Cryoprecipitated Factor VIII and Factor VIII Concentrate
  (only Bayer is allowed, under a special arrangement with PRC government, to
  import this product into PRC, commencing November 2007);
- Factor IX Concentrate;
- Human Fibrinogen;
- Platelet Concentrate;
- Human Prothrombin Complex;
- Whole blood or blood components.

Production of Plasma-based Products

The manufacture and sale of plasma-based biopharmaceutical
products is strictly regulated by the PRC government. For example, under PRC
law, each variation in the packaging, dosage and concentration of medical
products requires registration and approval by the SFDA. During this process the
altered product is not commercially available for sale. For example, among our
human albumin products only Human Albumin 20%/10ml, 20%/25ml, 20%/50ml,
10%/10ml, 10%/25ml, 10%/50ml, and 25%/50ml
products are currently approved and are commercially available. Accordingly, all
references, in this report, to our manufacture and sale of human albumin relate
to our approved human albumin products. The table below shows the PRC approval
process for the manufacture and sale of new medicines:

Stage (Estimated Time Period)
    Activities1
    Planning Stage (1 month)
    Prior to the development of potential new products, our
      Research & Development department will engage in a comprehensive
      review of existing medical literature, patent status and market
      information, including expected product demand and other competition, in
      order to determine the feasibility of development and production of a new
      product offering. Although this typically takes about 1 month to complete,
      this stage precedes development efforts for a new product, which could
      take several months or even years to complete. For products with lengthy
      development periods, we may be required to periodically revisit this stage
      to confirm the feasibility of continued development efforts.2
    Feasibility study and assumption clarification (2 months)
    If we determine that development, ownership and marketing
      of a potential new product is possible and potentially advantageous, we
      proceed with development efforts. However, potential new products are
      typically developed in a laboratory or small batch setting, and in order
      to obtain approval for potential new products and to market new products,
      we must develop a plan for testing and producing the new product. The
      first step in developing such plan is a feasibility study and assumption
      clarification. This study is conducted following or during development of
      a new product, and involves a review and study of the feasibility of our
      technical, production and financial capabilities, production conditions
      and financial forecasts. We also review the feasibility of preparing and
      conducting a clinical study, or a Clinical Trial program, during this
      stage.3
    Develop scope and technique for testing the new medicine
      (6 months)
    If following completion of a Stage 2 study we make a
      determination that producing and testing a potential new product is
      feasible and potentially advantageous, we will develop the scope and
      techniques for testing the potential new product. This involves confirming
      the sourcing of materials needed for production and marketing of the potential new product and
      development of the method of production, dosage design and prescription
      selections. During this stage, we will also develop a clinical research
      sample.


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4
    Preparation of a virus inactivation report and submission
      to the National Institute for the Control of Pharmaceutical and Biological
      Products, or NICPBP, for preliminary review (4-6 months)
    If following development of testing methods for the
      potential new product we determine that testing can be successfully
      completed, we will prepare and finalize the virus inactivation method for
      the potential new product. We are then required to prepare a report with
      details on the production method and procedures and basis of quality
      evaluation for preliminary review by the NICPBP. NICPBP staff usually
      makes an onsite visit during this stage to supervise testing and
      re-testing of the virus inactivation process. Tested samples will be sent
      back to the NICPBP central office in Beijing for evaluation.5
    R&D test product information submitted to the SFDA
      for preliminary assessment (4-6 months)
    Before the NICPBP can determine that our clinical
      research sampling and virus inactivation method and procedures are
      successful, we are required to submit our clinical research sampling and
      virus inactivation method and procedures to the SFDA via the provincial
      FDA for preliminary assessment. We also develop the parameters for a
      Clinical Trial program at this stage. Our program usually requires the
      establishment of a committee comprised of our Research and Development
      staff whose responsibility is to communicate with the hospitals and
      doctors who are invited to participate in the trial. After our submission
      of information to the SFDA we will become subject to random onsite
      sampling by the SFDA as they review our reports and procedures regarding
      testing of the potential product. The SFDA will usually inform us of the
      exact sampling date and SFDA staff will randomly select certain samples
      during their visit for additional testing. The SFDA will then provide us
      with their preliminary assessment of our new product and our related
      procedures. Depending on the results of its preliminary assessment the
      SFDA may recommend that we alter certain aspects of our reports and
      proposed Clinical Trial programs, or even repeat our Stage 3 and Stage 4
      trials and resubmit related reports. The SFDA review process typically
      takes 4-6 months, but this process could take longer if we are required to
      amend or repeat our trials or if we amend our reports in order to obtain
      more a favorable preliminary assessment.6
    Formal application to the NICPBP for test of virus
      inactivation and for CDE certification of Clinical Trial (6-7 months)
    Once we receive a favorable or satisfactory preliminary
      assessment from the SFDA, the NICPBP will continue the process begun at
      Stage 4. The NICPBP will conduct tests of virus inactivation based on
      defined medical literature and on our prescribed procedures and method of
      production. If the tests are successful, the NICPBP will transfer the
      application to the CDE for review of our prescribed procedures and method
      of production and the CDE may request additional information before making
      a determination. If the CDE is satisfied with our procedures and method of
      production it will certify the new product for production for Clinical
      Trial.7
    SFDA review of Clinical Trial program for approval (1
      month)
    Following provision of the CDE product certification, we
      must submit our Clinical Trial program (developed at Stage 5 and 6) to the
      SFDA for formal approval. The SFDA may request additional information
      regarding our proposed Clinical Trial program. If the SFDA rejects our
      Clinical Trial program or requires changes to any of our procedures and
      methods, we may be required to amend our Clinical Trial program, which may
      require repeating several of the processes previously conducted. The
      criteria for SFDA approval for Clinical Trial programs are based on Good
      Clinical Practice which is publicly available in the PRC.8
    Clinical Trial: Phases 1 to 4 (3 years for a new drug and
      2 years for a generic drug)
    Following approval of our Clinical Trial program by the
      SFDA, we will begin Clinical Trials of the potential new product. There
      are four phases to the clinical trial process and any failure of the
      potential new product at any of the Clinical Trial phases, could cause a
      significant delay in approval of the new product, or termination of the
      new product launch: Phase 1: Basic clinical pharmacology and human
      safety evaluation studies are conducted by the Company. Prior to
      determining the effectiveness of our potential new product, we must
      determine that certain pharmacological and safety standards are met by our
      potential new product. These standards are set in stage 4 or according to
      medical literature. If the clinical trial indicates that such standards
      are met, we then move on to Phase 2 of the trials. If the Phase 1
      standards are not met, we may be required to conduct further R&D on
      the potential new product, alter the new product formulation and amend the
      Clinical Trial program, which could require that we repeat several of the stages referenced
      above. Phase 2: A preliminary exploration of the product's
      therapeutic efficacy is conducted by the Company. If we determine at this
      stage that the potential new product is not effective, we may conduct
      further R&D on the potential new product, alter the new product
      formulation and amend the Clinical Trial program, which would require that
      we repeat several of the stages referenced above. Phase 3: If
      we determine that the potential new product meets the required standards
      of Phases 1 and 2 above, we must then submit a report of the Clinical
      Trial results to the SFDA together with an application for trial
      production of the product. If the SFDA rejects application for trial
      production or otherwise requires a repeat of our Clinical Trials, we may
      be required to repeat all or a portion of our Clinical Trial program,
      which may require repeating several of the processes previously conducted.
      Phase 4: If we receive SFDA approval to conduct a trial
      production of the new product, we will then conduct a larger test of
      approximately 2,000 samples. We will conduct this test while also
      conducting a new drug post- marketing study.


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9
    Application to the SFDA for official production permit
      and product certification (8- 9 months)
    The trial production of the potential new product will be
      monitored by an SFDA inspector who will also make onsite visits and assess
      the results of the trial production. We will also be required to prepare
      and submit to the SFDA a report of the trial production results by
      gathering statistical information obtained during the trial period. The
      CDE will also conduct a final review of the trial production for the
      potential new product. Upon satisfactory completion of the trial
      production, the CDE will inform the SFDA. The SFDA will then issue a
      permit to us for official production, the issuance of which is announced
      on the SFDA's website, and copied to the NICPBP and the provincial FDA.
      The SFDA will also issue the new product a Good Manufacturing Practice, or
      GMP, certification. The provincial FDA will follow with the issuance of a
      provincial production permit for the new product. Although the SFDA's
      criteria for final approval of new products are not publicly available in
      the PRC, if a manufacturer makes the adjustments to its methods and
      procedures recommended by the SFDA earlier on in the product approval
      process, it is likely that the SFDA will approve the new product for
      production.10
    Commercial Production
    Following issuance of state and provincial production
      permits and certifications, we may begin production of the new product.


Pricing

In addition, there are regulations regarding the retail price,
rather than regulations of wholesale prices, of our products. According to the
Regulations on controlling blood products promulgated by the State Council in
1996, the price (retail) setting standard and regulatory functions reside with
regional offices of the Pricing Bureau and the Ministry of Health. Presently,
there are retail pricing guidelines for hospitals which sell our human albumin
and immunoglobulin products to patients as prescribed by the relevant regulators
in each region. The retail pricing guidelines are established based on, amongst
other things, the regional living standards and the cost of production of the
manufacturers. The hospitals cannot sell the products to patients at prices
exceeding the highest retail price prescribed by the relevant regulators. There
is no pricing guideline on the ex-factory price to the hospital and the
distributors. The highest retail price guideline is revised occasionally.

Our Employees

As of December 31, 2009, we employed approximately 1,324
full-time employees, including Taibang and Dalin and all of their subsidiaries
and Shandong Medical, of which approximately 106 were seconded to us by the
Shandong Institute.

We believe that we maintain a satisfactory working relationship
with our employees and we have not experienced any significant labor disputes or
any difficulties in recruiting staff for our operations. As required by
applicable Chinese law, we have entered into employment contracts with most of
our officers, managers and employees. We are working towards entering into
employment contracts with those employees who do not currently have employment
contracts with us. The PRC enacted a new Labor Contract Law, which became
effective on January 1, 2008. We have updated our employment contracts and
employee handbook and are in compliance with the new law. We will work with the
employees and the labor union to insure that our employees obtain the full
benefit of the law. We do not anticipate that changes in the law will materially
impact our balance sheet and cash flows.

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ITEM 1A. RISK FACTORS.

RISKS RELATED TO OUR BUSINESS

We face risks related to general domestic and global
economic conditions and to the credit crisis. Disruptions in the capital and
credit markets related to the current national and worldwide financial crisis,
which may continue indefinitely or intensify, could adversely affect our results
of operations, cash flows and financial condition, or those of our customers,
suppliers and creditors.

We currently generate sufficient operating cash flows, which
combined with access to the credit markets, provide us with significant
discretionary funding capacity. However, the current uncertainty arising out of
domestic and global economic conditions, including the disruption in credit
markets, may impact our ability to manage normal relationships with our
customers, suppliers and creditors. The disruptions in the capital and credit
markets may continue indefinitely or intensify, and adversely impact our results
of operations, cash flows and financial condition, or those of our customers,
suppliers and creditors. Disruptions in the capital and credit markets as a
result of uncertainty, changing or increased regulation, reduced alternatives or
failures of significant financial institutions could adversely affect our access
to liquidity needed to conduct or expand our businesses or conduct acquisitions
or make other discretionary investments. Such disruptions may also adversely
impact the capital needs of our customers and suppliers, which, in turn, could
adversely affect our results of operations, cash flows and financial condition.

In addition, the demand for our products is largely affected by
the general economic conditions in China as our products are still not
affordable to many patients. As China's economy grows, we expect more Chinese
people will become consumers of medical treatments and procedures, including
procedures requiring human plasma. However, we expect that the current global
economic slowdown will result in slower economic growth in China and an
unfavorable economic environment which in turn may make our products less
affordable to more patients and result in an overall decreased demand for our
products. Such reductions and disruptions could have a material adverse effect
on our business operations.

In order to grow at the pace expected by management, we
will require additional capital to support our long-term business plan. If we
are unable to obtain additional capital in future years, we may be unable to
proceed with our long-term business plan and we may be forced to curtail or
cease our operations or further business expansion.

We will require additional working capital to support our
long-term business plan, which includes identifying suitable targets for
horizontal or vertical mergers or acquisitions, so as to enhance the overall
productivity and benefit from economies of scale. Our working capital
requirements and the cash flow provided by future operating activities, if any,
will vary greatly from quarter to quarter, depending on the volume of business
during the period and payment terms with our customers. We may not be able to
obtain adequate levels of additional financing, whether through equity
financing, debt financing or other sources, especially in light of the global
financial crisis and the market downturn. To raise funds, we may need to issue
new equities or bonds which could result in additional dilution to our
shareholders and investors. Additional financings could result in significant
dilution to our earnings per share or the issuance of securities with rights
superior to our current outstanding securities or contain covenants that would
restrict our operations and strategy. In addition, we may grant registration
rights to investors purchasing our equity or debt securities in the future. If
we are unable to raise additional financing, we may be unable to implement our
long-term business plan, develop or enhance our products and services, take
advantage of future opportunities or respond to competitive pressures on a
timely basis. In addition, a lack of additional financing could force us to
substantially curtail or cease operations.

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We have a significant amount of debt, which could have
negative consequences to us.

We have a significant amount of debt. As of December 31, 2009,
we had, on a consolidated basis, approximately $4.5 million principal amount of
indebtedness outstanding. Our substantial indebtedness could have important
consequences, including:

- increasing our vulnerability to adverse general economic and industry
  conditions and adverse changes in governmental regulations;
- limiting our ability to obtain additional financing to fund capital
  expenditures and other general corporate requirements;
- requiring us to dedicate a substantial portion of our cash flow from
  operations to payments on our indebtedness, thereby reducing the availability
  of our cash flow to fund capital expenditures or other general corporate
  purposes;
- limiting our flexibility in planning for or reacting to changes in our
  business and the industry in which we operate; and
- placing us at a competitive disadvantage compared to our less leveraged
  competitors.

Our ability to pay interest on our indebtedness and to satisfy
our other debt obligations will depend upon, among other things, our future
operating performance and cash flow and our ability to refinance indebtedness
when necessary. Each of these factors is, to a large extent, dependent on
general economic, financial, competitive, legislative, regulatory and other
factors beyond our control. If in the future we cannot generate sufficient cash
from operations to make scheduled payments on our indebtedness or to meet our
liquidity needs or other obligations, we will need to refinance our existing
debt, obtain additional financing or sell assets. We cannot assure you that we
will be able to renegotiate or refinance any of our debt on commercially
reasonable terms or at all. In addition, our interest expense may increase if
general economic conditions result in an increasing interest rate environment.
We cannot assure you that our business will generate cash flow, or that we will
be able to obtain funding sufficient to satisfy our debt service requirements.

If the PRC government bans or limits plasma-based
biopharmaceutical products, our operations, revenues and profitability would be
adversely affected.

The principal raw materials of our existing and planned
biopharmaceutical products is human source plasma, which, due to its unique
nature, is subject to various quality and safety control issues which include,
but are not limited to, contaminations and blood-born diseases. In addition,
limitations of current technology pose biological hazards inherent in plasma
that have yet to be discovered which could result in a wide spread epidemic due
to blood infusion. The primary law that regulates plasma products in China is
the PRC Pharmaceutical Law, the Implementation Rules on the PRC Pharmaceutical
Law and the Regulations on the Administration of Blood Products. These rules and
regulations require entities producing blood products to strictly comply with
certain hygienic standards and specifications promulgated by the government. In
the event that human plasma is discovered to be noncompliant with the
government's hygienic standards and specifications, the health department may
revoke the registration and/or the approval of the blood product, or otherwise
limit the use of such blood product. If the PRC government bans or limits
plasma-based biopharmaceutical products, our operations, revenues and
profitability would be adversely affected.

If the plasma we source is found to be contaminated, or
the supply from these plasma stations becomes restricted, our operation,
revenues and profitability would be adversely affected.

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We currently source plasma mainly from human donations to our
plasma stations in Shandong and Guangxi Provinces, and Qianfeng sources its
plasma from stations in Guizhou Province. If any of our human donors is infected
with certain diseases, then the plasma from such donor may be infected. If such
contaminated plasma is not appropriately screened out, our entire plasma source
for the relevant collection station may become contaminated. If the plasma from
our collection stations is found to be contaminated or the supply from these
plasma stations becomes restricted, our operation, revenues and profitability
would be adversely affected.

If we are unable to adequately monitor our plasma
stations our plasma supply may be tainted and we will be subject to sanctions by
the government which would have a material adverse effect on our
business.

As part of the industry reform initiative by the Chinese
government, in 2006 we acquired the assets of five of the six then existing
plasma stations in Shandong Province through our wholly owned subsidiaries, Xia
Jin Plasma Company, the Qi He Plasma Company, the He Ze Plasma Company, the
Zhang Qiu Plasma Company and the Yang Gu Plasma Company. We received permits to
operate these subsidiaries in January 2007. In April 2007, we acquired the
assets of two additional plasma stations, one through our newly formed
subsidiary, the Huan Jiang Plasma Company, and the other through our majority
owned subsidiary, the Fang Cheng Plasma Company, which is 80% owned by Shandong
Taibang and 20% owned by Lin Feng, an unrelated third party. We obtained
necessary permits and commenced their operation in July and August 2007,
respectively. Qianfeng, the main operating subsidiary of recently acquired
Dalin, is the 85% owner of the seven plasma stations in Guizhou province.
Huitian, the 35% minority owned affiliated company by the Company, has three
plasma stations operating in Shaanxi province. While we monitor our blood plasma
intake procedures through frequent unscheduled inspections of our stations,
there remains a risk that our blood supply may become tainted during the
collection process. Our blood supply may become tainted if we accept blood from
donors whose blood shows any irregular findings including HIV, Hepatitis C and
liver disease. We pre-screen all donors in order to ensure that these diseases
are not present. If our blood supply becomes tainted, the consequences for our
business could be severe. We could be subject to civil liability from suits
brought by consumers and to criminal liability and loss of our registration if
we are found by the government to have been criminally negligent.

Our operations, sales, profit and cash flow will be
adversely affected if our albumin products fail inspection or are delayed by
regulators.

Each batch of our albumin products requires inspection by
Chinese government regulators before we can ship it to our customers. The SFDA
has a quality standard which considers, among other things, the appearance,
packing capacity, thermal stability, pH value, protein content and percentage of
purity of the product. In order to pass inspection, our plasma must test
negative for any blood irregularities, including Hepatitis C, HIV and liver
disease. The plasma must be packaged in 25 separate 600g bags and boxed with a
packing list and labeled to be consistent with computer records. The plasma must
then be stored at -20°C as soon as possible after collection to ensure that it
will congeal within 6 hours. Government regulators usually take one month to
inspect a batch of albumin products. The process begins when the regulator
randomly selects samples of our albumin products and delivers them to the
National Institute for the Control of Pharmaceutical and Biological Products, or
the NICBPB, in Beijing for testing, and the process ends when the products are
given final approval by the NICBPB. In the event that the regulators delay the
approval of our products, change the requirements in such a way that we are
unable to comply with those requirements, or require our other products to be
inspected by regulators before we can ship them to our customers, our
operations, sales, profit and cash flow will be adversely affected.

We rely on a Secondment Agreement with the Shandong
Institute, which is expected to terminate upon the future privatization of the
Shandong Institute, for over 39% of our Shandong Taibang employees. If the
Secondment Agreement is breached or terminated, it could have an adverse effect
on our operations and on our financial results.

The Shandong Province Institute of Biological Products, or the
Shandong Institute, has provided us with approximately 106 of our employees out
of a total of approximately 1,324 employees, pursuant to a secondment agreement,
or Secondment Agreement, dated October 28, 2002, between Shandong Taibang and
the Shandong Institute. Pursuant to the Secondment Agreement, we are responsible
for the salaries of these employees, as well as for their social benefits such
as insurance. Our Secondment Agreement with the Shandong Institute will expire
on the sooner to occur of October 2032 or upon the privatization of the Shandong
Institute, which was originally expected to occur before the end of 2008.
However, the completion of privatization of Shandong Institute has been further
delayed indefinitely due to slower action taken by the Shandong Ministry of
Health in implementing the privatization plan. Upon expiration or termination of
the Secondment Agreement, we plan to hire the seconded employees directly.
However, we cannot be sure that all of the employees will accept our employment
offers at that time. Guang Li Pang, Shandong Taibang's Deputy Chief Executive
Officer, Yun Hua Gao and Dian Cong Liu, our Senior Technical Advisors are employed through the Secondment
Agreement. Although none of our seconded employees have indicated that they do
not plan to continue working for our Company after the privatization, if the
Secondment Agreement is terminated or expires and we are unable to hire those
employees or replacement employees on time, our operations, as well as our
financial results, may suffer.

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If the distributors who we rely on do not purchase our
products, our business and results of operations will be adversely
affected.

We sell all of our products in China through our network of
about 349 distributors located in about 30 provinces and municipal cities
throughout China. While we have established working relationships with many of
our distributors and strictly regulate their sales and marketing activities by
annual distribution agreements, there are no restrictions in these distribution
agreements preventing our distributors from also supplying products produced by
our competitors. Our own marketing and sales staff work to develop and maintain
relationships with our distributors, but there can be no assurance that we will
be able to maintain such relationships. For the years ended December 31, 2009
and 2008, direct sales to distributors represented approximately 67.3% and
65.6%, respectively, of our total revenues. If a number of our distributors
cease to purchase our products and we are unable to find suitable replacements,
our business and results of operations will be adversely affected.

Our inability to successfully research and develop
new biological pharmaceutical products could have an adverse
effect on our future growth.

We believe that the successful development of biological
pharmaceutical products can be affected by many factors. Products that appear to
be promising in the early phases of research and development may fail to be
commercialized for various reasons, including the failure to obtain the
necessary regulatory approvals. In addition, the research and development cycles
for new medicine for which we must obtain a Certificate of New Medicine from the
PRC Ministry of Health, is a relatively lengthy process. In our experience, the
process of conducting research and various tests on new products before
obtaining a Certificate of New Medicine and subsequent procedures may take
approximately three to five years. There is no assurance that our future
research and development projects will be successful or that they will be
completed within the anticipated time frame or budget. Also, there is no
guarantee that we will receive the necessary approvals from relevant authorities
for the production of our newly developed products. Even if such products could
be successfully commercialized, there is no assurance that they will be accepted
by the market as anticipated.

Our financial position and operations may be materially
and adversely affected, if our product liability insurance does not sufficiently
cover our liabilities.

Under current PRC laws, manufacturers and vendors of defective
products in the PRC may incur liability for loss and injury caused by such
products. Pursuant to the General Principles of the Civil Law of the PRC or the
PRC Civil Law, which became effective in 1987, a defective product which causes
property damage or physical injury to any person may subject the manufacturer or
vendor of such product to civil liability.

In 1993, the PRC promulgated the Product Quality Law of the PRC
or the Product Quality Law, which was revised in 2000. The Product Quality Law
was enacted to protect the rights and interests of end-users and consumers and
to strengthen the supervision and control of the quality of products. Under the
Product Quality Law, manufacturers who produce defective products may be subject
to fines and required to cease production, and in severe cases, be subject to
criminal liability and may have their business licenses revoked.

In 1993, the Law of the PRC on the Protection of the Rights and
Interests of Consumers or the Consumers' Rights Law was promulgated to further
protect the legal rights and interests of consumers in connection with the
purchase or use of goods and services. All businesses, including our business,
must observe and comply with the Consumers' Rights Law.

We maintain two product liability insurances for sales in the
PRC for Shandong Taibang and Qianfengs products in the amount of approximately
$2.9 million (RMB 20 million) each. Although no one has filed any claims in
relation to the use of our pharmaceutical products, our financial position and
operations may be materially and adversely affected, if our insurance coverage
is insufficient to cover a successful claim.

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We depend heavily on key personnel, and turnover of key
employees and senior management could harm our business.

Our success, to a certain extent, is attributable to the
expertise and experience of our senior management and key research and technical
personnel, including Chao-Ming Zhao, our Chief Executive Officer, Yu-Yun Tristan
Kuo, our Chief Financial Officer, Tung Lam, the Chief Executive Officer of
Shandong Taibang and Dian Cong Liu, the Chief Technical Adviser of Shandong
Taibang, who carry out key functions in our operation. If we lose the service of
any of our senior management or key research or technical personnel or fail to
attract additional personnel with suitable experience and qualification, our
business operations and research capability may be adversely affected.

Our senior management and employees have worked together
for a short period of time, which may make it difficult for you to evaluate
their effectiveness and ability to address challenges.

Due to our limited operating history and recent additions to
our management team, certain of our senior management and employees have worked
together at our company for only a relatively short period of time.
Specifically, Chao Ming Zhao became our Chief Executive Officer in June 2008
after serving as our Chief Financial Officer since November 2006 and Y. Tristan
Kuo became our Chief Financial Officer in June 2008 and had served as our Vice
President-Finance since September 2007. Siu Ling Chan and Lin Ling Li became our
directors in July 2006. In addition, while Mr. Zhao, Ms. Chen and Ms. Lin were
employed in various capacities by Logic Express and Shandong Taibang, Mr. Kuo is
a newcomer to our Company. As a result of these circumstances, it may be
difficult for you to evaluate the effectiveness of our senior management and
other key employees and their ability to address future challenges to our
business.

Future acquisitions may have an adverse effect on our
ability to manage our business.

Selective acquisitions form part of our strategy to further
expand our business. If we are presented with appropriate opportunities, we may
acquire additional companies, products or technologies. Future acquisitions and
the subsequent integration of new companies into ours would require significant
attention from our management. Our company has little experience with
integrating newly acquired businesses. Potential problems encountered by each
organization during mergers and acquisitions would be unique, posing additional
risks to the company. The diversion of our management's attention and any
difficulties encountered in any integration process could have an adverse effect
on our ability to manage our business. Future acquisitions would expose us to
potential risks, including risks associated with the assimilation of new
operations, technologies and personnel, unforeseen or hidden liabilities, the
diversion of resources from our existing businesses and technologies, the
inability to generate sufficient revenue to offset the costs and expenses of
acquisitions, and potential loss of, or harm to, relationships with employees,
customers and suppliers as a result of integration of new businesses.

We may lose our competitive advantage and our operations
may suffer if we fail to prevent the loss or misappropriation of, or disputes
over, our intellectual property.

None of our products are currently covered by patents, the
trademark Lu Yue is licensed to us by the Shandong Institute for our use as in
the labeling of human-use medicine, biopreparate and blood products, pursuant to
a trademark license agreement, dated February 27, 2007. We plan to apply for
patents for our manufacturing processes. The patent application will be subject
to approval from the relevant PRC authorities. We may not be able to
successfully obtain the approval of the PRC authorities for our patent
applications. Furthermore, third parties may assert claims to our proprietary
procedures, technologies and systems. These proprietary procedures, technologies
and systems are important to our business as they allow us to maintain our
competitive edge over our competitors.

While we are not aware of any infringement on our intellectual
property and we have not been notified by any third party that we are infringing
on their intellectual property, our ability to compete successfully and to
achieve future revenue growth will depend, in significant part, on our ability
to protect our proprietary technology and operate without infringing upon the
intellectual property rights of others. The legal regime in China for the
protection of intellectual property rights is still at its early stage of
development. Intellectual property protection became a national effort in China
in 1979 when China adopted its first statute on the protection of trademarks.
Since then, China has adopted its Patent Law, Trademark Law and Copyright Law
and promulgated related regulations such as Regulation on Computer Software
Protection, Regulation on the Protection of Layout Designs of Integrated
Circuits and Regulation on Internet Domain Names. China has also acceded to
various international treaties and conventions in this area, such as the Paris
Convention for the Protection of Industrial Property, Patent Cooperation Treaty,
Madrid Agreement and its Protocol Concerning the International Registration of
Marks. In addition, when China became a party to the World Trade Organization in
2001, China amended many of its laws and regulations to comply with the
Agreement on Trade-Related Aspects of Intellectual Property Rights. Despite many
laws and regulations promulgated and other efforts made by China over the years
with a view to tightening up its regulation and protection of intellectual
property rights, private parties may not enjoy intellectual property rights in
China to the same extent as they would in many Western countries, including the
United States, and enforcement of such laws and regulations in China have not achieved the levels
reached in those countries. Both the administrative agencies and the court
system in China are not well-equipped to deal with violations or handle the
nuances and complexities between compliant technological innovation and
non-compliant infringement.

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We rely on confidentiality agreements with our management and
employees to protect our confidential proprietary information. However, the
protection of our intellectual properties may be compromised as a result of:

- departure of any of our management members or employees in possession of
  our confidential proprietary information;
- breach by such departing management member or employee of his or her
  confidentiality and non- disclosure undertaking to us;
- infringement by others of our proprietary information and intellectual
  property rights; or
- refusal by relevant regulatory authorities to approve our patent or
  trademark applications.

Any of these events or occurrences may have a material adverse
effect on our operations and the measures that we have put into place to protect
our intellectual property rights may not be sufficient. Litigation to enforce
our intellectual property rights could result in substantial costs and may not
be successful. If we are not able to successfully defend our intellectual
property rights, we might lose rights to technology that we need to conduct and
develop our business. This may seriously harm our business, operating results
and financial condition, and enable our competitors to use our intellectual
property to compete against us.

Furthermore, if third parties claim that our products infringe
their patents or other intellectual property rights, we may be required to
devote substantial resources to defend against such claims. If we are
unsuccessful in defending against such infringement claims, we may be required
to pay damages, modify our products or suspend the production and sale of such
products. We cannot guarantee that we will be able to modify our products on
commercially reasonable terms.

A disruption in the supply of utilities, fire or other
calamity at our manufacturing plant would disrupt production of our products and
adversely affect our sales.

Our products are manufactured solely at our production facility
located in Tai'an City, Shandong Province in the PRC. While we have not in the
past experienced any calamities which disrupted production, any disruption in
the supply of utilities, in particular, electricity or power supply, or any
outbreak of fire, flood or other calamity resulting in significant damage at our
facilities would severely affect our production and have a material adverse
effect on our business, financial condition and results of operations.

We maintain insurance policies covering losses with respect to
damages to our properties and products. We do not have insurance coverage for
inventories of raw materials or business interruption. There is no assurance
that our insurance would be sufficient to cover all of our potential losses.

We may be exposed to potential risks relating to our
internal controls over financial reporting, and our independent auditors may not
attest to the operating effectiveness of our internal
controls.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002,
the SEC adopted rules requiring public companies to include a report of
management on the company's internal controls over financial reporting in their
annual reports on Form 10-K. A report of our management is included under Item
9A(T) of our Form 10-K for the year ended December 31, 2009. In addition,
Section 404 requires the independent registered public accounting firm auditing
a company's financial statements to also attest to and report on the operating
effectiveness of such company's internal controls. However, we will not be
subject to auditor attestation requirement until our annual report for the
fiscal year ending December 31, 2010. We can provide no assurance that we will
comply with all of the requirements imposed thereby. There can be no assurance
that we will receive a positive attestation from our independent registered
public accountants. In the event we identify significant deficiencies or
material weaknesses in our internal controls that we cannot remediate in a
timely manner or we are unable to receive a positive attestation from our
independent registered public accountants with respect to our internal controls,
investors and others may lose confidence in the reliability of our financial
statements.

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There are allegations of past criminal conduct against
certain members of our Board of Directors and a significant employee. Our
business and results of operations could be adversely affected if any of these
allegations are proven true.

Allegations have surfaced on certain financial websites of
fraud and criminal activity involving smuggling and related activities allegedly
engaged in prior to 2005 by the CEO of the Company's primary operating
subsidiary, Shandong Taibang, and by a relative of one of our directors. On
January 27, 2010, in response to these allegations, the Company's board of
directors established a special independent subcommittee comprised of the
Company's independent directors, Mr. Sean Shao and Dr. Tong Jun Lin (who were
later joined by new director Dr. Xiangmin Cui) (the "Special Committee"), to
investigate the allegations with the assistance of a reputable international
firm, and report its findings to the board of directors as soon as practicable.
On March 1, 2010, the Special Committee retained O'Melveny & Myers LLP, an
international law firm, to advise the Special Committee and to assist in the
investigation of the allegations. Although our management team continues to work
diligently on the daily business of the Company and remains committed to
executing our growth strategies and creating value for our shareholders, if the
investigation concludes that the allegations made on the financial websites were
correct, our business and results of operations could be adversely affected.

RISKS RELATING TO OUR FINANCIAL CONDITION

We face risks related to general domestic and global
economic conditions and to the current credit crisis.

We currently generate sufficient operating cash flows, which
combined with access to the credit markets, provide us with significant
discretionary funding capacity. However, the current uncertainty arising out of
domestic and global economic conditions, including the recent disruption in
credit markets, has impacted accounts receivable collectivity from our
customers, and may impact our ability to pay suppliers and creditors. If the
current situation deteriorates significantly, we could see a tightened cash flow
position and an abnormal amount of bad debt expenses related to the general
economic slow-down, or supplier or customer disruptions resulting from tighter
credit markets. Such reductions and disruptions could have a material adverse
effect on our business operations.

Our cash flow could be negatively affected as a result of
our extension of relatively long payment terms to customers that we believe are
credit worthy.

As is customary in our industry, we extend relatively long
payment terms (up to six months) to customers that we believe are credit worthy.
The dollar amount of our accounts receivable, net of our allowance for doubtful
accounts as of December 31, 2009 and 2008 was $1,767,076 and $313,087,
respectively. The bad debt (credit) expenses for the years ended December 31,
2009 and 2008 were $(13,089) and ($56,462), respectively. Although we attempt to
establish appropriate reserves for our receivables, those reserves may not prove
to be adequate in view of actual levels of bad debts. The failure of our
customers to pay us timely would negatively affect our working capital, which
could in turn adversely affect our cash flow.

Our limited operating history may not serve as an
adequate basis to judge our future prospects and results of operations.

We have a limited operating history. Shandong Taibang as began
its operation in October 2002. With the rapid growth of the industry, it has
experienced a high growth rate since 2002. Furthermore, we did not acquire a
controlling interest in Shandong Taibang until September 2005. As such, our
historical operating results may not provide a meaningful basis for evaluating
our business, financial performance and prospects. We may not be able to achieve
a similar growth rate in future periods. Accordingly, you should not rely on our
results of operations for any prior periods as an indication of our future
performance.

We face risks associated with debt financing (including
exposure to variation in interest rates).

Our total outstanding indebtedness as of December 31, 2009 was
$4.5 million. The interest rates on these bank loans are fixed between 5.31% and
5.40% per annum. Our obligations under our existing loans have been mainly met
through the cash flow from our operations and our financing activities. We are
subject to risks normally associated with debt financing, including the risk of
significant increase in interest rates and the risk that our cash flow will be insufficient to meet required payment of principal and
interest. In the past, cash flow from operations had been sufficient to meet
payment obligations and/or we have been able to roll over our borrowings. There
is however no assurance that we will be able to do so in the future. We may also
underestimate our capital requirements and other expenditures or overestimate
our future cash flows. In such event, additional capital, debt or other forms of
financing may be required for our working capital. If any of the aforesaid
events occur and we are unable for any reason to raise additional capital, debt
or other financing to meet our working capital requirements, our business,
operating results, liquidity and financial position will be adversely affected.

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We will incur capital expenditures in the future in
connection with our growth plans and therefore may require additional
financing.

To grow our sales volume, we need to increase our raw material
supplies and strengthen our commitment to our research and development efforts
to accelerate new product development. We plan to solve our raw materials
shortage through either the building of new plasma collection stations or
through scaling up our existing collection stations, both of which will require
substantial capital expenditures. We anticipate that our capital expenditure for
the next 12 months will be approximately $15 million. Such expenditures are
likely to be incurred in advance of any increase in sales. Our revenue may not
increase after these capital expenditures are incurred. This will depend on,
among other factors, on our ability to maintain or achieve high capacity
utilization rates. Any failure to increase our revenue after incurring capital
expenditure to expand production capacity will reduce our profitability.

We may need to obtain additional debt or equity financing
which may result in dilution to our stockholders and have a material adverse
economic effect on our business.

We may need to obtain additional debt or equity financing to
fund our capital expenditures. Additional equity financing may result in
dilution to our shareholders. Additional debt financing may be required, which,
if obtained, may:

- limit our ability to pay dividends or require us to seek consents for the
  payment of dividends;
- increase our vulnerability to general adverse economic and industry
  conditions;
- limit our ability to pursue our growth plan;
- require us to dedicate a substantial portion of our cash flow from
  operations as payment for our debt, thereby reducing availability of our cash
  flow to fund capital expenditures, working capital and other general corporate
  purposes; and/or
- limit our flexibility in planning for, or reacting to, changes in our
  business and our industry.

We cannot assure you that we will be able to obtain the
additional financing on terms that are acceptable to us.

RISKS RELATING TO OUR INDUSTRY

If our supply of quality plasma is interrupted, our
results of operations and profitability will be adversely affected.

The production of plasma-based biopharmaceutical products
relies on the supply of plasma of suitable quality. For the years ended December
31, 2009 and 2008, the cost of plasma used by us for production accounted for
approximately 83% and 76%, respectively, of total production cost. The supply
and market prices of plasma may be adversely affected by factors such as
regulatory restrictions, weather conditions or outbreak of diseases which would
impact our costs of production. We may not be able to pass on any resulting
increase in costs to our customers and therefore any substantial fluctuation in
supply or market prices of plasma may adversely affect our results of operations
and profitability.

The biopharmaceutical industry in the PRC is strictly
regulated and changes in such regulations may have an adverse effect on our
business.

The biopharmaceutical industry in the PRC is strictly regulated
by the government. The regulatory regime, such as administrative approval of
medicines and production approvals, comprises of series of regulations and
administrative rules. The PRC regulatory authorities may amend such regulations
and administrative rules and promulgate new regulations and administrative rules
from time to time. Changes in these regulations and administrative rules could have a significant impact on our
business. Such changes may have any adverse impact on our business.

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We may not be able to carry on our business if we lose
any of the permits and licenses required by the PRC Government in order to carry
on our business.

All pharmaceutical manufacturing and distribution enterprises
in the PRC are required to obtain from various PRC governmental authorities
certain permits and licenses, including, in the case of manufacturing
enterprises, a Pharmaceutical Manufacturing Permit and, in the case of
distribution enterprises, a Pharmaceutical Distribution Permit.

We have obtained permits and licenses and the GMP certificates,
required for the manufacture of our pharmaceutical products. These permits and
licenses held by us are subject to periodic renewal and/or reassessment by the
relevant PRC Government authorities and the standards of compliance required in
relation thereto may from time to time be subject to changes. We intend to apply
for the renewal of such permits and licenses when required by applicable laws
and regulations. Any changes in compliance standards, or any new laws or
regulations that may prohibit or render it more restrictive for us to conduct
our business or increase our compliance costs may adversely affect our
operations or profitability. Any failure by us to obtain such renewals may have
a material adverse effect on the operation of our business. In addition, we may
not be able to carry on business without such permits and business licenses
being renewed.

We may encounter increased competition from both local
and overseas pharmaceutical enterprises as a result of a relaxation of the PRC
regulatory approval process for plasma-based biopharmaceutical products or a
relaxation of international trade restrictions. A change in our competitive
environment could adversely affect our profitability and prospects.

Our continued ability to compete depends on the development of
the plasma-based biopharmaceutical manufacturing industry in China. The
plasma-based biopharmaceutical manufacturing industry in China is highly
regulated by both provincial and central governments. Prior to engaging in the
collection and production of plasma products, companies such as ours are
required to obtain collection permits from the central health department and
production permits and certificates for each new product formulation from the
various provincial food and drug authorities. We have the advantage of being
already approved by the state to collect plasma from human donors and
manufacture and sell plasma-based biopharmaceutical products in Shandong
Province, as well as in all other provinces in China, and our research and
development department has become familiar with the provincial product approval
process. However, although we believe that the regulatory requirements pose a
competitive barrier to entry into the biopharmaceutical industry, over time
there may be new entrants. If the government relaxes these restrictions and
allow more competitors to enter into the market, these competitors may have more
capital, better research and development resources, manufacturing and marketing
capability and experience than us. Our profitability may be adversely affected
if (i) competition intensifies; (ii) competitors drastically reduce prices; or
(iii) competitors develop new products having comparable medicinal applications
or therapeutic effects which are more effective or less costly than those
produced by us.

In addition we expect that competition from imported products
will increase as a result of a trend towards lower import tariffs and China's
admission as a member of the WTO in December 2001. We believe that lower import
tariffs will result in more affordable pricing for imported biopharmaceutical
products manufactured overseas as compared to domestically manufactured products
such as ours. In addition, China's membership in the WTO makes it more
accessible to foreign biopharmaceutical manufacturers who may wish to set up
production facilities in the PRC and compete directly with domestic
manufacturers. The expected increased supply of both domestic and foreign
competitively priced biopharmaceutical products in the PRC will result in
increased competition. There is no assurance that our strategies to remain
competitive can be implemented successfully as scheduled or at all. Our
inability to remain competitive may have an adverse effect on our profitability
and prospects.

If we do not receive PRC governmental approval to
increase the retail prices of certain of our biopharmaceutical products our
revenues may be adversely affected.

Retail prices of certain of our biopharmaceutical products in
the PRC are subject to the control of the relevant central and provincial price
administration authorities. The actual price for any given price-controlled
product set by manufacturers, wholesalers and retailers cannot exceed the price
ceiling imposed in accordance with the applicable government price control
rules. Only those pharmaceutical products which are included in the Insurance
Catalogue administered at the central or provincial level are subject to price
control.

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Our two principal product categories, human albumin and human
rabies immunoglobulin, which accounted for a total of approximately 65.5% of our
total revenues for the year ended December 31, 2008, were subject to national
price control regulations in the PRC. Hence, the prices of those products could
not be increased at our discretion above the relevant controlled retail price
ceiling without prior governmental approval. This, in turn, may affect the
ex-factory prices set by us for our products and we therefore do not have
unfettered freedom to maximize our profits. It is uncertain whether we will be
able to obtain necessary approvals to increase the price of any of our products.

RISKS RELATED TO DOING BUSINESS IN CHINA

Changes in China's political or economic situation could
harm us and our operating results.

Economic reforms adopted by the Chinese government have had a
positive effect on the economic development of the country, but the government
could change these economic reforms or any of the legal systems at any time.
This could either benefit or damage our operations and profitability. Some of
the things that could have this effect are:

- Level of government involvement in the economy;
- Control of foreign exchange;
- Methods of allocating resources;
- Balance of payments position;
- International trade restrictions; and
- International conflict.

The Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and
Development, or OECD, in many ways. For example, state-owned enterprises still
constitute a large portion of the Chinese economy and weak corporate governance
and a lack of flexible currency exchange policy still prevail in China. As a
result of these differences, we may not develop in the same way or at the same
rate as might be expected if the Chinese economy was similar to those of the
OECD member countries.

Uncertainties with respect to the PRC legal system could
limit the legal protections available to you and us.

We conduct substantially all of our business through our
operating subsidiaries in the PRC. Our operating subsidiaries are generally
subject to laws and regulations applicable to foreign investments in China and,
in particular, laws applicable to foreign-invested enterprises. The PRC legal
system is based on written statutes, and prior court decisions may be cited for
reference but have limited precedential value. Since 1979, a series of new PRC
laws and regulations have significantly enhanced the protections afforded to
various forms of foreign investments in China. However, since the PRC legal
system continues to evolve rapidly, the interpretations of many laws,
regulations and rules are not always uniform and enforcement of these laws,
regulations and rules involve uncertainties, which may limit legal protections
available to you and us. In addition, any litigation in China may be protracted
and result in substantial costs and diversion of resources and management
attention. In addition, all of our executive officers and all of our directors
are residents of China and not of the United States, and substantially all the
assets of these persons are located outside the United States. As a result, it
could be difficult for investors to affect service of process in the United
States or to enforce a judgment obtained in the United States against our
Chinese operations and subsidiaries.

You may have difficulty enforcing judgments against
us.

We are a Delaware holding company and most of our assets are
located outside of the United States. Most of our current operations are
conducted in the PRC. In addition, most of our directors and officers are
nationals and residents of countries other than the United States. A substantial
portion of the assets of these persons is located outside the United States. As
a result, it may be difficult for you to effect service of process within the
United States upon these persons. It may also be difficult for you to enforce in
U.S. courts judgments on the civil liability provisions of the U.S. federal
securities laws against us and our officers and directors, most of whom are not
residents in the United States and the substantial majority of whose assets are
located outside of the United States. In addition, there is uncertainty as to
whether the courts of the PRC would recognize or enforce judgments of U.S.
courts. Our counsel as to PRC law, has advised us that the recognition and
enforcement of foreign judgments are provided for under the PRC Civil Procedures
Law. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures
Law based on treaties between China and the country where the judgment is made
or on reciprocity between jurisdictions. China does not have any treaties or
other arrangements that provide for the reciprocal recognition and enforcement
of foreign judgments with the United States. In addition, according to the PRC
Civil Procedures Law, courts in the PRC will not enforce a foreign judgment
against us or our directors and officers if they decide that the judgment
violates basic principles of PRC law or national sovereignty, security or the
public interest. So it is uncertain whether a PRC court would enforce a judgment
rendered by a court in the United States.

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

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

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

Future inflation in China may inhibit our ability to
conduct business in China.

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

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

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

Fluctuations in exchange rates could adversely affect our
business and the value of our securities.

The value of our common stock will be indirectly affected by
the foreign exchange rate between U.S. dollars and RMB and between those
currencies and other currencies in which our sales may be denominated.
Appreciation or depreciation in the value of the RMB relative to the U.S. dollar
would affect our financial results reported in U.S. dollar terms without giving
effect to any underlying change in our business or results of operations.
Fluctuations in the exchange rate will also affect the relative value of any
dividend we issue that will be exchanged into U.S. dollars as well as earnings
from, and the value of, any U.S. dollar-denominated investments we make in the
future.

Since July 2005, the RMB has no longer been pegged to the U.S.
dollar. Although the People's Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange
rate, the RMB may appreciate or depreciate significantly in value against the
U.S. dollar in the medium to long term.

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Moreover, it is possible that in the future PRC authorities may
lift restrictions on fluctuations in the RMB exchange rate and lessen
intervention in the foreign exchange market.

Very limited hedging transactions are available in China to
reduce our exposure to exchange rate fluctuations. To date, we have not entered
into any hedging transactions. While we may enter into hedging transactions in
the future, the availability and effectiveness of these transactions may be
limited, and we may not be able to successfully hedge our exposure at all. In
addition, our foreign currency exchange losses may be magnified by PRC exchange
control regulations that restrict our ability to convert RMB into foreign
currencies.

Currently, some of our raw materials and major equipment are
imported. In the event that the U.S. dollars appreciate against RMB, our costs
will increase. If we cannot pass the resulting cost increases on to our
customers, our profitability and operating results will suffer. In addition, if
our sales to international customers grow, we will be increasingly subject to
the risk of foreign currency depreciation.

Restrictions under PRC law on our PRC subsidiaries'
ability to make dividends and other distributions could materially and adversely
affect our ability to grow, make investments or acquisitions that could benefit
our business, pay dividends to you, and otherwise fund and conduct our
businesses.

Substantially all of our revenues are earned by our PRC
subsidiaries. However, PRC regulations restrict the ability of our PRC
subsidiaries to make dividends and other payments to their offshore parent
company. PRC legal restrictions permit payments of dividend by our PRC
subsidiaries only out of their accumulated after-tax profits, if any, determined
in accordance with PRC accounting standards and regulations. Our PRC
subsidiaries are also required under PRC laws and regulations to allocate at
least 10% of our annual after-tax profits determined in accordance with PRC GAAP
to a statutory general reserve fund until the amounts in said fund reaches 50%
of our registered capital. Allocations to these statutory reserve funds can only
be used for specific purposes and are not transferable to us in the form of
loans, advances or cash dividends. Any limitations on the ability of our PRC
subsidiaries to transfer funds to us could materially and adversely limit our
ability to grow, make investments or acquisitions that could be beneficial to
our business, pay dividends and otherwise fund and conduct our business.

Failure to comply with PRC regulations relating to the
establishment of offshore special purpose companies by PRC residents may subject
our PRC resident stockholders to personal liability, limit our ability to
acquire PRC companies or to inject capital into our PRC subsidiaries, limit our
PRC subsidiaries' ability to distribute profits to us or otherwise materially
adversely affect us.

In October 2005, the PRC State Administration of Foreign
Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange
Control over Financing and Return Investment Through Special Purpose Companies
by Residents Inside China, generally referred to as Circular 75, which required
PRC residents to register with the competent local SAFE branch before
establishing or acquiring control over an offshore special purpose company, or
SPV, for the purpose of engaging in an equity financing outside of China on the
strength of domestic PRC assets originally held by those residents. Internal
implementing guidelines issued by SAFE, which became public in June 2007 (known
as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the
establishment or acquisition of control by PRC residents of offshore entities
which merely acquire control over domestic companies or assets, even in the
absence of legal ownership; (2) adding requirements relating to the source of
the PRC resident's funds used to establish or acquire the offshore entity;
covering the use of existing offshore entities for offshore financings; (3)
purporting to cover situations in which an offshore SPV establishes a new
subsidiary in China or acquires an unrelated company or unrelated assets in
China; and (4) making the domestic affiliate of the SPV responsible for the
accuracy of certain documents which must be filed in connection with any such
registration, notably, the business plan which describes the overseas financing
and the use of proceeds. Amendments to registrations made under Circular 75 are
required in connection with any increase or decrease of capital, transfer of
shares, mergers and acquisitions, equity investment or creation of any security
interest in any assets located in China to guarantee offshore obligations, and
Notice 106 makes the offshore SPV jointly responsible for these filings. In the
case of an SPV which was established, and which acquired a related domestic
company or assets, before the implementation date of Circular 75, a retroactive
SAFE registration was required to have been completed before March 31, 2006;
this date was subsequently extended indefinitely by Notice 106, which also
required that the registrant establish that all foreign exchange transactions
undertaken by the SPV and its affiliates were in compliance with applicable laws
and regulations. Failure to comply with the requirements of Circular 75, as
applied by SAFE in accordance with Notice 106, may result in fines and other
penalties under PRC laws for evasion of applicable foreign exchange
restrictions. Any such failure could also result in the SPV's affiliates being
impeded or prevented from distributing their profits and the proceeds from any
reduction in capital, share transfer or liquidation to the SPV, or from engaging
in other transfers of funds into or out of China.

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We believe our stockholders who are PRC residents as defined in
Circular 75 have registered with the relevant branch of SAFE, as currently
required, in connection with their equity interests in us and our acquisitions
of equity interests in our PRC subsidiaries. However, we cannot provide any
assurances that their existing registrations have fully complied with, and they
have made all necessary amendments to their registration to fully comply with,
all applicable registrations or approvals required by Circular 75. Moreover,
because of uncertainty over how Circular 75 will be interpreted and implemented,
and how or whether SAFE will apply it to us, we cannot predict how it will
affect our business operations or future strategies. For example, our present
and prospective PRC subsidiaries' ability to conduct foreign exchange
activities, such as the remittance of dividends and foreign currency-denominated
borrowings, may be subject to compliance with Circular 75 by our PRC resident
beneficial holders. In addition, such PRC residents may not always be able to
complete the necessary registration procedures required by Circular 75. We also
have little control over either our present or prospective direct or indirect
stockholders or the outcome of such registration procedures. A failure by our
PRC resident beneficial holders or future PRC resident stockholders to comply
with Circular 75, if SAFE requires it, could subject these PRC resident
beneficial holders to fines or legal sanctions, restrict our overseas or
cross-border investment activities, limit our subsidiaries' ability to make
distributions or pay dividends or affect our ownership structure, which could
adversely affect our business and prospects.

Under the New EIT Law, we may be classified as a
resident enterprise of China. Such classification will likely result in
unfavorable tax consequences to us and our non-PRC shareholders.

China passed a new Enterprise Income Tax Law, or the New EIT
Law, and its implementing rules, both of which became effective on January 1,
2008. Under the New EIT Law, an enterprise established outside of China with de
facto management bodies within China is considered a resident enterprise,
meaning that it can be treated in a manner similar to a Chinese enterprise for
enterprise income tax purposes. The implementing rules of the New EIT Law define
de facto management as substantial and overall management and control over the
production and operations, personnel, accounting, and properties of the
enterprise.

On April 22, 2009, the State Administration of Taxation issued
the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to
Criteria of de facto Management Bodies, or the Notice, further interpreting the
application of the New EIT Law and its implementation non-Chinese enterprise or
group controlled offshore entities. Pursuant to the Notice, an enterprise
incorporated in an offshore jurisdiction and controlled by a Chinese enterprise
or group will be classified as a non-domestically incorporated resident
enterprise if (i) its senior management in charge of daily operations reside or
perform their duties mainly in China; (ii) its financial or personnel decisions
are made or approved by bodies or persons in China; (iii) its substantial assets
and properties, accounting books, corporate chops, board and shareholder minutes
are kept in China; and (iv) at least half of its directors with voting rights or
senior management often resident in China. A resident enterprise would be
subject to an enterprise income tax rate of 25% on its worldwide income and must
pay a withholding tax at a rate of 10% when paying dividends to its non-PRC
shareholders. However, it remains unclear as to whether the Notice is applicable
to an offshore enterprise incorporated by a Chinese natural person. Nor are
detailed measures on imposition of tax from non-domestically incorporated
resident enterprises are available. Therefore, it is unclear how tax authorities
will determine tax residency based on the facts of each case.

We may be deemed to be a resident enterprise by Chinese tax
authorities. If the PRC tax authorities determine that we are a resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC
tax consequences could follow. First, we may be subject to the enterprise income
tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise
income tax reporting obligations. In our case, this would mean that income such
as interest on financing proceeds and non-China source income would be subject
to PRC enterprise income tax at a rate of 25%. Second, although under the New
EIT Law and its implementing rules dividends paid to us from our PRC
subsidiaries would qualify as tax-exempt income, we cannot guarantee that such
dividends will not be subject to a 10% withholding tax, as the PRC foreign
exchange control authorities, which enforce the withholding tax, have not yet
issued guidance with respect to the processing of outbound remittances to
entities that are treated as resident enterprises for PRC enterprise income tax
purposes. Finally, it is possible that future guidance issued with respect to
the new resident enterprise classification could result in a situation in
which a 10% withholding tax is imposed on dividends we pay to our non-PRC
shareholders and with respect to gains derived by our non-PRC shareholders from
transferring our shares. We are actively monitoring the possibility of resident
enterprise treatment for the 2008 tax year and are evaluating appropriate
organizational changes to avoid this treatment, to the extent possible.

If we were treated as a resident enterprise by PRC tax
authorities, we would be subject to taxation in both the U.S. and China, and our
PRC tax may not be creditable against our U.S. tax.

30

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We may be exposed to liabilities under the Foreign
Corrupt Practices Act and Chinese anti-corruption laws, and any determination
that we violated these laws could have a material adverse effect on our
business.

We are subject to the Foreign Corrupt Practice Act, or FCPA,
and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. persons and
issuers as defined by the statute, for the purpose of obtaining or retaining
business. We have operations, agreements with third parties and we make most of
our sales in China. PRC also strictly prohibits bribery of government officials.
Our activities in China create the risk of unauthorized payments or offers of
payments by the employees, consultants, sales agents or distributors of our
Company, even though they may not always be subject to our control. It is our
policy to implement safeguards to discourage these practices by our employees.
However, our existing safeguards and any future improvements may prove to be
less than effective, and the employees, consultants, sales agents or
distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result
in severe criminal or civil sanctions, and we may be subject to other
liabilities, which could negatively affect our business, operating results and
financial condition. In addition, the U.S. government may seek to hold our
Company liable for successor liability FCPA violations committed by companies in
which we invest or that we acquire.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

All land in China is owned by the government. Individuals and
companies are permitted to acquire land use rights for specific purposes.
Industrial land use rights are granted for a period of 50 years. This period may
be renewed at the expiration of the initial and any subsequent terms. Granted
land use rights are transferable and may be used as security for borrowings and
other obligations.

In July 2003, Shandong Taibang obtained certain land use rights
from the PRC municipal government to 43,663 square meters consisting of
manufacturing facilities, warehouses and office buildings in Tai'an City,
Shandong Province. Shandong Taibang is required to make payments totaling
approximately $20,369 (RMB138,848) per year to the local state-owned entity, for
the 50 year life of the rights or until the Shandong Institute completes its
privatization process. We recorded land use rights equal to other payable 
land use rights totaling $323,687 and $325,390 as of December 31, 2009 and
2008, respectively, determined using present value of annual payments over 50
years.

The Company's 48.6% indirectly owned subsidiary, Qianfeng,
entered into a lease agreement on June 1, 2006 with a group of individuals in an
area located next to its production facility, to lease and use the space for
processing industrial wastes for 10 years. The annual lease amount is
approximately $1,530 (RMB 10,438).

We believe that all of our properties have been adequately
maintained, are generally in good condition, and are suitable and adequate for
our business.

Some of our properties are leased from third parties. We have
entered into formal lease agreements with two of them. The remaining leases are
on a verbal basis. In all cases, the lessors have not been able to provide
copies of documentation evidencing their rights to use the leased property. In
most cases, the leased properties are small operating spaces we leased for our
sales offices in different parts of China. In the event of any future dispute
over the ownership of the leased properties, we believe we could easily and
quickly find replacement premises so that the operations would not be
affected.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties and an adverse result in these
or other matters may arise from time to time that may harm our business. Except
as disclosed below, we are currently not aware of any such legal proceedings or
claims that we believe will have a material adverse affect on our business,
financial condition or operating results.

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Bobai County Collection Station

In January 2007, the Company's PRC subsidiary, Shandong
Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20% minority
shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. (Bobai) in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. (Hua Lan) filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Tai'an City. A hearing was held on June 25, 2007 and judgment
was entered against the defendants along with a $226,780 (RMB1,700,000) joint
financial judgment. The Company appealed the District Court judgment to the
Xinxiang City Intermediate Court. In November 2007, the Intermediate Court
affirmed the judgment against the three defendants and increased the amount of
the joint financial judgment to approximately $405,954 (RMB3,000,000).

In January 2008, Hua Lan enforced the judgment granted by the
Intermediate Court to freeze the Company's bank accounts. Shandong Taibang has
filed a separate action against Hua Lan before the Tai'an City District Court to
seek recovery of any losses in connection with Hua Lan's claim and to request
that the Tai'an City District Court preserve Hua Lan's property or freeze up to
approximately $411,300 (RMB 3 million) of Hua Lan's assets to secure the return
of such funds to the Company. The intermediate court in Tai'an City accepted the
application on February 14, 2008 but the matter is still pending. Pending the
outcome of the proceedings, Shandong Taibang increased its loss contingency
reserve during its fourth quarter of 2007 from approximately $75,593
(RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the enforcement of
this judgment. During the fourth quarter of 2008, full amount of the judgment,
including Feng Lin and Keliang Huang's portions of the judgment and the related
fees, approximately $456,222 (RMB 3,109,900) has been withdrawn from Shandong
Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of
the judgment, approximately $304,143 (RMB2,073,234), as receivable as a result
of the withdrawal. As of December 31, 2008, the Company determined that it is
unlikely that the Company will be able to recover such receivable from those two
individuals and wrote off the receivable as bad debt expense.

In October 2009, Shandong Taibang appealed to the High Court of
Henan Province requesting the court to reverse judgments from the Hong Qi
District Court based on Shandong Taibang's belief that Hua Lans involvement in Bobai was
in violation of PRC Blood Products Regulations as Hua Lan did not invest, as
Shandong Taibang did, in Bobai as required by the Regulation. The Company was awaiting
the judgment of the Henan High Court as of the date of this report. In light of
the foregoing, it is unlikely that the Company's planned acquisition of the
assets of Bobai will go forward.

Dispute among Qianfeng Shareholders over Raising
Additional Capital

On May 28, 2007, a 91% majority of Qianfeng's shareholders
approved a plan to raise additional capital from private strategic investors
through the issuance of an additional 20,000,000 shares of Qianfeng equity
interests at RMB 2.80 per share. The plan required all existing Qianfeng
shareholders to waive their rights of first refusal to subscribe for the
additional shares. The remaining 9% minority holder of Qianfeng's shares, the
Guizhou Jie'an Company, or Jie'an, did not support the plan and did not agree to
waive its right of first refusal. On May 29, 2007, the majority shareholders
caused Qianfeng to sign an Equity Purchase Agreement with certain investors,
pursuant to which the investors agreed to invest an aggregate of RMB 50,960,000
(approximately $7,475,832) in exchange for 18,200,000 shares, or 21.4%, of
Qianfeng's equity interests. At the same time, Jie'an also subscribed for
1,800,000 shares, representing its 9% pro rata share of the 20,000,000 shares
being offered. The proceeds from all parties were received by Qianfeng in
accordance with the agreement.

In June 2007, Jie'an brought suit in the High Court of Guizhou
province, China, against Qianfeng and the three other original Qianfeng
shareholders, alleging the illegality of the Equity Purchase Agreement. In its
complaint, Jie'an alleged that it had a right to acquire the shares waived by
the original Qianfeng shareholders and offered to the investors in connection
with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High
Court ruled against Jie'an and sustained the Equity Purchase Agreement, but on
November 2008, Jie'an appealed the Guizhou High Court judgment to the People's
Supreme Court in Beijing. On May 13, 2009, the People's Supreme Court sustained
the original ruling and denied the rights of first refusal of Jie'an over the
additional shares waived by the original Qianfeng's shareholders. The
registration of the new investors as Qianfeng's shareholders and the related increase in registered capital of Qianfeng with the
Administration for Industry and Commerce are still pending. On January 27, 2010,
the strategic investors brought suit in the High Court of Guizhou Province
against Qianfeng alleging Qianfengs failure to register their equity interest
in Qianfeng with the local AIC and requesting the distribution of their share of
Qianfengs dividends. Dalin was also joined as a co-defendant as it is the
majority shareholder and exercises control over Qianfengs day-to-day
operations. The Company does not expect the strategic investors to prevail
because, upon evaluation of the Equity Purchase Agreement, the Company believes
that the Equity Purchase Agreement is void due to certain invalid pre-conditions
and the absence of shareholder authorization of the initial investment. In the
event that Qianfeng is required to return their original investment amount to
the strategic investors, Qianfeng has set aside the strategic investors fund
along with RMB 7,313,387 (approximately $1,072,216) in accrued interest , and
RMB 519,600 (approximately $74,712) for the 1% penalty imposed by the agreement
for any breach. If strategic investors prevail in their suit, Dalin's interests
in Qianfeng may be reduced to approximately 41.3% . The High Court of Guizhou is
scheduled to hear the case in early April, 2010.

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Dispute over Qianfeng Technical Consulting
Agreement

In 1997, Qianfeng entered into a Technical Cooperation
Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide certain
fractionation equipment and transfer processing know-how to Qianfeng. In August
2004, Sin filed a law suit against Qianfeng with the Intermediate Court in
Guiyang City, China, alleging non-payment of RMB 100,000 (approximately,
$14,670) for his fractionation equipment and RMB 5,000,000 (approximately,
$733,500) for the transfer of his technological know-how. The Intermediate Court
ruled in favor of Sin and found that Qianfeng owed Sin RMB 10,376,160
(approximately, $1,522,183), but Qianfeng appealed the Intermediate Court ruling
to the Guizhou High Court. The Guizhou High Court agreed in part with Qianfeng's
grounds for appeal and reduced the amount of know-how transfer fee to RMB
1,970,413 (approximately, $289,060). In May 2007, Sin appealed the Guizhou High
Court's decision to the People's Supreme Court in Beijing. The People's Supreme
Court heard in April 2008 and ruled on December 29, 2009 for Qianfeng pay RMB
4,700,000 (approximately, $689,490) as compensation to Sin for technology
transfer and RMB 100,000 (approximately, $14,670) for unpaid equipment purchase.
Qianfeng has accrued and accounted for all these expenses as of December 31,
2009.

Administration Interference

Qianfeng is party to an administrative proceeding against the
government of the Qiandongnan Autonomous Region, or the Qiandongnan Authorities,
in Guizhou Province, China, in connection with the ownership of three of
Qianfeng's entitled eight plasma stations in Guizhou Province. Qianfeng was
authorized to acquire a total of eight plasma stations in Guizhou Province based
on several national and provincial administrative authorizations issued by the
PRC State Council and the Guizhou Ministry of Health between 2006 and 2007, but
to date, the governmental authorizations have not been fully implemented by the
Qiandongnan Authorities. In early 2007, Qianfeng submitted RMB 8,010,000
(approximately $1,173,465) to the local finance department of Sansui County,
Qiandongnan, for acquiring the Sansui Plasma Collection Station (Sansui), but
the local finance department refused to honor the purchase and returned the full
consideration to Qianfeng. Furthermore, subsequent local rulings published by
the Qiandongnan Authorities February 28, 2008 appear to authorize another
private company to acquire the Sansui and two other stations, the Zhengyuan
Plasma Collection Station and the Shibing Plasma Collection Station. In December
2008 Qianfeng filed an administrative review application with the People's
Government of Guizhou Province, or the Guizhou Provincial Government, but the
Guizhou Provincial Government has delayed making a final decision pending
further review of regulations regarding administrative authorizations. Qianfeng
has received verbal notification from staff in the Guizhou Provincial Government
that the Qiandongnan Authorities have withdrawn the local rulings. As a result, Qianfeng has
withdrawn
its application with the Guizhou Provincial Government to facilitate further
negotiation with Qiandongnan Authorities on its right to acquire all eight plasma stations in Guizhou Province. In addition, Qianfeng has set aside the funds necessary to
purchase Sansui pending the outcome of the administrative review. There have
been no further developments on this case as of the date of this report.

Dispute over Raw Plasma Supply Agreement with
Xintai

On March 10, 2009, Henan Xintai Medicine Company (previously
known as Henan Zhongtai Medicine, Xintai) brought suit against Shandong
Taibang and its two wholly-owned plasma collecting subsidiaries in Shandong for
breach of a raw plasma supply agreement. The suit was subsequently withdrawn by
Xintai on May 31, 2009. The agreement, signed by Shandong Taibang and Xintai on
October 10, 2006, requires the two subsidiaries to provide to Xintai 45 metric
tons of raw plasma per year from 2007 to 2009. The subsidiaries provided more
than 34 metric tons of plasma to Xintai during 2007 in accordance with the
agreement. On October 31, 2007, PRC State Department published the Regulation on
Plasma Collection Stations. The Company believes the agreement is invalid
because it violates clause 43 of the new Regulation, which prohibits
plasma collecting stations from providing raw plasma to any manufacturer other
than their direct parent. To comply with the Regulation, the subsidiaries ceased
supplying plasma to Xintai in late 2007. On March 12, 2009, Shandong Taibang
filed a suit in the Shandong Tai'an Middle Court against Xintai seeking damages
of RMB50,000 (approximately, $7,335) for the plasma already supplied to Xintai
during 2007. On June 29, 2009, Xintai re-filed the suit in Shandong Tai'an
Middle Court against Shandong Taibang and the two subsidiaries seeking
compensation of RMB6,000,000 (approximately, $880,200) for contract breach and
demanding that Shandong Taibang and the subsidiaries continue to honor the
agreement. On October 20, 2009, the Tai'an Middle Court combined and heard the
two suits and ruled on January 20, 2010 in favor of Shandong Taibang on all
accounts.

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Qianfeng's Guarantee to a Third Party

In 2007, as a condition to purchase Huang Ping Plasma Station,
Qianfeng entered into an agreement with Guizhou Zhongxin Investment Company
(Zhongxin) in which Qianfeng agreed to repay Zhongxin's debt out of Qianfeng's
payables to Zhongxin arising from plasma purchased from Zhongxin. In the same
agreement, Qianfeng also guaranteed to the Huang Ping County Hospital (Huang
Ping Hospital), which was the co-owner with Zhongxin of the Huang Ping Plasma
Station, for the amount of RMB3,074,342 (approximately, $451,006) of debt that
Zhongxin owed to Huang Ping Hospital. On June 1, 2009, Huang Ping Hospital
brought suit, in Huang Ping County People's Court of Guizhou Province, against
Zhongxin for non-payment of its payables and debt due to Huang Ping Hospital and
Qianfeng as the guarantor. On November 2, 2009, the court ruled in favor of the
plaintiff and Qianfeng will need to repay the Zhongxins debt to Huang Ping
Hospital on behalf of Zhongxin as the guarantor. In October 2009, Qianfeng
appealed to the Middle Court of Kaili District in Guizhou Province and was
accepted by the court in January 2010. The hearing is expected to be held by the
end of April 2010. The Equity Transfer Agreement pursuant to
which we acquired a 90% interest in Dalin, Qianfeng's majority shareholder,
provides that the sellers will be responsible, in accordance with their equity
proportion in Qianfeng, for damages incurred by Qianfeng from Zhongxin's debt
and shall repay Dalin the sellers' proportionate share of payments made by
Qianfeng to creditors in connection with Zhongxin's debt within 10 days after
payment by Qianfeng. The RMB 3,074,342 contingent liability and proportionate
share of the liability to be recovered from the sellers were properly reflected
in the financials as of December 31, 2009.

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

No matters were submitted during the fourth quarter of our 2009
fiscal year to a vote of security holders, through the solicitation of proxies
or otherwise.

PART II

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

Market Information

Our common stock is quoted under the symbol CPBO on the
NASDAQ Global Market. The CUSIP number is 16938C 10 6.

The following table sets forth, for the periods indicated, the
high and low bid prices of our common stock. These prices reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.

|                                       |  | Closing Prices (1) | 
|-------------------------------------- |  | ------------------ | 
|                                       |  | High               | 
|Year Ended December 31, 2010           |  |                    | 
|First Quarter (through March 18, 2010) |  | 13.48              | 
|                                       |  |                    | 
|Year Ended December 31, 2009           |  |                    | 
|First Quarter                          |  | 2.45               | 
|Second Quarter                         |  | 5.00               | 
|Third Quarter                          |  | 8.00               | 
|Fourth Quarter                         |  | 12.08              | 

|                             |  |      |  |  |      | 
|---------------------------- |  | ---- |  |  | ---- | 
|Year Ended December 31, 2008 |  |      |  |  |      | 
|First Quarter                |  | 5.85 |  |  | 3.30 | 
|Second Quarter               |  | 4.32 |  |  | 2.76 | 
|Third Quarter                |  | 4.70 |  |  | 2.00 | 
|Fourth Quarter               |  | 2.79 |  |  | 1.26 | 

|    |                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The above tables set forth the range of high and low
      closing bid prices per share of our common stock as reported by
      www.quotemedia.com for the periods indicated.

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Approximate Number of Holders of Our Common Stock

As of March 18, 2010, there were approximately 442 stockholders
of record of our common stock. The number of record holders does not include
persons who held our common stock in nominee or street name accounts through
brokers.

Dividends

China Biologic Products, Inc. has never declared or paid a cash
dividend. Any future decisions regarding dividends will be made by our board of
directors. We currently intend to retain and use any future earnings for the
development and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. Our board of directors has complete
discretion on whether to pay dividends, subject to the approval of our
stockholders. Even if our board of directors decides to pay dividends, the form,
frequency and amount will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual
restrictions and other factors that the board of directors may deem
relevant.

Securities Authorized for Issuance Under Equity Compensation
Plans

The following table includes the information as of the end of
2009 for each category of our equity compensation plan:

Plan category
    Number of securities
      to be issued upon exercise of
      outstanding options, warrants and rights
      (a)
    Weighted- average
      exercise price of outstanding options,
      warrants and rights (b)
    Number of securities
      remaining available for future issuance under
      equity compensation plans (excluding securities
      reflected in column (a)) (c)Equity compensation plans approved by
      security holders
    910,000
    4.00
    4,002,500Equity compensation plans not approved by security holders
      (1)
    -
    -
    -Total
    910,000
    
    4,002,500


|(1) | Effective May 9, 2008, our board of directors adopted the
      China Biologic Products, Inc. 2008 Equity Incentive Plan, or the 2008
      Plan. The 2008 Plan provides for grants of stock options, stock
      appreciation rights, performance units, restricted stock, restricted stock
      units and performance shares. A total of five million (5,000,000) shares
      of our common stock may be issued pursuant to the 2008 Plan. The exercise
      price per share for the shares to be issued pursuant to an exercise of a
      stock option will be no less than the fair market value per share on the
      grant date, except that, in the case of an incentive stock option granted
      to a person who holds more than 10% of the total combined voting power of
      all classes of our stock or any of our subsidiaries, the exercise price
      will be no less than 110% of the fair market value per share on the grant
      date. No more than an aggregate of 500,000 shares (or for awards
      denominated in cash, the fair market value of 5,000,000 shares on the
      grant date) may be subject to awards under the 2008 Plan to any individual
      participant in any one fiscal year. No awards may be granted under the
      2008 Plan after May 9, 2018, except that any award granted before then may
      extend beyond that date.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

_____________

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Recent Sales of Unregistered Securities

We have not sold any equity securities during the fiscal year
ended December 31, 2009 that were not previously disclosed in a quarterly report
on Form 10-Q or a current report on Form 8-K that was filed during the 2009
fiscal year.

Purchases of Our Equity Securities

No repurchases of our common stock were made during the fourth
quarter of our fiscal year ended December 31, 2009.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

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

The following managements discussion and analysis should be
read in conjunction with our financial statements and the notes thereto and the
other financial information appearing elsewhere in this Report. In addition to
historical information, the following discussion contains certain
forward-looking information. See Special Note Regarding Forward Looking
Statements above for certain information concerning those forward looking
statements. Our financial statements are prepared in U.S. dollars and in
accordance with U.S. GAAP.

Overview of Our Business

We are a biopharmaceutical company and through our indirect
majority-owned Chinese subsidiaries, Shandong Taibang and Qianfeng, and
minority-owned Chinese subsidiary, Huitian, we are principally engaged in the
research, development and manufacturing of plasma-based pharmaceutical products
in China. Shandong Taibang operates from our manufacturing facility located in
Tai'an City, Shandong Province and Qianfeng operates in Guizhou Province. Our
minority owned subsidiary, Huitian, operates from facilities in Shaanxi Province.
The plasma-based biopharmaceutical manufacturing industry in China is highly
regulated by both the provincial and central governments. Accordingly, the
manufacturing process of our products is strictly monitored from the initial
collection of plasma from human donors to finished products. Our principal
products include our approved human albumin and immunoglobulin products.

We are approved to sell human albumin 20%/10ml, 20%/25ml,
20%/50m, 10%/10ml, 10%/25ml, 10%/50ml and 25%/50ml. Human albumin is our top-selling
product. Sales of these human albumin products represented approximately 49.7%
and 57.8% of our total revenues, respectively, for the each of the years ended
December 31, 2009 and 2008. Human albumin is principally used to increase blood
volume while immunoglobulin is used for certain disease preventions and cures.
The Companys approved human albumin and immunoglobulin products use human
plasma as the basic raw material. Albumin has been used for almost 50 years to
treat critically ill patients by replacing lost fluid and maintaining adequate
blood volume and pressure. All of our products are prescription medicines
administered in the form of injections.

We sell our products to customers in the PRC, mainly hospitals
and inoculation centers. Our sales have historically been made on the basis of
short-term arrangements and our largest customers have changed over the years.
For the years ended December 31, 2009 and 2008, our top 5 customers accounted
for approximately 10.7% and 16.2%, respectively, of our total revenue. For the
years ended December 31, 2009 and 2008, our largest customer accounted for
approximately 4.0% and 6.4% of our revenue, respectively. As we continue to
diversify our geographic presence, customer base and product mix, as well as the
acquisition of Dalin, we expect that our largest customers will continue to
change from year to year.

We operate and manage our business as a single segment. We do
not account for the results of our operations on a geographic or other basis.

All our business has been conducted in Renminbi, the official
currency of China. Renminbi is still not a free floating currency. The value of
Renminbi is subject to changes in the Chinese government's policies and depends
to a large extent on China's domestic and international economic and political
developments, as well as supply and demand in the local market. Since 1994, the
official exchange rate for the conversion of Renminbi to U.S. dollars has
generally been stable, and Renminbi has appreciated against the U.S. dollar
since July 2005.

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On November 25, 2009, we received approval to list our
securities on The NASDAQ Global Market. The symbol for our common stock is
CBPO. We began trading under our new symbol on December 2, 2009.

Recent Developments

Acquisition of Yuncheng Ziguang BiotechnologyOn January 22, 2010, Shandong Taibang entered into an Equity Transfer
Agreement with Yuncheng Ziguang Biotechnology Co., Ltd., which is located in
Yuncheng, Shandong Province. Under the terms of the Equity Transfer Agreement,
Shandong Taibang agreed to purchase 100% of Yuncheng Ziguang's equity interest
at a purchase price of RMB 10,066,672 (approximately $1,216,054), which was
subsequently paid as of February 24, 2010. Yuncheng Ziguang's main business is
manufacturing, packing and selling of health drinks and foods. Among its assets,
Yuncheng Ziguang owns six buildings and a right to acquire a land use right with
approximately 323,000 square feet in size. The purpose of this acquisition is
mainly for relocation of Shandong Taibang's Yun Cheng plasma station, which is
adjacent to Yuncheng Ziguang, into the existing building and the land that
Yuncheng Ziguang currently owns or entitled to own. Yun Cheng plasma station is
the oldest and smallest among the Company's five stations in Shandong. Shandong
Taibang expects that the relocation of the plasma station into the new facility
will increase its plasma collection capacity with a low investment cost.

Principal Factors Affecting our Financial Performance

The following are key factors that affect our financial
condition and results of operations and we believe them to be important to the
understanding of our business:

Global Financial Crisis

The ongoing downturn in global financial markets has is
expected to slow down China's GDP growth, and may have an adverse effect on the
demand for our products which are still not affordable to many PRC patients. If
the current global economic slowdown continues and a depressed economic
environment make our products less affordable to more patients or result in an
overall decreased demand for our products, such reductions and disruptions could
have a material adverse effect on our projected total sales increase and
deteriorate our profit margins.

We believe that due to the rate of attrition of non-compliant
companies in the wake of increased governmental regulations imposed on our
industry, we have not yet seen a decline in the demand for our products.
However, we can give no assurance that this demand for our products will
continue.

Raw Material Prices

The primary raw material used in the production of our albumin
and immunoglobulin products is human plasma. These products are still not
affordable to many PRC patients. As China's economy grows, we expect more
Chinese people will become consumers of medical treatments and procedures,
including procedures requiring the use of human plasma, resulting in increased
demand for human plasma. Collection of human plasma in China is regulated and
until recently, only licensed Plasmapheresis stations owned and operated by the
government could collect human plasma. Each collection station was only allowed
to supply plasma to the one manufacturer that has signed the Quality
Responsibility statement with them. The price of human plasma is negotiated on
an annual basis and is determined by a number of factors including, but not
limited to, the cost of operating the collection stations, the nutritional
supplement fee awarded to the donors for each donation, and the anticipated
volume of total plasma donated. However, in March 2006, the Ministry of Health
promulgated certain Measures on Reforming Plasma Collection Stations, or the
Blood Collection Measures, whereby the ownership and management of PRC plasma
stations are required to be transferred to plasma-based biopharmaceutical
companies while the regulatory supervision and administrative control remain
with the State. Plasma stations that did not complete their reform by December
31, 2006, risked revocation of their license to collect plasma.

In December 2006, we acquired five of the six then existing
plasma stations in Shandong and on January 1, 2007 we obtained the permits to
operate these stations. These acquisitions have allowed us to have a direct
influence on the operation of these collection stations and secure a stable
source of plasma supply for production. The foregoing acquisitions, as well as
the acquisition of Dalin and its indirectly owned plasma stations, have led to
an increase in our plasma supply for production and did not result in any
material differences in our cost structure. Due to current market conditions, we
have generally been able to pass substantially all cost increases in recent
years on to our customers.

Prices of and Demand for Our Products

In recent years, due to increased regulatory restrictions and
market demand, we have been able to increase the selling price of most of our
key products. The demand for our products is largely affected by the general
economic conditions in China because they are still not affordable to many
patients. As China's economy grows, we expect more Chinese people will become consumers of medical treatments
and procedures, including procedures requiring human plasma. A significant
improvement in the economic environment in China will likely improve consumer
income which in turn would make our products more affordable and consequently
increase the demand for our products. We have been able to expand our product
range and markets by introducing new products required by customers. We believe
that our technical expertise is important in introducing products that are in
demand.

37

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Production Capacity

Our sales volume is limited by our annual production capacity.
As we grow our business in the future, our ability to fulfill additional and
larger orders will depend on our ability to increase our production capacity.
Our plan to expand our production capacity will depend on, inter alia, the
availability of capital to meet our needs of expansion or upgrading of
production lines, and the availability of stable plasma supply.

As of December 2009, the aggregate production capacity of
Shandong Taibang and Qianfeng was 1,100 metric tons per annum. We estimate that the production
capacity of our major competitors ranges from 300 tons to 1,000 tons per annum.
We believe that our current production capacity is sufficient to meet the
current demand for our products for the next two years.

Competition

We are subject to intense competition. There are both local and
overseas pharmaceutical enterprises that are engaged in the manufacture and sale
of potential substitute or similar biopharmaceutical products as our products in
the PRC. These competitors may have more capital, better research and
development resources, manufacturing and marketing capability and experience
than we do. In our industry, we compete based upon product quality, product
cost, ability to produce a diverse range of products and logistical
capabilities.

We believe that we have strengthened our position in the
marketplace with our recent acquisition of a 90% equity interest in Dalin and
its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest
in Huitian, Xi'an-based biopharmaceutical company.

Our profitability may be adversely affected if (i) competition
intensifies; (ii) competitors drastically reduce prices; or (iii) competitors
develop new products or product substitutes with comparable medicinal
applications or therapeutic effects which are more effective or less costly than
those produced by us. Please refer to Competition for more information
regarding this factor.

Taxation

United States and British Virgin Islands

We are subject to United States tax at a tax rate of 34%. No
provision for income taxes in the United States has been made as we have no
income taxable in the United States. Our subsidiary, Logic Express Ltd., was
incorporated in the BVI and under the current laws of the BVI, is not subject to
income taxes.

China

Before the implementation of the New EIT Law, Foreign Invested
Enterprises, or FIEs, established in the PRC are generally subject to an
enterprise income tax, or EIT, rate of 33.0%, which includes a 30.0% state
income tax and a 3.0% local income tax. The New EIT Law imposes a unified EIT of
25.0% on all domestic enterprises and FIEs, unless they qualify under certain
limited exceptions. Therefore, nearly all FIEs are subject to the new tax rate
alongside other domestic businesses rather than benefiting from the old tax laws
applicable to FIEs, and its associated preferential tax treatments, beginning
January 1, 2008.

Despite these pending changes, the New EIT Law gives the FIEs
established before March 16, 2007, or Old FIEs, such as our 82.76% owned
subsidiary Shandong Taibang, a five-year grandfather period during which they
can continue to enjoy their existing preferential tax treatment. During this
five-year grandfather period, the Old FIEs which enjoyed tax rates lower than
25% under the original EIT law shall gradually increase their EIT rate by 2% per
year until the tax rate reaches 25%. In addition, the Old FIEs that are eligible
for the two-year exemption and three-year half reduction or five-year
exemption and five-year half-reduction under the original EIT law, are allowed
to remain to enjoy their preference until these holidays expire. The
discontinuation of any such special or preferential tax treatment or other incentives would have an adverse effect
on any organization's business, fiscal condition and current operations in
China.

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Under the New EIT Law, dividend distributions paid out of
earnings from our PRC subsidiaries are subject to a withholding tax at 10%. This
new dividend withholding tax, however, will only be levied on our PRC subsidiary
in respect of profits earned in 2008 onwards. Profits distributed after January
1, 2008 but related to financial results generated in the year ended December
31, 2007 and prior years will not be subject to dividend withholding tax.

In addition to the changes to the current tax structure, under
the New EIT Law, an enterprise established outside of China with de facto
management bodies within China is considered a resident enterprise and will
normally be subject to an EIT of 25.0% on its global income. The implementing
rules define the term de facto management bodies as an establishment that
exercises, in substance, overall management and control over the production,
business, personnel, accounting, etc., of a Chinese enterprise. If the PRC tax
authorities subsequently determine that the Company should be classified as a
resident enterprise, then our global income will be subject to PRC income tax of
25.0% .

As a sino-foreign joint venture company, Shandong Taibang has
been granted a preferential tax holiday by the Tax Bureau of the PRC as of 2003.
Accordingly, Shandong Taibang is entitled to tax concessions from 2003 whereby
the profit for the first two financial years beginning with the first
profit-making year is exempt from income tax in the PRC, and the profit for each
of the subsequent three financial years is taxed at 50% of the prevailing state
income tax rate. Local income tax of 3% is exempted for five years starting from
the first profit-making year. Shandong Taibang will be allowed the benefits of
tax holidays under the grandfather treatment over a five-year transition period,
and the applicable income rate will be 25% after the tax holiday. According to
the PRC's central government policy, new or high technology companies will enjoy
preferential tax treatment of 15%, instead of 25%. On February 12, 2009,
Shandong Taibang received the new technology or high technology certification
from Shandong provincial government. The Certification allows the Company to
receive the 15% preferential income tax rate, for a period of three years
starting from January 1, 2008. Qianfeng is currently enjoying the preferential
income tax rate of 15% also under the 10-year Western Development Tax
Concession, which started on January 2001 and ends on December 2010. The PRC tax
authority is studying the possibility of extending the concession, especially
for those industries that are encouraged by the PRC government, such as ours. In the
event that PRC tax authorities discontinue the concession, Qianfeng will apply
for the new or high technology preferential tax treatment of 15% like Shandong
Taibang.

Results of Operations

The following table sets forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
net sales.

China Biologic and Subsidiaries Fiscal Years Ended
December 31

**$**
    
    
    PercentageIncrease
    
    
    Increase2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Revenue
    
    $
    118,998,155
    
    $
    46,751,160
    
    $
    72,246,995
    
    
    154.5%Cost of revenue
    
    
    32,621,908
    
    
    14,040,602
    
    
    18,581,306
    
    
    132.3%Gross profit
    
    
    86,376,247
    
    
    32,710,558
    
    
    53,665,689
    
    
    164.1%Gross profit as a percentage of revenue
    
    
    72.6%
    
    
    70.0%
    
    
    2.6%Operating expenses
    
    
    24,999,055
    
    
    12,374,787
    
    
    12,624,268
    
    
    102.0%Other expense
    
    
    33,250,706
    
    
    449,656
    
    
    32,801,050
    
    
    7294.7%Income before taxes and minority interest
    
    
    28,126,486
    
    
    19,886,115
    
    
    8,240,371
    
    
    41.4%Income taxes
    
    
    10,513,100
    
    
    4,596,603
    
    
    5,916,497
    
    
    128.7%Net income before minority interests
    
    $
    17,613,386
    
    $
    15,289,512
    
    $
    2,323,874
    
    
    15.2%


Comparison of Fiscal Years Ended December 31, 2009 and
2008

Revenues.Our revenues are derived primarily from
the sales of human albumin and various types of immunoglobulin. Our revenues
increased 154.5%, or $72,246,995, to $118,998,155 for the fiscal year ended
December 31, 2009, compared to revenues of $46,751,160 for the fiscal year ended
December 31, 2008. The increase in revenues during fiscal year 2009 is primarily
attributable to a general increase in the price and volume of plasma based products. Among the factors that contributed to
the growth in revenue, foreign exchange translation accounted for 4.3% of the
increase. Our financial results for the year ended December 31, 2009 also
benefited from the consolidation of Dalin, which we acquired in the first
quarter of 2009. Dalin contributed approximately $52.1 million in revenue, which
accounted for approximately 43.8% of our total revenue for the year ended
December 31, 2009. All of our approved products recorded price increases ranging
from 0.5% to 38.2% . For the fiscal year ended December 31, 2009, the average
price for our approved human albumin products, which contributed 49.7% to our
total revenue, increased 0.5%, the average price for our approved human
immunoglobulin for intravenous injection, which contributed 36.8% to our
revenue, increased 7.9%, the average price for our approved human tetanus
immunoglobulin, which contributed 2.2% to our revenue, increased 26.2%, the
average price for our approved human rabies immunoglobulin, which contributed
4.0% to our revenue, increased 38.2%, and the average price for our approved
human hepatitis B immunoglobulin, which contributed 2.9% to our revenue,
increased 8.7%, as compared to the same period in 2008. Volume in sales for our
human albumin, human immunoglobulin for intravenous injection and human tetanus
immunoglobulin products increased by 117.8%, 293.4% and 40.2%, respectively, for
the fiscal year ended December 31, 2009, as compared to the same period in 2008.
Volume in sales for our human hepatitis B immunoglobulin and human rabies
immunoglobulin products decreased, due to the shortage of vaccines that are
needed to generate each type of raw material, by 0.5% and 5.1%, respectively,
for the fiscal year ended December 31, 2009, as compared to the same period in
2008.

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Price increase of our products was primarily attributable to
the continuing shortage in supply of the plasma-based products. We were able to
adjust our production plan to take advantage of the limited market supply of
plasma resources to realize higher profit margins. The plasma-based industry has
been immune from the impact of the ongoing global financial crisis as the demand
for our products has out-paced supply.

Cost of Revenues.Our cost of sales increased
$18,581,306, or 132.3%, to $32,621,908 for the year ended December 31, 2009,
from $14,040,602 during the same period in 2008. This increase was mainly due to
the actual 130.8% increase in cost of revenues in addition to a 3.9% increase in
foreign exchange translation. The increase in cost of revenues is primarily due
to the consolidation of Dalin and the increase in cost of raw material in
connection with the expansion of our donor base during 2009. The raw material
cost as a percentage of total cost of revenues is 83% in 2009, as compared to
the 76% in 2008. Cost of revenues as a percentage of sales was 27.4% for the
fiscal year ended December 31, 2009, as compared to 30.0% during the same period
in 2008. The decrease in cost of revenue as a percentage of sales is primarily
due to the favorable selling price increase, as well as the change in product
mix.

Gross Profit.The gross profit increased by
$53,665,689, or 164.1%, to $86,376,247 for the fiscal year ended December 31,
2009 from $32,710,558 for the same period in 2008. The increase in our gross
profit is due primarily to the consolidation of Dalin. As a percentage of sales
revenue, our gross profit increased by 2.6% to 72.6% for the fiscal year ended
December 31, 2009, from 70.0% for the same period in 2008. The increase in gross
profit as a percentage of sales is due to the prices increase in our products
outpaced the increase in raw material cost.

Operating Expenses. Our total operating expenses
increased by $12,624,268, or 102.0%, to $24,999,055 for the fiscal year ended
December 31, 2009, from $12,374,787 for the same period in 2008. As a percentage
of sales revenue, total expenses decreased by 5.5% to 21.0% for the fiscal year
ended December 31, 2009 from 26.5% for the same period in 2008. The increase was
primarily attributable to the 59.5%, 120.17% and 42.5% increase in our selling
expenses, general and administrative expenses and R&D expenses,
respectively, during the 2009 period as a result of the consolidation of Dalin,
which was offset by the $1.3 million decrease in compensation expense.

Selling Expenses. For the
fiscal year ended December 31, 2009, our selling expenses increased to
$3,529,242, from $2,212,073 for the fiscal year ended December 31, 2008, an
increase of $1,317,169, or 59.5% . As a percentage of sales, our selling
expenses for the fiscal year ended December 31, 2009 decreased by 1.7%, to 3.0%,
from 4.7% for the fiscal year ended December 31, 2008. The amount increase in
selling expenses is due primarily to our consolidation of Dalins selling
activities, as well as more efforts spent on broadening new direct hospital
customers, building sales force in Qianfeng and expanding into new sales territories.

General and Administrative
Expenses. For the fiscal year ended December 31, 2009, our general and
administrative expenses increased to $19,807,123, from $8,996,220 for the fiscal
year ended December 31, 2008, a $10,810,903, or 120.17% increase. General and
administrative expenses as a percentage of sales decreased by 2.6% to 16.6% for
fiscal year 2009 from 19.2% for the fiscal year 2008. The dollar increase was
mainly due to an increase in our administrative salary and employee benefit
costs and extra depreciation and amortization expenses in connection with our
acquisition of Dalin resulting from fair value adjustments, as well as
additional professional service charge related to the acquisition of Dalin.
Non-cash employee compensation for the year ended December 31, 2009 decreased to
$62,281, from $1,311,727 for the same period in 2008, primarily as a result of
grants to employees, consultants and directors made under our 2008 Equity
Incentive Plan during our third quarter of 2008.

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The $62,281 compensation expense, which was included in the
General and Administrative Expenses, represents the amortization of the
compensation expense related to the grant of options to the independent
directors.

Research and Development
Expenses. For the fiscal years ended December 31, 2009 and 2008, our
research and development expenses were $1,662,690 and $1,166,494, respectively,
an increase of $496,196 or 42.5% . As a percentage of revenues, our research and
development expenses for the fiscal year ended December 31, 2009 and 2008 were
1.4% and 2.5%, respectively. The amount increase was primarily due to the cost
of research activities and the clinical trial on our new products during the
period.

Change in Fair Value of Derivative Liabilities.Prior to
January 1, 2009, the warrants issued in 2006 were accounted for as equity
instruments. Because the strike price of the warrants is denominated in USD and
the Companys functional currency is the RMB, the warrants are now classified as
a derivative liability carried at fair value, with periodic changes in the fair
value charged or credited to income each period. Similarly, the embedded
derivatives (including the conversion option) in our senior secured convertible
notes and warrants that were issued in June 2009 are classified as derivative
liabilities carried at fair value. For the year ended December 31, 2009 and
2008, the Company recognized a loss on the change in the fair value of
derivative liabilities of $29,626,189 and $0, respectively. The recognized loss
on the change in the fair value is mainly due to the Companys stock price
increase from $2.00 to $12.08 as of December 31, 2008 and December 31, 2009,
respectively. Future changes in the market price of our common stock could cause
the fair value of these derivative financial instruments to change significantly
in future periods.

Interest Expense (income), net. Our net interest expense
increased $3,556,752 to $3,930,249 for the year ended December 31, 2009, from
interest expense of $373,497 for the same period in 2008. The increase in
interest expense is primarily due to the financing related to the acquisition of
Dalin, as well as the interest accrued for Qianfengs strategic investors as
described in legal proceedings above.

Income Tax Expense.Our provision for income taxes
increased $5,916,497, or 128.7%, to $10,513,100 for the year ended December 31,
2009, from $4,596,603 for the same period in 2008. Our effective tax rate for
the year ended December 31, 2009 was 37.4%, and our 2008 effective tax rate was
23.1% . The increase in effective tax rate is due to the increase in $29.6
million expenses that are not PRC tax deductible.

Net Income before Noncontrolling Interest.Our net income
before minority interest increased $2,323,874, or 15.2%, to $17,613,386 for the
year ended December 31, 2009, from $15,289,512 for the same period in 2008.
Income before noncontrolling interest as a percentage of revenues was 14.8%
and 32.7% for the year ended December 31, 2009 and 2008, respectively. The
decrease is due directly to non-cash change in fair value of warrant liabilities
charge of $29,626,189.

Liquidity and Capital Resources

Cash Flow and Working Capital

As of December 31, 2009, we had cash and cash equivalents of
$53,843,951, primarily consisting of cash on hand and demand deposits.To
date, we have financed our operations primarily through cash flows from
operations, augmented by short-term bank borrowings and equity contributions by
our stockholders. With the bank credit facilities that are available to us and
other financing activities, we expect that cash on hand, funds generated from
our operations and funds generated from companies that we may acquire in the
future will be sufficient to satisfy our current and future commitments for at
least the next twelve months. We do not believe that we have any significant
short term liquidity problems.

The following table sets forth a summary of our cash flows for
the periods indicated:

China Biologic and Subsidiaries Fiscal Years Ended
December 31 (audited)

|                                                  |   | 2009       |   |   | 2008        |  
|------------------------------------------------- | - | ---------- | - | - | ----------- | -
|Net Cash provided by Operating activities         | $ | 50,300,987 |   | $ | 20,020,039  |  
|Net Cash used in Investing activities             |   | (6,860,454 | ) |   | (21,666,504 | )
|Net Cash provided by Financing activities         |   | 1,564,925  |   |   | 4,785,780   |  
|Effects of Exchange Rate Change in Cash           |   | 23,877     |   |   | 665,268     |  
|Net Increase in Cash and Cash Equivalents         |   | 45,029,335 |   |   | 3,804,583   |  
|Cash and Cash Equivalent at Beginning of the Year |   | 8,814,616  |   |   | 5,010,033   |  
|Cash and Cash Equivalent at
      End of the Year |   | 53,843,951 |   |   | 8,814,616   |  

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Operating activities

Net cash provided by operating activities was $50 million for
the fiscal year ended December 31, 2009, as compared to $20.0 million net cash
provided by operating activities for the same period in 2008. The increase in
net cash provided by operating activities was mainly due the increase in
operating income of $41,041,421 to $61,377,192 for the fiscal year ended
December 31, 2009, as compared to $20,335,771 in fiscal year 2008, as well as
the increases in other payables and accrued liabilities, taxes payable, accrued
interest and non-cash activities. For the fiscal year ended December 31, 2009,
net income attributable to non-controlling interest of $16,348,489, warrants and
derivative mark-to-market charges of $29,626,189 and other non-cash activities
of $5,869,368 brought the operating income to a net income of $1,264,897.
Increase in customer deposits provided $274,768 in net cash. The increase in
accrued interest expense-holder of noncontrolling interest, tax payable and
other payables and accrued liabilities provided $2,068,526, 3,809,437 and
7,058,773, respectively, in net cash, which was offset by an increase in
inventory of $12,456,975.

Investing activities

Our use of cash for investing activities is primarily for the
acquisition of property, plant and equipment and intangibles, and advances on
non-current assets. We also made investment payment of $10,373,854 for the
acquisition in Dalin and remitted our remaining investment payable balance of
$3,225,420 in related to the acquisition in Huitian. Net cash used for investing
activities for the fiscal year ended December 31, 2009 was $6.9 million, as
compared to $21.7 million in the same period of 2008. The cash used for
acquiring additional plant and equipment and intangible assets and advance on
non-current assets was $6,803,317 offset by the refunds of $1,174,346 from the
local finance department of Sansui County, Qiandongnan, for the advance deposits
that we previously made of acquiring the Sansui Plasma Collection Stations. Cash
used for the payment of the Dalin acquisition were offset by the acquisition of
Dalin's existing cash of $11,946,933.

Financing activities

Net cash provided by financing activities for the year ended
December 31, 2009 totaled $1.6 million as compared to $4.8 million used in
financing activities in the same period of 2008. The increase of the cash
provided by financing activities was mainly attributable to the net proceeds of $8,967,516
from issuance of convertible notes of $9,554,140 ($2,054,140 of which were converted
into 513,535 shares of common stock as of the date of this report), proceeds
from warrants exercised of $3,649,770 and bank loans of $13,517,442, which was
offset by shareholder loan repayments of $2,841,302, a non-controlling
shareholder dividend payment of $2,969,372 and a short term bank loan payment of
$18,355,572.

Management believes that the Company has sufficient cash on
hand and continuing positive cash inflow, from the sale of its plasma-based
products in the PRC market. Our management expects continued growth in revenues
throughout the term of the convertible notes, largely due to the ongoing limited
supply of plasma-based products in the PRC market due to the introduction of
more stringent health and safety measures which we already meet. In light of the
foregoing, we believe that the Company will have the financial ability to
fulfill its payment obligations under the convertible notes when they come due.

Loan Facilities

On January 8, 2009, Shandong Taibang entered into a short term
loan agreement with the Taishan Sub-Branch of the Bank Of China, pursuant to
which the bank loaned Shandong Taibang RMB40 million (approximately $5,868,000).
The Loan has an annual interest rate of 5.31% on all outstanding principal and
is due and payable in full on January 7, 2010. Shandong Taibang is obligated
under the loan agreement to pay the interest quarterly and repay the principal
along with any remaining unpaid interest in full on the maturity date. Shandong
Taibang may not prepay the loan without the bank's prior written consent, which
should be solicited no later than 30 days before such prepayment, and any such
prepayment will be subject to a penalty equal to 0.0005% of the principal. If
the loan is not paid in full by the maturity date, the interest rate will be
increased to 6.90%, until full payment is made. In addition, if the loan is used for any other purpose than to
fund the purchase of raw materials, the bank will have the right to increase the
interest rate to 8.23% on the misused portion of the loan, effective as of the
date such funds are misused, until the misused portion is repaid in full.
Furthermore, if the quarterly interest payments required under the loan
agreement are not timely made during the term, the bank will have the right to
increase the interest rate to 6.90%, and if any such quarterly interest payments
are outstanding after the maturity date and are not timely made thereafter, then
the bank will have the right to charge an interest rate of 8.23% . Shandong
Taibang currently plans to use the loan to fund the purchase of raw materials.
In November 2009, with the consent from the bank, the company repaid RMB 20
million (approximately $2,939,000) of the loan amount prior to its maturity.

42

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On May 31, 2009, Taibang entered into two unsecured short term
loan agreements, for the amount of RMB20,000,000 (approximately $2,980,000)
each, with the Taishan sub-branch of the Communication Bank of China to replace
the RMB 40,000,000 (approximately $5,860,000) long term loan originally dated
October 28, 2008. Pursuant to the agreements, these loans are for the working
capital purpose and mature on June 1, 2010. Both loans bear a fixed interest
rate of 5.4% with the interest payable quarterly. In August and November 2009,
with the consent from the bank, the company further reduced the loan by RMB 10
(approximately $1,467,000) and RMB 20 million (approximately $2,934,000). As of
December 31, 2009, the loan has an outstanding balance of RMB 10 million
(approximately $1,467,000).

Obligations under Material Contracts

On September 26, 2008, Logic Express entered into an equity
transfer agreement with Dalin, and Fan Shaowen, Chen Aimin, Chen Aiguo and Yang
Gang, the shareholders of Dalin, relating to the purchase of an aggregate 90%
equity interest in Dalin, for a total purchase price of RMB194,400,000
(approximately, $28,479,600), due in four installments. The parties agreed that
(i) if Logic will have paid 90% of the purchase price (or RMB 174,960,000) on or
before April 7, 2009, then Logic will be entitled to its share of Dalin's
portion of the profit generated by Qianfeng starting from January 1, 2009, and
(ii) if Logic fails to pay the said amount, the profit generated by Qianfeng
from January 1, 2009 until the day of payment of said amount will be shared by
Party A and Party B (i.e., Logic will be entitled to its share of Dalin's
portion of the profit generated by Qianfeng calculated according to the
proportion of the purchase price paid by it, and Party A will be entitled to the
rest of Dalin's portion of the profit generated by Qianfeng). We timely
initiated the third installment payment to achieve 90% of the purchase price on
April 7, 2009, in accordance with the instructions provided by the Dalin
shareholders, however, due to erroneous account information provided by the
selling shareholders, RMB3,865,400 (approximately, $566,281) in funds were
initially withheld by the bank, which was subsequently corrected and paid on
April 8, 2009. In addition, the proper account information for the payment of
RMB4,500,000 (approximately, $657,425) was not provided to the Company until
April 14, 2009, upon receipt of which the funds were immediately delivered.
Because the error resulted from an omission on the part of the selling
shareholders themselves, we were deemed by the parties to have still fulfilled
its obligations under the agreement. As of January 1, 2009, Logic Holdings
became entitled to all the rights and privileges of a 90% shareholder in Dalin,
including the right to receive its pro rata share of the profits generated by
Dalin's 54% majority-owned operating subsidiary, Qianfeng, subject to a possible
dilution to as low as 41.3%, if certain strategic investors purchase of
Qianfengs equity in May 2007 is found to be valid. However, we did not exercise
any control over Qianfeng until January 16, 2009, when our four nominees were
elected to Qianfengs seven-member board of directors in a special meeting of
Qianfengs board of directors on that date, and our management took control of
Qianfengs operations as of the same date. We are obligated to pay the fourth
and final installment, representing the remaining 10% of the purchase price, on
or before April 9, 2010, the one-year anniversary of the local Administration
for Industry and Commerce's approval of the equity transfer.

On April 6, 2009, Logic Express entered into an equity transfer
and entrustment agreement, or Entrustment Agreement, among Logic Express,
Shandong Taibang, and the Shandong Institute of Biological Products, or the
Shandong Institute, the holder of the minority interests in Shandong Taibang,
pursuant to which Logic Express agreed to permit Shandong Taibang and the
Shandong Institute to participate in the indirect purchase of Qianfeng's equity
interests. Under the terms of the Entrustment Agreement, Shandong Taibang agreed
to contribute 18%, or RMB35,000,000 (approximately, $5,116,184), of the purchase
price for Dalin and the Shandong Institute agreed to contribute 12.86%, or
RMB25,000,000 (approximately, $3,654,917), of the purchase price. Logic Express
is obligated to repay to Shandong Taibang and the Shandong Institute their
respective investment amounts on or before April 6th, 2010, along with their pro
rata share, based on their percentage of the purchase price contributed, of any
distribution on the indirect equity investment in Qianfeng payable to Logic
Express during 2009. Logic Express has agreed that if these investment amounts
are not repaid within 5 days of the payment due date, then Logic Express is
obligated to pay Shandong Taibang and the Shandong Institute liquidated damages
equal to 0.03% of the overdue portion of the amount due until such time as it is
paid. Logic Express has also agreed to pledge 30% of its ownership in Shandong
Taibang to the Shandong Institute as security for nonpayment. If failure to
repay continues for longer than 3 months after the payment due date, then the
Shandong Institute will be entitled to any rights associated with the pledged interests, including but not limited to rights of
disposition and profit distribution, until such time as the investment amount
has been repaid. Logic Express also provided a guarantee that Shandong Taibang
and the Shandong Institute will receive no less than a 6% return based on their
original investment amount.

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Critical Accounting Policies

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires our
management to make assumptions, estimates and judgments that affect the amounts
reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that
are significant to the preparation of our financial statements. These accounting
policies are important for an understanding of our financial condition and
results of operation. Critical accounting policies are those that are most
important to the portrayal of our financial conditions and results of operations
and require management's difficult, subjective, or complex judgment, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting
estimates are particularly sensitive because of their significance to financial
statements and because of the possibility that future events affecting the
estimate may differ significantly from management's current judgments. We
believe the following critical accounting policies involve the most significant
estimates and judgments used in the preparation of our financial statements.

Fair Value of Financial Instruments

On January 1, 2008, the Company adopted FASB's accounting
standard related to fair value measurements and began recording financial assets
and liabilities subject to recurring fair value measurement at the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. These fair value principles prioritize
valuation inputs across three broad levels. The Company considers the carrying
amount of cash, receivables, payables including accrued liabilities and short
term loans to approximate their fair values because of the short period of time
between the origination of such instruments and their expected realization and
if applicable, their stated rates of interest are equivalent to interest rates
currently available. The fair values are measured pursuant to the three levels
defined by the FASB's accounting standard as follow:

- Level 1: inputs to the valuation methodology are quoted prices
  (unadjusted) for identical assets or liabilities in active markets.
- Level 2: inputs to the valuation methodology include quoted prices for
  similar assets and liabilities in active markets, and inputs that are
  observable for the assets or liability, either directly or indirectly, for
  substantially the full term of the financial instruments.
- Level 3: inputs to the valuation methodology are unobservable and
  significant to the fair value.

Revenue Recognition

We recognize revenue when products are delivered and the
customer takes ownership and assumes risk of loss, collection of the relevant
receivable is probable, persuasive evidence of an arrangement exists and the
sales price is fixed or determinable, which are generally considered to be met
upon delivery and acceptance of products at the customer site. Sales are
presented net of any discounts given to customers. As a policy, we do not accept
any product returns and based on our records, product returns, if any, are
immaterial. Sales revenue represents the invoiced value of goods, net of a
value-added tax, or VAT. All products produced by us and sold in the PRC are
subject to a Chinese VAT at a rate of 6% of the gross sales price or at a rate
approved by the Chinese local government. Products distributed by Taibang
Medical are subjected to a 17% VAT.

Inventories

Due to its unique nature, our principal raw material, human
blood plasma is subject to various quality and safety control issues which
include, but are not limited to, contaminations and blood born diseases. In
addition, limitations of current technology pose biological hazards inherent in
plasma that have yet to be discovered, which could result in a widespread
epidemic due to blood infusion. In the event that human plasma is discovered to
contain pathogens or infectious agents or other bio-hazards, we would be
required to write down our inventory to net realizable value. We determine the
net realizable value of our inventories on the basis of anticipated sales
proceeds less estimated selling expenses. At each balance sheet date, we
evaluate inventories that may be worth less than current carrying amounts. Total
inventories amounted to $35.1 million as of December 31, 2009. In order to
ensure that the growing demand for our products is met, as well as the 90-day
quarantine period requirement on plasma raw material implemented by the PRC
government, we have been gradually increasing our inventory level of raw
materials. We strictly follow the production processes required by government
regulations resulting in the relatively high level of work-in-progress customary
to our industry.

44

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Impairment of Long-Lived Assets

We review periodically the carrying amounts of long-lived
assets including property, plant and equipment, and intangible assets with
finite useful lives, to assess whether they are impaired. We evaluate these
assets for impairment whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable such as a change of business plan,
technical obsolescence, or a period of continuous losses. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. In determining
estimates of future cash flows, significant judgment in terms of projection of
future cash flows and assumptions is required.

Use of Estimates

The preparation of consolidated financial statements in
accordance with U.S. GAAP requires us to make a number of estimates and
assumptions relating to the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. On an
ongoing basis, we review our estimates and assumptions, including those related
to the recoverability of the carrying amount and the estimated useful lives of
long-lived assets, valuation allowances for accounts receivable and realizable
values for inventories. Changes in facts and circumstances may result in revised
estimates.

Contingencies

In the normal course of business, we are subject to
contingencies, including, legal proceedings and claims arising out of the
business that relate to a wide range of matters, including among others, product
liability. We recognize a liability for such contingency if we determine that it
is probable that a loss has occurred and a reasonable estimate of the loss can
be made. We may consider many factors in making these assessments, including
past history and the specifics of each matter. As we have not become aware of
any product liability claim since operations commenced, we have not recognized a
liability for any product liability claims.

Recent Accounting Pronouncements

Effective January 1, 2009, the Company adopted FASB's
accounting standard related to business combination which required acquisition
method of accounting to be used for all business combinations and for an
acquirer to be identified for each business combination. This accounting
standard requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions. It
also requires the acquirer in a business combination achieved in stages
(sometimes referred to as a step acquisition) to recognize the identifiable
assets and liabilities, as well as the non-controlling interest in the acquiree,
at the full amounts of their fair values (or other amounts determined in
accordance with the standard)

Effective January 1, 2009, the Company adopted FASB's
accounting standard regarding non-controlling interest in consolidated financial
statements. Certain provisions of this statement are required to be adopted
retrospectively for all periods presented. Such provisions include a requirement
that the carrying value of non-controlling interests (previously referred to as
minority interests) be removed from the mezzanine section of the balance sheet
and reclassified as equity. Further, as a result of adoption this accounting
standard, net income attributable to non-controlling interests is now excluded
from the determination of consolidated net income. In addition, foreign currency
translation adjustment is allocated between controlling and non-controlling
interests.

In January 2009, the Financial Accounting Standards Board
issued an accounting standard which amended the impairment model by removing its
exclusive reliance on market participant estimates of future cash flows used
in determining fair value. Changing the cash flows used to analyze
other-than-temporary impairment from the market participant view to a holder's
estimate of whether there has been a probable adverse change in estimated cash
flows allows companies to apply reasonable judgment in assessing whether
another-than-temporary impairment has occurred. The adoption of this accounting standard did not have
a material impact on the Company's consolidated financial statements.

45

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In April 2009, the Financial Accounting Standards Board issued
an accounting standard that makes the other-than-temporary impairments guidance
more operational and improves the presentation of other-than-temporary
impairments in the financial statements. This standard replaced the existing
requirement that the entity's management assert it has both the intent and
ability to hold an impaired debt security until recovery with a requirement that
management assert it does not have the intent to sell the security, and it is
more likely than not it will not have to sell the security before recovery of
its cost basis. This standard provides increased disclosure about the credit and
noncredit components of impaired debt securities that are not expected to be
sold and also requires increased and more frequent disclosures regarding
expected cash flows, credit losses, and an aging of securities with unrealized
losses. Although this standard does not result in a change in the carrying
amount of debt securities, it does require that the portion of an
other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. The Company adopted this
accounting standard, but it did not have a material impact on its consolidated
financial statements.

In April 2009, the Financial Accounting Standards Board issued
an accounting standard that requires disclosures about fair value of financial
instruments not measured on the balance sheet at fair value in interim financial
statements as well as in annual financial statements. Prior to this accounting
standard, fair values for these assets and liabilities were only disclosed
annually. This standard applies to all financial instruments within its scope
and requires all entities to disclose the method(s) and significant assumptions
used to estimate the fair value of financial instruments. This standard does not
require disclosures for earlier periods presented for comparative purposes at
initial adoption, but in periods after the initial adoption, this standard
requires comparative disclosures only for periods ending after initial adoption.
The Company adopted this accounting standard, but it did not have a material
impact on the disclosures related to its consolidated financial statements.

In June 2009, the Financial Accounting Standards Board issued
an accounting standard amending the accounting and disclosure requirements for
transfers of financial assets. This accounting standard requires greater
transparency and additional disclosures for transfers of financial assets and
the entity's continuing involvement with them and changes the requirements for
derecognizing financial assets. In addition, it eliminates the concept of a
qualifying special-purpose entity (QSPE). This accounting standard is
effective for financial statements issued for fiscal years beginning after
November 15, 2009, and the Company does not expect this standard to have a
material effect on its consolidated financial statements.

In June 2009, the Financial Accounting Standards Board also
issued an accounting standard amending the accounting and disclosure
requirements for the consolidation of variable interest entities (VIEs). The
elimination of the concept of a QSPE, as discussed above, removes the exception
from applying the consolidation guidance within this accounting standard.
Further, this accounting standard requires a company to perform a qualitative
analysis when determining whether or not it must consolidate a VIE. It also
requires a company to continuously reassess whether it must consolidate a VIE.
Additionally, it requires enhanced disclosures about a company's involvement
with VIEs and any significant change in risk exposure due to that involvement,
as well as how its involvement with VIEs impacts the company's financial
statements. Finally, a company will be required to disclose significant
judgments and assumptions used to determine whether or not to consolidate a VIE.
This accounting standard is effective for financial statements issued for fiscal
years beginning after November 15, 2009, and the Company does not expect this
standard to have a material effect on its consolidated financial statements.

In June 2009, the Financial Accounting Standards Board issued
an accounting standard which establishes the FASB Accounting Standards
Codification (the Codification) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with U.S. GAAP. The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. The Codification is
effective for interim and annual periods ending after September 15, 2009, and as
of the effective date, all existing accounting standard documents will be
superseded. The Codification is effective for the Company in the third quarter
of 2009, and accordingly, the Company's Quarterly Report on Form 10-Q for the
quarter ending September 30, 2009 and all current and subsequent public filings
will reference the Codification as the sole source of authoritative literature.

In August 2009, the Financial Accounting Standards Board issued
an Accounting Standards Update (ASU) regarding measuring liabilities at fair
value. This ASU provides additional guidance clarifying the measurement of
liabilities at fair value in circumstances in which a quoted price in an active
market for the identical liability is not available; under those circumstances, a reporting entity is
required to measure fair value using one or more of valuation techniques, as
defined. This ASU is effective for the first reporting period, including interim
periods, beginning after the issuance of this ASU. The adoption of this ASU did
not have a material impact on its consolidated financial statements.

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In October 2009, the Financial Accounting Standards Board
issued an ASU regarding accounting for own-share lending arrangements in
contemplation of convertible debt issuance or other financing. This ASU requires
that at the date of issuance of the shares in a share-lending arrangement
entered into in contemplation of a convertible debt offering or other financing,
the shares issued shall be measured at fair value and be recognized as an
issuance cost, with an offset to additional paid-in capital. Further, loaned
shares are excluded from basic and diluted earnings per share unless default of
the share-lending arrangement occurs, at which time the loaned shares would be
included in the basic and diluted earnings-per-share calculation. This ASU is
effective for fiscal years beginning on or after December 15, 2009, and interim
periods within those fiscal years for arrangements outstanding as of the
beginning of those fiscal years. The adoption of this ASU did not have a
material impact on its consolidated financial statements.

In November 2009, the FASB issued an ASU regarding accounting
for stock dividends, including distributions to shareholders with components of
stock and cash. This ASU clarifies that the stock portion of a distribution to
shareholders that contains components of cash and stock and allows shareholders
to select their preferred form of the distribution (with a limit on the amount
of cash that will be distributed in total) should be considered a stock dividend
and included in EPS calculations as a share issuance. The adoption of this
guidance did not have a material impact on the Companys consolidated financial
statements

In December 2009, FASB issued ASU No. 2009-16, Accounting for
Transfers of Financial Assets. This Accounting Standards Update amends the FASB
Accounting Standards Codification for the issuance of FASB Statement No. 166,
Accounting for Transfers of Financial Assetsan amendment of FASB Statement No.
140. The amendments in this Accounting Standards Update improve financial
reporting by eliminating the exceptions for qualifying special-purpose entities
from the consolidation guidance and the exception that permitted sale accounting
for certain mortgage securitizations when a transferor has not surrendered
control over the transferred financial assets. In addition, the amendments
require enhanced disclosures about the risks that a transferor continues to be
exposed to because of its continuing involvement in transferred financial
assets. Comparability and consistency in accounting for transferred financial
assets will also be improved through clarifications of the requirements for
isolation and limitations on portions of financial assets that are eligible for
sale accounting. The Company does not expect the adoption of this ASU to have a
material impact on its consolidated financial statements.

In December 2009, FASB issued ASU No. 2009-16, Accounting for
Transfers of Financial Assets. This Accounting Standards Update amends the FASB
Accounting Standards Codification for the issuance of FASB Statement No. 166,
Accounting for Transfers of Financial Assetsan amendment of FASB Statement No.
140. The amendments in this Accounting Standards Update improve financial
reporting by eliminating the exceptions for qualifying special-purpose entities
from the consolidation guidance and the exception that permitted sale accounting
for certain mortgage securitizations when a transferor has not surrendered
control over the transferred financial assets. In addition, the amendments
require enhanced disclosures about the risks that a transferor continues to be
exposed to because of its continuing involvement in transferred financial
assets. Comparability and consistency in accounting for transferred financial
assets will also be improved through clarifications of the requirements for
isolation and limitations on portions of financial assets that are eligible for
sale accounting. The Company does not expect the adoption of this ASU to have a
material impact on its consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-01- Accounting for
Distributions to Shareholders with Components of Stock and Cash. The amendments
in this Update clarify that the stock portion of a distribution to shareholders
that allows them to elect to receive cash or stock with a potential limitation
on the total amount of cash that all shareholders can elect to receive in the
aggregate is considered a share issuance that is reflected in EPS prospectively
and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity
and Earnings Per Share). The amendments in this update are effective for interim
and annual periods ending on or after December 15, 2009, and should be applied
on a retrospective basis. The adoption of this ASU did have a material impact on
the Companys consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-02  Accounting and
Reporting for Decreases in Ownership of a Subsidiary  a Scope Clarification.
The amendments in this Update affect accounting and reporting by an entity that
experiences a decrease in ownership in a subsidiary that is a business or
nonprofit activity. The amendments also affect accounting and reporting by an
entity that exchanges a group of assets that constitutes a business or nonprofit
activity for an equity interest in another entity. The amendments in this update
are effective beginning in the period that an entity adopts SFAS No. 160,
Non-controlling Interests in Consolidated Financial Statements  An Amendment of ARB No. 51. If an entity has previously adopted
SFAS No. 160 as of the date the amendments in this update are included in the
Accounting Standards Codification, the amendments in this update are effective
beginning in the first interim or annual reporting period ending on or after
December 15, 2009. The amendments in this update should be applied
retrospectively to the first period that an entity adopted SFAS No. 160. The
adoption of this ASU did not have a material impact on the Companys
consolidated financial statements.

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In January 2010, FASB issued ASU No. 2010-06  Improving
Disclosures about Fair Value Measurements. This update provides amendments to
Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out
of Levels 1 and 2. A reporting entity should disclose separately the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements
and describe the reasons for the transfers. 2) Activity in Level 3 fair value
measurements. In the reconciliation for fair value measurements using
significant unobservable inputs (Level 3), a reporting entity should present
separately information about purchases, sales, issuances, and settlements (that
is, on a gross basis rather than as one net number). This update provides
amendments to Subtopic 820-10 that clarify existing disclosures as follows: 1)
Level of disaggregation. A reporting entity should provide fair value
measurement disclosures for each class of assets and liabilities. A class is
often a subset of assets or liabilities within a line item in the statement of
financial position. A reporting entity needs to use judgment in determining the
appropriate classes of assets and liabilities. 2) Disclosures about inputs and
valuation techniques. A reporting entity should provide disclosures about the
valuation techniques and inputs used to measure fair value for both recurring
and nonrecurring fair value measurements. Those disclosures are required for
fair value measurements that fall in either Level 2 or Level 3. The new
disclosures and clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. These disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years. The Company is currently evaluating the
impact of this ASU, however, the Company does not expect the adoption of this
ASU to have a material impact on its consolidated financial statements.

Seasonality of our Sales

Our operating results and operating cash flows historically
have not been subject to seasonal variations. This pattern may change, however,
as a result of new market opportunities or new product introductions.

Inflation

Inflation does not materially affect our business or the
results of our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our investors.

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 begin on page
F-1 hereof.

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

None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

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We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that
information that would be required to be disclosed in Exchange Act reports is
recorded, processed, summarized and reported within the time period specified in
the SECs rules and forms, and that such information is accumulated and
communicated to our management, including to our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.

As required by Rule 13a-15 under the Exchange Act, our
management, including our Chief Executive Officer, Mr. Chao Ming Zhao, and our
Chief Financial Officer, Mr. Y. Tristan Kuo, evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of December
31, 2009. Based on our assessment, Mr. Zhao and Mr. Kuo determined that, as of
December 31, 2009, and as of the date that the evaluation of the effectiveness
of our disclosure controls and procedures was completed, because of the material
weaknesses in our internal control over financial reporting described below, our
disclosure controls and procedures were not effective to satisfy the objectives
for which they are intended.

Notwithstanding managements assessment that our internal
control over financial reporting was ineffective as of December 31, 2009 due to
the material weakness described below under Managements Report on Internal
Control Over Financial Reporting, we believe that the consolidated financial
statements included in this Annual Report on Form 10-K correctly present our
financial condition, results of operations and cash flows for the fiscal years
covered thereby in all material respects.

Internal Controls over Financial Reporting

Managements Annual Report on Internal Control over
Financial Reporting.

Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with
U.S. GAAP, and includes those policies and procedures that:

| | (1) | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      our assets;                                                                                                                                                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                  
| | (2) | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with U.S. GAAP, and that our receipts and expenditures are
      being made only in accordance with the authorization of our management and
      directors; and
| |     |                                                                                                                                                                                                                                                                                                                  
| | (3) | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of our
      assets that could have a material effect on the financial
    statements.                                                                                               

Management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2009. In making this assessment,
management used the framework set forth in the report entitled Internal Control
- Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on that evaluation, our management concluded that
our internal control over financial reporting was not effective, as of December
31, 2009, because of the material weaknesses in our internal control over
financial reporting described below.

During its evaluation of the effectiveness of internal control
over financial reporting as of December 31, 2009, the management concluded that,
after adding two qualified accountants, the Company still needs to increase its
qualified accounting personnel and enhances the supervision, monitoring and
reviewing of financial statements preparation processes. The Company has already
taken measures to remediate these material weaknesses by seeking an additional
financial reporting and accounting staff member with relevant accounting
experience, skills and knowledge in the preparation of financial statements
in accordance with of U.S. GAAP and financial reporting disclosure requirements under SEC rules. In addition, The Company is working closely with its
outside consultant in reinforcing the rigorous process for collecting and
reviewing information required for the preparation of the financial statements
including footnotes.

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

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Changes in Internal Controls over Financial Reporting.

Except for the addition of qualified accountants and enhancing
internal control procedures, during the fiscal year ended December 31, 2009,
there were no changes in our internal control over financial reporting
identified in connection with the evaluation performed during the fiscal year
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.

Directors and Executive Officers

The following sets forth the name and position of each of our
current executive officers and directors.

|NAME               | AGE | POSITION                             
|------------------ | --- | -------------------------------------
|Siu Ling Chan      | 47  | Chairwoman of the Board              
|Chao Ming Zhao     | 38  | Chief Executive Officer and President
|Yu-Yun Tristan Kuo | 55  | Chief Financial Officer              
|Lin Ling Li        | 47  | Director                             
|Sean Shao          | 53  | Director                             
|Xiangmin Cui       | 41  | Director                             
|Tong Jun Lin       | 48  | Director                             

Siu Ling Chan. Ms. Chan has been our director since July
19, 2006. She has been our chairwoman since January 1, 2007 and served as our
CEO from January 2007 to March 2007. Ms. Chan is also currently a director of
our subsidiary Logic Express. She was also appointed as the director of Shandong
Taibang in April 2006. Prior to joining us, Ms. Chan worked from 1991 to 2005,
as an administrator at the Fujian Academy of Social Sciences, and from 1989 to
1991 as a statistician at the Fujian Pingtan Economy Committee. She received her
diploma in Statistics from Xiamen University in 1989 and a diploma in management
from the Fujian Party Committee School in 2004.

Chao Ming Zhao. Mr. Zhao has been our Chief Executive
Officer since June 1, 2008. Mr. Zhao was our Chief Financial Officer from
November 2006 to until his appointment as our Chief Executive Officer, and has
been the Chief Financial Officer of our operating subsidiary, Shandong Taibang
since September 2003. From February 2002 to June 2003, Mr. Zhao was the
financial manager at EF English First (Fuzhou) School, where he was responsible
for managing the school's accounting and its internal control. He was a manager
and auditor at Fujian (CFC) Group from July 1996 to January 2002, and was in
charge of internal audit. Mr. Zhao is a certified accountant in the PRC and is
an international registered internal auditor. Mr. Zhao obtained his Bachelor's
degree in Investment Economy Management from Fuzhou University in 1996 and
received his MBA from the Chinese University of Hong Kong in 2006.

Yu-Yun Tristan Kuo. Mr. Kuo has been our Chief Financial
Officer since June 1, 2008 and has served as the Vice President-Finance of the
Company since September 2007. Mr. Kuo has more than 28 years of experience in
accounting, financing and information system for companies in the manufacturing,
commodity trading and banking industries and has served in the capacity of CFO,
CIO and Controller. Of these 27 years, Mr. Kuo has worked in the United States
for 25 years and in Asia for 3 years. Prior to joining our company, Mr. Kuo
worked for the Noble Group in Hong Kong as the Senior Business Analysis Manager
from February through August 2007. Prior to that, Mr. Kuo served as the CFO of
Cuisine Solution, Inc., a publicly traded company in Alexandria, Virginia, from
December 2002 to January 2007. Mr. Kuo also served as the Vice President of
Information System for Zinc Corporation of America in Monaca, Pennsylvania from
2001 and 2002 and as Chief Information Officer and Controller of Wise Metals
Group in Baltimore, Maryland, the largest independent aluminum sheet producer in
the U.S., from 1991 to 2001. Mr. Kuo obtained his Master's degree
in Accounting from the Ohio State University and Bachelors degree in Economics
from Soochow University in Taipei.

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Lin Ling Li. Ms. Li has been a member of our board of
directors since July 19, 2006. Since February 2006, Ms. Li has been the director
of our subsidiary Logic Express, and since May 2004, she has been a director at
Up-Wing Investment Limited, a predecessor to Logic Express. Ms. Li was a
technician at Fuzhou Fuxing Pharmaceutical Company from 1980 to 2000. From
October 1998 to April 2006, she was a senior manager at Fuzhou Chengxin Dian
Dang Company Limited, where she was involved in financing, mortgage and loan
industry. She holds a diploma in accounting from the Fujian Party Committee
School of Finance and Accounting in October 1994.

Sean Shao. Mr. Shao has been a member of our board of
directors since July 24, 2008. He currently serves as an independent director
for China Recycling Energy Corporation as the Chairman of Audit Committee, an
energy recycling system design company listed on the NASDAQ, since November
2009; Yongye International, Inc. as the Chairman of Audit Committee, a Chinese
agricultural company listed on the NASDAQ, since April 2009; Agria Corporation
as the Chairman of Compensation Committee, a Chinese agricultural company listed
on the NYSE, since November 2008; China Nuokang Bio-Pharmaceutical, Inc. as the
Chairman of Audit Committee, a biopharmaceutical company listed on the NASDAQ,
since September 2008 and; China Biologic Products, Inc. as the Chairman of Audit
Committee, a plasma-based biopharmaceutical company listed on the NASDAQ, since
July 2008. In addition, Sean served as Chairman of Audit Committee of China
Public Security Technology, Inc. from April 2008 to October 2009. Mr. Shao had
served as the Chief Financial Officer of Trina Solar Limited from August 2006 to
June 2008, where he assisted Trina Solar Limited in listing on the NYSE in
December 2006. Mr. Shao was the chief financial officer of ChinaEdu Corporation,
a Chinese educational service provider, from September 2005 to August 2006. Mr.
Shao was the chief financial officer of Watchdata Technologies Ltd., a Chinese
security software company, from August 2004 to September 2005. He was previously
with Deloitte Touche Tohmatsu Beijing from October 1998 to July 2004 and
Deloitte & Touche Toronto from December 1994 to November 1997. Mr. Shao
received his masters degree in health care administration from the University
of California at Los Angeles in 1988 and his bachelors degree in art from East
China Normal University in 1982. Mr. Shao is a member of American Institute of
Certified Public Accountants.

Dr. Tong Jun Lin. Dr. Lin has been a member of our board
of directors since July 24, 2008. He is a Professor in the Departments of
Microbiology and Immunology and Pediatrics, Dalhousie University and has focused
his research in immune response to microbial pathogens. Dr. Lin received his PhD
degrees (1990) from the Chinese Academy of Medical Sciences, and his
post-doctoral training at the University of Alberta (1993-1997), Duke University
(1997-1998) and Dalhousie University (1998-2000). He has published extensively
in leading scientific journals and has served on the Editorial Advisory Board of
the journal of Inflammation and Allergy  Drug Targets. He has received
continuous funding from Canadian Institutes of Health Research and other
national granting agencies. Dr. Lin is a Scholar of Canadian Institutes of
Health Research, a recipient of the Award of Excellence in Medical Research from
Dalhousie University (2004), and a recipient of an Investigator Award from
Canadian Society for Immunology (2007).

Dr. Xiangmin Cui. Dr. Cui, aged 41, joined our board in
February 2010. Dr. Cui is  a Principal at
Bay City Capital LLC ("Bay City"), a venture capital firm managing approximately
$1.5 billion of capital invested across various healthcare sectors. Prior to
joining Bay City in 2006, Dr. Cui was Director of Strategic Investment Planning
for Southern Research Institute, an organization that discovered and developed
six anti-cancer drugs that have been approved by the U.S. Food and Drug
Administration. Prior to that, Dr. Cui co-founded Pan Pacific Pharmaceuticals, a
U.S. biotech company, and Hucon Biopharmaceuticals, a PRC pharmaceutical
company. He served as the Chief Scientific Officer and Executive Vice President
of Pan Pacific Pharmaceuticals from 1998 to 2002 and Chief Executive Officer and
President of Hucon Biopharmaceuticals 2003 to 2005, respectively. In these
positions, he led the efforts to evaluate and acquire several key technologies
in the fields of oncology, infectious and inflammatory diseases. Dr. Cui was
also a co-founder of CNetwork, a San Francisco based non-profit organization
dedicated to serving Chinese communities in North America. He received his Ph.D.
in Cancer Biology from Stanford University, and his B.S. in Molecular Biology
from Peking University.

There are no agreements or understandings for any of our
executive officers or directors to resign at the request of another person and
no officer or director is acting on behalf of nor will any of them act at the
direction of any other person. To the best of our knowledge and belief, there
are no arrangements or understandings with any of our principal stockholders,
customers, suppliers, or any other person, pursuant to which any of our
directors or executive officers were appointed.

Directors are elected until their successors are duly elected
and qualified.

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Significant Employees

The following sets forth the name and position of each of our
current significant employees.

|NAME             | AGE | POSITION                                         
|---------------- | --- | -------------------------------------------------
|Tung Lam         | 50  | Chief Executive Officer of
      Shandong Taibang
|Yiwu Vincent Xie | 40  | Chief Technology Officer                         

Tung Lam. Mr. Lam has been the Chief Executive Officer
of our operating subsidiary, Shandong Taibang, since October 2003, and is
responsible for the entire operation. Prior to joining the Company, Mr. Lam
served, from November 1999 to August 2003, as the vice president of Fujian
Province Fei Yue Group, where he was in charge of management investment.

Dr. Yiwu Xie. Dr Xie has been our Chief Technology
Officer since December 2009. He served from 2007 to 2009 as the general manager
of R&D at New a-Ikor, a Hong Kong-based biopharmaceutical company, and from 2002
to 2007, as the director of R&D at Advantek Serum Laboratories.

Board Composition and Committees

Our Board is currently composed of five members, three of whom
are independent directors, as that term is defined in Rule 5605(a)(2) of the
Listing Rules of The Nasdaq Stock Market, Inc., or the NASDAQ Listing Rules. All
actions of the board of directors require the approval of a majority of the
directors in attendance at a meeting at which a quorum is present. Our directors
have a duty of to act in good faith with a view to our interests. In fulfilling
their duty of care to us, our directors must ensure compliance with our
Certificate of Incorporation. Board action requires the approval of a majority
of the directors in attendance at a meeting at which a quorum is present. During
2009, our board met 9 times and except for two, who missed one meeting, no
director missed more than 25% of the meetings of the board or any committee on
which he or she sat.

Our Board currently has three standing committees which,
pursuant to delegated authority, perform various duties on behalf of and report
to the Board: the Audit Committee, Compensation Committee and Corporate
Governance and Nominating Committee. Each of these Committees is comprised
entirely of independent directors. From time to time, the Board may establish
other committees. Each of the Compensation Committee and Corporate Governance
and Nominating Committee were formed on August 7, 2008 and the Audit Committee
was formed on July 24, 2008. During the fiscal year ended December 31, 2009, the
audit committees met 4 times. Copies of the charters for each of our standing
committees may be obtained from our website at
http://www.chinabiologic.com.

Compensation Committee

Our compensation committee was formed on August 7, 2008 and
consists of Mr. Tong Jun Lin, Mr. Xiangmin Cui, and Mr. Sean Shao, each of whom
is independent as that term is defined under the NASDAQ Listing Rules. Our
compensation committee assists the Board in reviewing and approving the
compensation structure of our directors and executive officers, including all
forms of compensation to be provided to our directors and executive officers.
Our chief executive officer may not be present at any committee meeting during
which his compensation is deliberated.

The Compensation Committee and the new Compensation Committee
Charter is available on the Company website at www.chinabiologic.com. The compensation committee is
responsible for, among other things:

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- approving and overseeing the compensation package for our executive
  officers;
- reviewing and making recommendations to the Board with respect to the
  compensation of our directors;
- reviewing and approving corporate goals and objectives relevant to the
  compensation of our chief executive officer, evaluating the performance of our
  chief executive officer in light of those goals and objectives, and setting
  the compensation level of our chief executive officer based on this
  evaluation; and
- reviewing periodically and making recommendations to the Board regarding
  any long-term incentive compensation or equity plans, programs or similar
  arrangements, annual bonuses, employee pension and welfare benefit plans.

The Compensation Committee has sole authority to retain and
terminate outside counsel, compensation consultants retained to assist the
Compensation Committee in determining the compensation of the Chief Executive
Officer or senior executive officers, or other experts or consultants, as it
deems appropriate, including sole authority to approve the firms' fees and other
retention terms. The Compensation Committee may also form and delegate authority
to subcommittees and may delegate authority to one or more designated members of
the Compensation Committee. The Compensation Committee may from time to time
seek recommendations from the executive officers of the Company regarding
matters under the purview of the Compensation Committee, though the authority to
act on such recommendations rests solely with the Compensation Committee.

Corporate Governance and Nominating Committee

Our corporate governance and nominating committee consists of
Mr. Tong Jun Lin, Mr. Xiangmin Cui, and Mr. Sean Shao, each of whom is
independent as that term is defined in the NASDAQ Listing Rules. The corporate
governance and nominating committee assists the Board of Directors in
identifying individuals qualified to become our directors and in determining the
composition of the Board and its committees. Dr. Lin serves as Chair of the
corporate governance and nominating committee.

The corporate governance and nominating committee is
responsible for, among other things:

- identifying and recommending to the Board nominees for election or
  re-election to the board, or for appointment to fill any vacancy;
- reviewing annually with the Board the current composition of the Board in
  light of the characteristics of independence, age, skills, experience and
  availability of service to us;
- identifying and recommending to the Board the directors to serve as
  members of the Board's committees; and
- monitoring compliance with our code of business conduct and ethics.

Family Relationships

Ms. Siu Ling Chan is the wife of Mr. Tung Lam. There are no
other family relationships among any of our officers and directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or
executive officers has been convicted in a criminal proceeding, excluding
traffic violations or similar misdemeanors, or has been a party to any judicial
or administrative proceeding during the past five years that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws, except for matters
that were dismissed without sanction or settlement. Except as set forth in our
discussion below in Transactions with Related Persons, Promoters and Certain
Control Persons; Corporate Governance, none of our directors, director nominees
or executive officers has been involved in any transactions with us or any of
our directors, executive officers, affiliates or associates which are required
to be disclosed pursuant to the rules and regulations of the SEC.

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Promoters and Certain Control Persons

We did not have any promoters at any time during the past five
fiscal years.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our executive officers, directors and beneficial owner of more
than 10% of a registered class of our equity securities to file with the
Securities and Exchange Commission statements of ownership and changes in
ownership. The same persons are required to furnish us with copies of all
Section 16(a) forms they file. We believe that, during fiscal 2009, all of our
executive officers, directors and beneficial owner of more than 10% of a
registered class of our equity securities complied with the applicable filing
requirements.

In making these statements, we have relied upon examination of
the copies of all Section 16(a) forms provided to us and the written
representations of our executive officers, directors and beneficial owner of
more than 10% of a registered class of our equity securities.

Code of Ethics

On March 25, 2008, our board of directors adopted a code of
ethics, which applies to all of our directors, officers and employees, including
our principal executive officer, principal financial officer, and principal
accounting officer. The code of ethics is designed to deter wrongdoing and to
promote: honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the SEC, and in other public
communications that we made; compliance with applicable government laws, rules
and regulations; the prompt internal reporting of violations of the code to the
appropriate person or persons; and accountability for adherence to the code.

The code requires the highest standard of ethical conduct and
fair dealing of its senior financial officers, or SFO, defined as the Chief
Executive Officer and Chief Financial Officer. While this policy is intended to
only cover the actions of the SFO, we expect our other officers, directors and
employees will also review our code and abide by its provisions. We believe that
our reputation is a valuable asset and must continually be guarded by all
associated with us so as to cam the trust, confidence and respect of our
suppliers, customers and stockholders.

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures by which
stockholders may recommend nominees to our board of directors since such
procedures were last disclosed.

Audit Committee and Audit Committee Financial Expert

Our board of directors established an audit committee on July
24, 2008 and appointed Mr. Sean Shao, Dr. Xiangmin Cui, and Dr. Tong Jun Lin to
serve as members of the committee, each of whom our board determined to be
independent as that term is defined by Rule 4200(a)(15) of the Marketplace
Rules of The Nasdaq Stock Market, Inc. Mr. Shao was appointed as the Chair of
the audit committee.

Our audit committee oversees our accounting and financial
reporting processes and the audits of our financial statements. Our audit
committee is responsible for, among other things:

- selecting our independent auditors and pre-approving all auditing and
  non-auditing services permitted to be performed by our independent auditors;
- reviewing with our independent auditors any audit problems or difficulties
  and managements response;
- reviewing and approving all proposed related-party transactions;
- discussing the annual audited financial statements with management and our
  independent auditors;
- reviewing major issues as to the adequacy of our internal controls and any
  special audit steps adopted in light of significant internal control
  deficiencies;
- annually reviewing and reassessing the adequacy of our audit committee
  charter;

54

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- such other matters that are specifically delegated to our audit committee
  by our board of directors from time to time;
- meeting separately and periodically with management and our internal and
  independent auditors; and
- reporting regularly to the full board of directors.

Our board of directors has determined that Mr. Shao possesses
the accounting or related financial management experience that qualifies him as
financially sophisticated within the meaning of Rule 4350(d)(2)(A) of the Nasdaq
Marketplace Rules and that he is an audit committee financial expert as
defined by the rules and regulations of the SEC.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table  2009 and 2008

The following table sets forth information concerning all cash
and non-cash compensation awarded to, earned by or paid to the named persons for
services rendered in all capacities during the noted periods. No other executive
officers received total annual salary and bonus compensation in excess of
$100,000.

Name and Principal
      Position
    Year
    Salary ($)
    Bonus ($)
    Stock Awards
      ($)
    Option Awards
      ($)
    Non-Equity Incentive Plan
      Compensation Earnings ($)
    Non-qualified Deferred
      **Compensation**Earnings ($)
    All Other
      Compensation ($)
    Total ($)Chao Ming Zhao, CEO and former CFO
      (1)
    2009
    $184,046
    $43,803
    -
    -
    -
    -
    -
    $227,8492008
    $148,208
    $34,377
    -
    $154,954
    -
    -
    -
    $337,539Yu-Yun Tristan Kuo, CFO(2)
    2009
    $227,095
    $37,996
    -
    -
    -
    -
    $9,229
    $274,3202008
    $179,805
    $20,582
    -
    $101,055
    -
    -
    -
    $301,442


|(1) | Chao Ming Zhao has served as our CEO since June 1, 2008
      and has also served as the Chief Financial Officer of our subsidiary
      Shandong Taibang since September 2003. He served as our CFO from November
      2006 until June 1, 2008. The option awards in 2008 represents options
      granted to Mr. Zhao, in accordance with his employment agreement with the
      Company, to purchase 115,000 shares in May, 2008 as described in the
      section Option of footnote 15 in the accompanying financial
      statements.                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | Yu-Yun Tristan Kuo has served as our Chief Financial
      Officer since June 1, 2008 and has served as the Vice President- Finance
      of Shandong Taibang since September 2007. The option awards in 2008
      represents options granted to Mr. Kuo, in accordance with his employment
      agreement with the Company, to purchase 75,000 shares in May, 2008 as
      described in the section Option of footnote 15 in the accompanying
      financial statements. On January 7, 2010, our board of directors granted
      Mr. Kuo options to purchase 50,000 shares of our common stock under the
      2008 Plan, in accordance with his employment agreement with the
      Company.

Summary of Employment Agreements and Material Terms

Pursuant to an employment agreement, as consideration for his
services as our Chief Financial Officer and as a director, Chao Ming Zhao
received a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400), payable on December 31 of each year.
On May 9, 2008, we entered into a new employment agreement with Mr. Zhao,
pursuant to which we agreed to pay him an annual salary of RMB1,060,000
(approximately $151,368) per annum, as consideration for performance of his
duties as Chief Executive Officer. We also agreed to pay Mr. Zhao an annual
bonus equal to one months salary and Mr. Zhao may be eligible to receive
additional bonus compensation as may be awarded by our board of directors at
their sole discretion. We also agreed to grant to Mr. Zhao a ten-year
nonstatutory stock option under the 2008 Plan, for the purchase of 115,000
shares of our common stock, at an exercise price of $4.00 per share. The stock
option immediately vested.

Pursuant to the terms of Mr. Yu-Yun Tristan Kuos employment
agreement, dated May 9, 2008, we agreed to pay Mr. Kuo an annual salary of
RMB1,320,000 (approximately $188,900), as consideration for performance of his
duties as Chief Financial Officer. We also agreed to pay Mr. Kuo an annual bonus
equal to one months salary and Mr. Kuo may be eligible to receive additional
bonus compensation as may be awarded by our board of directors at their sole discretion. We also agreed to grant to Mr. Kuo a
ten-year nonstatutory stock option under the 2008 Plan, for the purchase of
75,000 shares of our common stock, at an exercise price of $4.00 per share. The
stock option immediately vested. In addition, we agreed to pay Mr. Kuo, within a
month of the completion of a private placement financing by the Company, a cash
bonus equal to one percent of the gross proceeds raised via such financing, or
at the sole discretion of Mr. Kuo, the number of shares of our common stock
equivalent to such cash amount; provided however, that if the Company does not
complete the first PIPE financing before December 31, 2008, Mr. Kuo will not be
entitled to any Cash bonus upon the Companys completion of its first PIPE
financing following December 31, 2008 (but will be eligible to receive the cash
bonus upon completion by the Company of subsequent PIPE financing as long as he
remains employed by the Company on the date of closing of such subsequent PIPE
financing). In June 2009, the Company completed a private placement financing of
$9,554,140 but there is no cash bonus paid out to Mr. Kuo since this first PIPE
financing was completed after December 31, 2008. Furthermore, we were obligated
to grant Mr. Kuo, within a month of our listing on NASDAQ, NYSE or AMEX, an
option to purchase 50,000 shares of our common stock pursuant to the 2008 Plan
immediately vested and exercisable at the fair market value of the shares on the
grant date. On January 7, 2010, our board of directors granted Mr. Kuo options
to purchase 50,000 shares of our common stock under the 2008 Plan. The options
have a ten-year term and are exercisable at an exercise price of $12.60, which
was the fair market value of our common stock on the date of the grant.

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Outstanding Equity Awards at Fiscal Year End

Other than as set forth below, none of our executive officers
received unexercised options, stock that has not vested or equity incentive plan
awards that remained outstanding as of the end of the fiscal year ended December
31, 2009.

Name
    Number of
      securities underlying unexercisedoptions exercisable
    Number of
      securities underlying
      **unexercised** options
      **unexercisable**
    Equity incentive plan
      awards: Number of securities
      underlying unexercised unearned
      options
    Option
      exercise price ($)
    Option
      expiration date
    Number of shares
      or units of stock that have not
      vested
    Market value of
      shares of units of stock thathave
      not vested ($)
    Equity incentive plan
      awards: Number of unearned shares,
      units**or other rights**that have notvested
    Equity incentive plan
      awards: Market or payout value of
      **unearned shares,** **units or other**
      **rights that have** not vested ($)Chao Ming Zhao
    115,000
    -
    -
    4.00
    6/1/2018
    -
    -
    -
    -Yu-Yun Tristan Kuo
    75,000
    -
    -
    4.00
    6/1/2018
    -
    -
    -
    -


We use the Black-Scholes option pricing model to measure the
fair value of stock options, granted in 2009. The determination of the fair
value of stock-based compensation awards on the date of grant using an
option-pricing model is affected by our stock price as well as assumptions
regarding a number of complex and subjective variables, including the expected
volatility of our stock price over the term of the awards, actual and projected
employee stock option exercise behaviors, risk-free interest rate and expected
dividends.

Compensation of Directors

The following table sets forth certain information concerning
the compensation paid to our directors for services rendered to us during the
fiscal year ending December 31, 2009:

|              |  | Fees    |  |  |        |  |  |        |  |  |                |  |  | Nonqualified |  |  |              |  |  |         | 
|------------- |  | ------- |  |  | ------ |  |  | ------ |  |  | -------------- |  |  | ------------ |  |  | ------------ |  |  | ------- | 
|              |  | earned  |  |  |        |  |  |        |  |  | Non-Equity     |  |  | Deferred     |  |  |              |  |  |         | 
|              |  | or paid |  |  | Stock  |  |  | Option |  |  | Incentive Plan |  |  | Compensation |  |  | All Other    |  |  |         | 
|              |  | In cash |  |  | Awards |  |  | Awards |  |  | Compensation   |  |  | Earnings     |  |  | Compensation |  |  | Total   | 
|Name          |  | ($)     |  |  | ($)    |  |  | ($)    |  |  | ($)            |  |  | ($)          |  |  | ($)          |  |  | ($)     | 
|Siu Ling Chan |  | 130,585 |  |  |        |  |  | -      |  |  | -              |  |  |              |  |  |              |  |  | 130,585 | 
|Lin Ling Li   |  | 130,585 |  |  |        |  |  |        |  |  |                |  |  |              |  |  |              |  |  | 130,585 | 
|Sean Shao     |  | 24,000  |  |  |        |  |  |        |  |  |                |  |  |              |  |  |              |  |  | 24,000  | 
|Jie Gan       |  | 18,000  |  |  |        |  |  |        |  |  |                |  |  |              |  |  |              |  |  | 18,000  | 
|Tong Jun Lin  |  | 18,000  |  |  |        |  |  |        |  |  |                |  |  |              |  |  |              |  |  | 18,000  | 

All directors receive reimbursements from us for expenses which
are necessarily and reasonably incurred by them for providing services to us or
in the performance of their duties. Our directors who are also our employees
receive compensation in the form of salaries, housing allowances, employee
insurance and benefits in kind. Our executive directors do not receive any
compensation in addition to their salaries in their capacity as directors or
other remunerations as members of our management team. However, we do
pay their expenses related to attending board meetings and participating in
board functions.

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On July 19, 2006, we entered into director employment
agreements with Ms. Siu Ling Chan and Ms. Lin Ling Li, pursuant to which they
receive a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400) payable on December 31 of each year,
as consideration for their services as directors.

On July 24, 2008, we entered into independent director
agreements with Mr. Sean Shao, Dr. Jie Gan, and Dr. Tong Jun Lin. Under the
terms of the independent director agreements, we agreed to pay each an annual
salary of $18,000 as compensation for the services to be provided by them as
independent directors, except that Mr. Shao will receive an additional $6,000 as
compensation for his role as head of our Audit Committee. In addition, we agreed
to grant to each independent director an option to purchase 20,000 shares of our
common stock, with an exercise price of $4.00 per share, of which 10,000 shares
vested on January 25, 2009 and the remaining 10,000 shares will be vested on
July 25, 2009.

On February 4, 2010, we entered into an independent director
agreement with Dr. Xiangmin Cui, who was appointed by our board of directors, to
fill the vacancy left by Dr. Gans departure. Under the terms of the independent
director agreement, we agreed to pay each an annual salary of $18,000 as
compensation for the services to be provided by him as independent director. In
addition, we granted to Dr. Cui an option to purchase 20,000 shares of our
common stock, with an exercise price of $10.66, the fair market value of the
Companys common stock as of the grant date. 10,000 shares will be vested on
August 4, 2010 and the remaining 10,000 shares will be vested on February 4,
2011.

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

Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth information regarding beneficial
ownership of our common stock as of March 19, 2010, (i) by each person who is
known by us to beneficially own more than 5% of our common stock; (ii) by each
of our officers and directors; and (iii) by all of our officers and directors as
a group.

Unless otherwise specified, the address of each of the persons
set forth below is in care of China Biologic Products, Inc., No. 14 East Hushan
Road, Tai'an City, Shandong, People's Republic of China 271000.

Name & Address of Beneficial
      Owner
    Office, If Any
    Title of Class
      Officers and Directors
    Amount and Nature of
      Beneficial Ownership (1)
    Percent of
      Class (2)Siu Ling Chan
    Chairwoman of the Board
    Common stock $.0001 par value
    6,912,624(3)
    29.4%Chao Ming Zhao
    Chief Executive Officer
    Common stock $.0001 par value
    1,136,787(4)
    4.8%Yu-Yun Tristan Kuo
    Chief Financial Officer
    Common stock $.0001 par value
    125,000(5)
    0.5%Lin Ling Li
    Director
    Common stock $.0001 par value
    6,912,624(3)
    29.4%Sean Shao
    Director
    Common stock $.0001 par value
    20,000(6)
    0.1%Xiangmin Cui
    Director
    Common stock $.0001 par value
    20,000(6)
    0.1%Tong Jun Lin
    Director
    Common stock $.0001 par value
    20,000(6)
    0.1%All officers and directors as a group (7
      persons named above)
    
    Common stock $.0001 par value
    15,147,035
    63.9%5% Securities HoldersSiu Ling Chan
    Chairwoman of the Board
    Common stock $.0001 par value
    6,912,624(3)
    29.4%Lin Ling Li
    Director
    Common stock $.0001 par value
    6,912,624(3)
    29.4%IDG-Accel China Growth Fund II LP.
      (7)
    -
    Common stock $.0001 par value
    1,797,367
    7.6%Patrick J. McGoven(8)
    -
    Common stock $.0001 par value
    1,944,360
    8.3%Quan Zhou(8)
    -
    Common stock $.0001 par value
    1,944,360
    8.3%Essence International Investment
      LTD(9)
    -
    Common stock $.0001 par value
    2,812,500
    12.0%Lixin Tian
      (9)
    -
    Common stock $.0001 par value
    2,812,500
    12.0%


________________ *Less than 1%

57

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|(1) | Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to the shares of our common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | As of November 25, 2009, a total of 22,707,942 shares of
      our common stock are considered to be outstanding pursuant to SEC Rule
      13d-3(d)(1). For each Beneficial Owner above, any securities that are
      exercisable or convertible within 60 days have been included in the
      denominator.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(3) | Includes 50,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Includes 115,000 shares underlying a ten-year
      nonstatutory stock option granted under the 2008 Plan, exercisable at
      $4.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | Includes 75,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(6) | Represents shares underlying an option to purchase 20,000
      shares of our common stock, with an exercise price of $4.00 per share, of
      which 10,000 shares vested on January 25, 2009 and the remaining 10,000
      shares vested on July 25, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(7) | Patrick J. McGoven and Quan Zhou are directors and
      executive officers of IDG-Accel China Growth Fund GP II Associates Ltd.,
      which is the ultimate general partner of IDG-Accel China Growth Fund II
      LP. By virtue of acting together to direct the management and operations
      of the general partner of IDG-Accel China Growth Fund II LP., Patrick J.
      McGoven and Quan Zhou may be deemed to have shared voting and dispositive
      power with respect to the securities of the Company held by IDG- Accel
      China Growth Fund II LP. Each of Patrick J. McGoven and Quan Zhou
      disclaims beneficial ownership of the securities of the Company held by
      IDG-Accel China Growth Fund II LP.                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(8) | Represents our securities held by IDG-Accel China Growth
      Fund II LP. disclosed in the preceding note, as well as, 146,993 shares of
      common stock, held by IDG-Accel China Investors II L. P. Patrick J.
      McGoven and Quan Zhou are directors and executive officers of IDG-Accel
      China Growth Fund GP II Associates Ltd., which is the general partner of
      IDG-Accel China Investors II L.P. By virtue of acting together to direct
      the management and operations of the general partner of IDG-Accel China
      Investors II L.P., Patrick J. McGoven and Quan Zhou may be deemed to have
      shared voting and dispositive power with respect to the securities of the
      Company held by IDG -Accel China Investors II L.P. Each of Patrick J.
      McGoven and Quan Zhou disclaims beneficial ownership of the securities of
      the Company held by IDG-Accel China Investors II L. P.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(9) | Consists of (i) 1,875,000 shares of our common stock
      issuable upon conversion of our 3.8% convertible notes issued in the 2009
      financing; and (ii) 937,500 shares of common stock issuable upon the
      exercise of three-year warrants to purchase common stock at an exercise
      price of $4.80 per share. The General Partner of Essence International
      Investment LTD is DT Capital Management Limited which is controlled by
      Lixin Tian.                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Changes in Control

There are currently no arrangements which may result in a
change in control of the Company.

Securities Authorized for Issuances under Equity
Compensation Plans

The following table includes the information as of the end of
2009 for each category of our equity compensation plan:

58

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Plan category
    Number of securities to
      be issued upon exercise of outstanding options,
      warrants and rights (a)
    Weighted-average
      exercise price of outstanding options,
      warrants and rights (b)
    Number of securities remaining
      available for future issuance under equity
      compensation plans (excluding securities
      reflected in column (a)) (c)Equity compensation plans approved by security holders
    -
    -
    -Equity compensation plans not approved by security holders
      (1)
    910,000
    $4.00
    4,002,500Total
    910,000
    
    4,002,500


|(1) | Effective May 9, 2008, our board of directors adopted the
      2008 Plan. The 2008 Plan provides for grants of stock options, stock
      appreciation rights, performance units, restricted stock, restricted stock
      units and performance shares. A total of five million (5,000,000) shares
      of our common stock may be issued pursuant to the 2008 Plan. The exercise
      price per share for the shares to be issued pursuant to an exercise of a
      stock option will be no less than the fair market value per share on the
      grant date, except that, in the case of an incentive stock option granted
      to a person who holds more than 10% of the total combined voting power of
      all classes of our stock or any of our subsidiaries, the exercise price
      will be no less than 110% of the fair market value per share on the grant
      date. No more than an aggregate of 500,000 shares (or for awards
      denominated in cash, the fair market value of 5,000,000 shares on the
      grant date) may be subject to awards under the 2008 Plan to any individual
      participant in any one fiscal year. No awards may be granted under the
      2008 Plan after May 9, 2018, except that any award granted before then may
      extend beyond that date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Related Party Transactions

The following includes a summary of transactions since the
beginning of the 2009 fiscal year, or any currently proposed transaction, in
which we were or are to be a participant and the amount involved that exceeded
or exceeds the lesser of $120,000 or one percent of the average of our total
assets at year-end for the last two completed fiscal years, and in which any
related person had or will have a direct or indirect material interest (other
than compensation described under Item 11. Executive Compensation). We believe
the terms obtained or consideration that we paid or received, as applicable, in
connection with the transactions described below were comparable to terms
available or the amounts that would be paid or received, as applicable, in
arms-length transactions.

- In 2007, the Company also prepaid $516,456 to the same minority
  shareholder of one of the plasma companies. The prepayment is for the purpose
  of acquiring certain assets. Assets are expected to be received by January
  2009. However, as of December 31, 2008, the Company determined that the
  likelihood of recovering these advances and prepayment is minimal, due to the
  minority shareholders ability to secure the title of the assets and the
  personal financial difficulty as a result of the economic downturn, and made a
  provision for both amounts as bad debt expense as of December 31, 2008. The
  Company is currently negotiating with the shareholder in attempt to recover
  the funds.
- On January 13, 2010, the 17.26% minority shareholder of Shandong Taibang,
  Shandong Institute,  forty two (42) employees of the Company
  seconded from Shandong Institute purchased 52.3% and 27.7%, respectively, of
  the equity interest in one of
  the Companys existing suppliers and agents, Shandong Jinxiang Medical Device
  Company, or Jinxiang, from its owners. Since November 2003, Jinxiang has been one of the Companys suppliers for chemicals and diagnostic
  reagents that are used in the fractionation process. Purchases from Jinxiang
  accounted for 1.0%, or RMB 679,127 (approximately $99,567), of the Companys
  total purchases from suppliers in 2009. Jinxiang also acts as a commissioned
  agent for the Companys products. During 2009, Shandong Taibang sold to or
  through Jinxiang RMB 1,292,800 (approximately $189,537) in products,
  representing less than 0.2% of the Companys net sales, and Jinxiang was
  entitled to commission totaling RMB 117,312 (approximately $17,199).

59

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- Qianfeng provides processing services for Guizhou Eakan, one of the
  Qianfengs non-controlling shareholders. The total processing services income
  amounted to $705,018 for the year period ended December 31, 2009. As of
  December 31, 2009, Guizhou Eakan owes Qianfeng processing fees in an amount of
  $222,617. This balance has been paid in cash at the end of February 2010.
- On April 6, 2009, Logic Express entered into an equity transfer and
  entrustment agreement, or Entrustment Agreement, among Logic Express, Shandong
  Taibang, and the Shandong Institute of Biological Products, or the Shandong
  Institute, the holder of the noncontrolling interests in Shandong Taibang,
  pursuant to which, Logic Express agreed to permit Shandong Taibang and the
  Shandong Institute to participate in the indirect purchase of Qianfeng's
  equity interests. Under the terms of the Entrustment Agreement, Shandong
  Institute agreed to contribute 12.86% or $3,652,500 (RMB 25,000,000) of the
  Dalin purchase price. Logic express is obligated to repay to the Shandong
  Institute their investment amount on or before April 6th, 2010, along with
  their pro rata share, based on their percentage of the Dalin purchase price
  contributed, of any distribution on the indirect equity investment in Qianfeng
  payable to Logic Express during 2009. The accrued interest  holder of
  noncontrolling interest amounted to $2,068,526 represents the pro rata share
  of equity investment income pursuant of Entrustment Agreement for the year
  ended December 31, 2009.
- Qianfeng has payables to Guizhou Eakan Investing Corp. in the amount of
  approximately $2,122,772 (RMB14, 470,160). Guizhou Eakan Investing Corp. is
  one of the shareholders of Guizhou Eakan, one of the Qianfengs minority
  shareholders. The Company borrowed the amount for working capital purposes.
  The balance is due on demand in the form of cash.
- In 2007, Qianfeng received additional contributions from Guizhou Jiean, a
  holder of non-controlling interest in Qianfeng, in the amount of approximately
  $963,796 (RMB 6,569,840) to maintain Jiean ownership interest in the Company
  at 9%. However, due to legal dispute among Shareholders over Raising
  Additional Capital as stated in legal proceeding section, commitment and
  contingent liabilities, the money may be returned to Jiean.

Except as set forth in our discussion above, none of our
directors, director nominees or executive officers has been involved in any
transactions with us or any of our directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the SEC.

Director Independence

Each of Mr. Sean Shao, Dr. Xiangmin Cui, and Dr. Tong Jun Lin
serves on our board as independent directors, as that term is defined by Rule
4200(a)(15) of the Marketplace Rules of The NASDAQ Stock Market, Inc.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors Fees

The following is a summary of the fees billed to the Company by
Frazer Frost, LLP (Successor Entity of Moore Stephens Wurth Frazer and Torbet,
LLP) for professional services rendered for the fiscal years ended December 31,
2009 and 2008:

|                   |   | Year Ended December 31, | 
|------------------ | - | ----------------------- | 
|                   |   | 2009                    | 
|Audit Fees         | $ | 420,000                 | 
|Audit-Related Fees | $ | -                       | 
|Tax Fees           | $ | 17,000                  | 
|All Other Fees     | $ | 48,000                  | 
|TOTAL              | $ | 485,000                 | 

Audit Fees consisted of fees billed for professional services
rendered by the principal accountant for the audit of our annual financial
statements and review of the financial statements included in our Form 10-K and
10-Q or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements.

Audit-Related Fees consisted of fees billed for assurance and
related services by the principal accountant that were reasonably related to the
performance of the audit or review of our financial statements and are not
reported under the paragraph captioned Audit Fees above.

60

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Tax Fees consisted of fees billed for professional services
rendered by the principal accountant for tax returns preparation.

All Other Fees consisted of fees billed for products and
services provided by the principal accountant, other than the services reported
above under other captions of this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit
services performed by our auditors must be approved in advance by our Board of
Directors to assure that such services do not impair the auditors independence
from us. In accordance with its policies and procedures, our Board of Directors
pre-approved the audit service performed by Frazer Frost, LLP (Successor Entity
of Moore Stephens Wurth Frazer and Torbet, LLP) for our financial statements as
of and for the year ended December 31, 2009.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Financial Statements and Schedules

The financial statements are set forth under Item 8 of this
Annual Report on Form 10-K. Financial statement schedules have been omitted
since they are either not required, not applicable, or the information is
otherwise included.

Exhibit List

The following exhibits are filed as part of this report or
incorporated by reference:

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |  |                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                 
|2.1     |  | Share Exchange Agreement
      between the Company, Logic Express Limited and the selling stockholders
      signatory thereto, dated as of July 18, 2006 (incorporated by reference to
      Exhibit 2 of the registration statement on Form SB-2, filed by the Company
      on September 5, 2007)                                                                            
|3.1     |  | Certificate of Incorporation of the Company
      (incorporated by reference to Exhibit 3.1 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                                                                        
|3.2     |  | Amended and Restated By-Laws,
      adopted on March 31, 2009                                                                                                                                                                                                                                                                                                                   
|4.1     |  | Securities Purchase Agreement between the
      Company, Logic Express Limited, Shandong Taibang Biological Products Co.,
      Ltd., and the selling stockholders and investors signatory thereto, dated
      as of July 18, 2006 (incorporated by reference to Exhibit 4.1 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
|4.2     |  | Registration Rights Agreement,
      between the Company and certain investors signatory thereto, dated as of
      July 18, 2006 (incorporated by reference to Exhibit 4.2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)                                                                                                  
|4.3     |  | Form of Stockholder Warrant to purchase Common
      Stock, dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                                                                                                              
|4.4     |  | Lane Warrant, dated as of July
      19, 2006 (incorporated by reference to Exhibit 4.4 of the registration
      statement on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                                                                            
|4.5     |  | Share Escrow Agreement, between the Company,
      Lane, as investor representative, the Escrow Agent, and the selling
      stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.5 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)                                             

61

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|4.6   |  | Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006
      (incorporated by reference to Exhibit 4.6 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                                                                                   
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.7   |  | Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                          
|4.8   |  | Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                 
|4.9   |  | Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                  
|4.10  |  | Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                   
|4.11  |  | Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)
|4.12  |  | Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)   
|4.13  |  | Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)    
|4.14  |  | Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)      
|4.15  |  | Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                  
|4.16  |  | Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).                                                                                                                                                                                                                
|4.17  |  | Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).                                                                                                                                                                                                                     
|4.18  |  | Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5, 2009)                                                                                                                                                                                                                                                                 
|10.1. |  | China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)                                                                                                                                                                                                                
|10.2. |  | Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current
      report on Form 8-K, filed by the Company on May 13, 2008)                                                                                                                                                                                                   

62

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|10.3.  |  | Group Secondment Agreement,
      dated October 28, 2002, between Shandong Taibang Biological Products Co.,
      Ltd. and the Shandong Institute (English Translation) (incorporated by
      reference to Exhibit 10.1 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                                         
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4.  |  | Amended and Restated Joint Venture Agreement,
      between Logic Express Limited and the Shandong Institute, dated as of
      March 12, 2006 (English Translation) (incorporated by reference to Exhibit
      10.2 of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                             
|10.5.  |  | Letter of Intent for Equity
      Transfer, between Logic Express Limited and the Shandong Institute, dated
      as of June 10, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.3 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)                                                                      
|10.6.  |  | Raw Plasma Supply Agreement, between Shandong
      Taibang Biological Products Co., Ltd. and Qihe Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.4 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)                                          
|10.7.  |  | Raw Plasma Supply Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and the Xiajin
      Plasma Collection Station, dated as of December 30, 2005 (English
      Translation) (incorporated by reference to Exhibit 10.5 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)                              
|10.8.  |  | Raw Plasma Supply Agreement, between Shandong
      Taibang and the Zhangqiu Plasma Collection Station, dated as of December
      30, 2005 (English Translation) (incorporated by reference to Exhibit 10.6
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                                
|10.9.  |  | Plasma Processing Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and Qi He An Tai
      Plasma Collection Co., Ltd., dated as of January 2, 1007 (English
      Translation) (incorporated by reference to Exhibit 10.9 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                           
|10.10. |  | Plasma Processing Agreement, between Shandong
      Taibang Biological Products Co., Ltd. and the Xia Jin An Tai Plasma
      Collection Co., Ltd., dated as of January 2, 2007 (English Translation)
      (incorporated by reference to Exhibit 10.10 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)                          
|10.11. |  | Plasma Processing Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and the Zhang Qiu
      An Tai Plasma Collection Co., Ltd., dated as of January 2, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.11 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                  
|10.12. |  | Asset Purchase Agreement, between Zhang Qiu An
      Tai Plasma Collection Co., Ltd. and Zhang Qiu Plasma Collection Station,
      dated as of December 31, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.12 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                        
|10.13. |  | Asset Purchase Agreement,
      between Guang Xi Huan Jiang Missile Plasma Collection Co., Ltd. and Huan
      Jiang Maonan Autonomous County Plasma Collection Station, dated as of
      April 24, 2007 (English Translation) (incorporated by reference to Exhibit
      10.13 of the registration statement on Form SB-2/A, filed by the Company
      on December 3, 2007)
|10.14. |  | Asset Purchase Agreement, between Qi He An Tai
      Plasma Collection Co., Ltd. and Qi He County Plasma Collection Station,
      dated as of November 9, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.14 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                          
|10.15. |  | Asset Purchase Agreement,
      between Xia Jin An Tai Plasma Collection Co., Ltd. and Xia Jin County
      Plasma Collection Station, dated as of October 20, 2006 (English
      Translation) (incorporated by reference to Exhibit 10.15 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                
|10.16. |  | Asset Purchase Agreement, between Liao Cheng An
      Tai Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station, dated as of November 3,
      2006 (English Translation) (incorporated by reference to Exhibit 10.16 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)                                   

63

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|10.17. |  | Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)                                                                                                      
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18. |  | Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)                                                                                 
|10.19. |  | Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)                                                                    
|10.20. |  | Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                           
|10.21. |  | Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)                                                              
|10.22. |  | Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)        
|10.23. |  | Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)
|10.24. |  | Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)                        
|10.25. |  | Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)                                                                                                                                                  
|10.26. |  | Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)                                                                                     
|10.27. |  | Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16, 2008)                                                     
|10.28. |  | (Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16, 2008)                                                                                                                          
|10.29. |  | Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)                                                                                                                                                                                        

64

---

|10.30. |  | Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                            
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.31. |  | Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
|10.32. |  | Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Taian Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                       
|10.33. |  | China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Taian Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)        
|10.34. |  | Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)                                                                  
|10.35. |  | Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                           
|10.36. |  | Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                         
|10.37. |  | Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                         
|10.38. |  | Form of Directors Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                         
|10.39. |  | Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)                                                                                                                                        
|10.40. |  | Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2 of the current report on
      Form 8-K, filed by the Company on July 30, 2008)                                                                                                                                                   
|10.41  |  | Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).                                                                                                                                                     
|10.42  |  | Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).                                                                                                                                                          
|14     |  | Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)                                                                                                                                                                                                
|21*    |  | Subsidiaries of China Biologic Products, Inc.                                                                                                                                                                                                                                                                                                   
|31.1*  |  | Certifications of Chief Executive Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                       
|31.2*  |  | Certifications of Chief Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                       
|32.1*  |  | Certification of Chief Executive Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|32.2*  |  | Certification of Chief Financial Officer
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        

* Filed herewith

65

---

CHINA BIOLOGIC PRODUCTS, INC. CONSOLIDATED FINANCIAL
STATEMENTS

YEARS ENDED DECEMBER 31, 2009 AND 2008

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

Index to Financial Statements

|                                                                                                                      | Page
|--------------------------------------------------------------------------------------------------------------------- | ----
|CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
      DECEMBER 31, 2009 AND 2008                                |     
|Report of Independent Registered Public
      Accounting Firm                                                         | F-1 
|Consolidated Balance Sheets as of December 31, 2009 and
      2008                                                    | F-2 
|Consolidated Statements of Income and Other
      Comprehensive Income for the Years Ended December 31, 2009 and 2008 | F-3 
|Consolidated Statements of Changes in Equity                                                                          | F-4 
|Consolidated Statements of Cash Flows for
      the Years Ended December 31, 2009 and 2008                            | F-5 
|Notes to Consolidated Financial Statements                                                                            | F-7 



66



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Stockholders of 
China Biologic Products, Inc.

We have audited the accompanying consolidated balance sheets
of China Biologic Products, Inc. and subsidiaries as of December 31, 2009 and
2008, and the related consolidated statements of income and other comprehensive
income, changes in equity, and cash flows for each of the years in the two-year
period ended December 31, 2009. China Biologic Products, Inc.s management is
responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of China Biologic Products, Inc. and subsidiaries as of December 31,
2009 and 2008, and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2009 in conformity with
accounting principles generally accepted in the United States of America.

/s/ Frazer Frost, LLP (Successor Entity of Moore Stephens
Wurth Frazer and Torbet, LLP, see Form 8-K filed on January 7, 2010)

Brea, California 
March 23, 2010

F-1

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 
AS OF DECEMBER 31, 2009 AND
2008

|ASSETS                                                                                                                                                                          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                                                                                                |  
|                                                                                                                                                                                |  
|                                                                                                                                                                                |  
|CURRENT ASSETS:                                                                                                                                                                 |  
|Cash and cash
      equivalents                                                                                                                                                 | $
|Accounts receivable, net of allowance for
      doubtful accounts of $1,254,955 and $1,268,052 as of December 31, 2009 and
      2008, respectively                             |  
|Accounts receivable -
      related party                                                                                                                                       |  
|Dividend receivable                                                                                                                                                             |  
|Other receivables                                                                                                                                                               |  
|Inventories, net of allowance for obsolete of $519,333 and
      $0 as of December 31, 2009 and 2008, respectively                                                              |  
|Prepayments and
      deferred expense                                                                                                                                          |  
|Deferred tax assets                                                                                                                                                             |  
|Total
      current assets                                                                                                                                                      |  
|                                                                                                                                                                                |  
|PLANT AND EQUIPMENT, net                                                                                                                                                        |  
|                                                                                                                                                                                |  
|OTHER ASSETS:                                                                                                                                                                   |  
|Investment in unconsolidated affiliate                                                                                                                                          |  
|Refundable deposit for
      potential acquisition                                                                                                                              |  
|Prepayments - non-current                                                                                                                                                       |  
|Intangible assets, net                                                                                                                                                          |  
|Goodwill                                                                                                                                                                        |  
|Total
      other assets                                                                                                                                                        |  
|                                                                                                                                                                                |  
|Total assets                                                                                                                                                                    | $
|                                                                                                                                                                                |  
|LIABILITIES AND
      EQUITY                                                                                                                                                    |  
|                                                                                                                                                                                |  
|CURRENT LIABILITIES:                                                                                                                                                            |  
|Accounts payable                                                                                                                                                                | $
|Notes payable                                                                                                                                                                   |  
|Short term loans - bank                                                                                                                                                         |  
|Short term loans -
      holder of noncontrolling interest                                                                                                                      |  
|Other payables and accrued liabilities                                                                                                                                          |  
|Other payable - related
      parties                                                                                                                                           |  
|Accrued interest - holder of
      noncontrolling interest                                                                                                                      |  
|Distribution payable to
      holder of noncontrolling interest                                                                                                                 |  
|Customer deposits                                                                                                                                                               |  
|Taxes payable                                                                                                                                                                   |  
|Investment payable                                                                                                                                                              |  
|Total
      current liabilities                                                                                                                                                 |  
|                                                                                                                                                                                |  
|OTHER LIABILITIES:                                                                                                                                                              |  
|Other payable - land use right                                                                                                                                                  |  
|Notes payable, net of
      discount of $8,464,380 as of December 31, 2009                                                                                                      |  
|Long term loan - bank, net of current
      maturities                                                                                                                          |  
|Derivative liability -
      conversion option                                                                                                                                  |  
|Fair value of derivative instruments                                                                                                                                            |  
|Total
      other liabilities                                                                                                                                                   |  
|                                                                                                                                                                                |  
|Total liabilities                                                                                                                                                               |  
|                                                                                                                                                                                |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                   |  
|                                                                                                                                                                                |  
|EQUITY:                                                                                                                                                                         |  
|Common stock, $0.0001 par value, 100,000,000 shares
      authorized, 23,056,442 and 21,434,942 shares issued and outstanding at
      December 31, 2009 and 2008, respectively |  
|Additional
      paid-in-capital                                                                                                                                                |  
|Statutory reserves                                                                                                                                                              |  
|Retained earnings                                                                                                                                                               |  
|Accumulated other comprehensive income                                                                                                                                          |  
|Total
      shareholders' equity                                                                                                                                                |  
|                                                                                                                                                                                |  
|NONCONTROLLING INTEREST                                                                                                                                                         |  
|                                                                                                                                                                                |  
|Total
      equity                                                                                                                                                              |  
|                                                                                                                                                                                |  
|Total liabilities and equity                                                                                                                                                    | $

See report of independent registered public accounting
firm.
The accompanying notes are an integral part of these consolidated statements.

F-2

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME 
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

|                                                                           |   | 2009        |   |   | 2008       |  
|-------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|REVENUES:                                                                  |   |             |   |   |            |  
|Revenues                                                                   | $ | 118,293,137 |   | $ | 46,751,160 |  
|Revenues -
      related party                                             |   | 705,018     |   |   | -          |  
|Total revenues                                                             |   | 118,998,155 |   |   | 46,751,160 |  
|                                                                           |   |             |   |   |            |  
|COST OF REVENUES:                                                          |   |             |   |   |            |  
|Cost of
      revenues                                                     |   | 32,544,743  |   |   | 14,040,602 |  
|Cost of revenues - related party                                           |   | 77,165      |   |   | -          |  
|Total cost of revenues                                                     |   | 32,621,908  |   |   | 14,040,602 |  
|                                                                           |   |             |   |   |            |  
|GROSS PROFIT                                                               |   | 86,376,247  |   |   | 32,710,558 |  
|                                                                           |   |             |   |   |            |  
|OPERATING EXPENSES:                                                        |   |             |   |   |            |  
|Selling expenses                                                           |   | 3,529,242   |   |   | 2,212,073  |  
|General and
      administrative expenses                                  |   | 19,807,123  |   |   | 8,996,220  |  
|Research and development expenses                                          |   | 1,662,690   |   |   | 1,166,494  |  
|Total operating expenses                                                   |   | 24,999,055  |   |   | 12,374,787 |  
|                                                                           |   |             |   |   |            |  
|INCOME FROM OPERATIONS                                                     |   | 61,377,192  |   |   | 20,335,771 |  
|                                                                           |   |             |   |   |            |  
|OTHER EXPENSES (INCOME):                                                   |   |             |   |   |            |  
|Equity in income of unconsolidated affiliate                               |   | (566,984    | ) |   | (175,231   | )
|Change in
      fair value of derivative liabilities                       |   | 29,626,189  |   |   | -          |  
|Other income - related party                                               |   | (97,447     | ) |   | -          |  
|Interest
      expense, net                                                |   | 3,930,249   |   |   | 373,497    |  
|Other expense, net                                                         |   | 358,699     |   |   | 251,390    |  
|Total other expenses, net                                                  |   | 33,250,706  |   |   | 449,656    |  
|                                                                           |   |             |   |   |            |  
|INCOME BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING
      INTEREST |   | 28,126,486  |   |   | 19,886,115 |  
|                                                                           |   |             |   |   |            |  
|PROVISION FOR INCOME TAXES                                                 |   | 10,513,100  |   |   | 4,596,603  |  
|                                                                           |   |             |   |   |            |  
|NET INCOME BEFORE NONCONTROLLING INTEREST                                  |   | 17,613,386  |   |   | 15,289,512 |  
|                                                                           |   |             |   |   |            |  
|Less: Net income attributable to noncontrolling
      interest             |   | 16,348,489  |   |   | 3,303,841  |  
|                                                                           |   |             |   |   |            |  
|NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST                            |   | 1,264,897   |   |   | 11,985,671 |  
|                                                                           |   |             |   |   |            |  
|OTHER COMPREHENSIVE INCOME:                                                |   |             |   |   |            |  
|Foreign currency translation adjustments                                   |   | 523,906     |   |   | 2,144,091  |  
|                                                                           |   |             |   |   |            |  
|COMPREHENSIVE INCOME                                                       | $ | 1,788,803   |   | $ | 14,129,762 |  
|                                                                           |   |             |   |   |            |  
|BASIC EARNINGS PER SHARE:                                                  |   |             |   |   |            |  
|Weighted
      average number of shares                                    |   | 21,754,911  |   |   | 21,434,942 |  
|Earnings per share                                                         | $ | 0.06        |   | $ | 0.56       |  
|                                                                           |   |             |   |   |            |  
|DILUTED EARNINGS PER SHARE:                                                |   |             |   |   |            |  
|Weighted
      average number of shares                                    |   | 22,644,342  |   |   | 21,556,342 |  
|Earnings per share                                                         | $ | 0.07        |   | $ | 0.56       |  

See report of independent registered public accounting
firm.
The accompanying notes are an integral part of these
consolidated statements.

F-3

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

|                                                              |  | China Biologic Products, Inc.
      shareholders' equity |  |   |            |  |   |                 |  
|------------------------------------------------------------- |  | -------------------------------------------------------- |  | - | ---------- |  | - | --------------- | -
|                                                              |  |                                                          |  |   |            |  |   |                 |  
|                                                              |  | Common stock                                             |  |   | Additional |  |   | Statutory       |  
|                                                              |  | Shares                                                   |  |   | Par value  |  |   | paid-in-capital |  
|BALANCE, December 31, 2007                                    |  | 21,434,942                                               |  | $ | 2,143      |  | $ | 9,388,305       |  
|                                                              |  |                                                          |  |   |            |  |   |                 |  
|Stock based
      compensation                                |  |                                                          |  |   |            |  |   | 1,311,727       |  
|Net income                                                    |  |                                                          |  |   |            |  |   |                 |  
|Distribution declared to noncontrolling interest shareholders |  |                                                          |  |   |            |  |   |                 |  
|Adjustment to statutory reserve                               |  |                                                          |  |   |            |  |   |                 |  
|Foreign currency
      translation adjustments                |  |                                                          |  |   |            |  |   |                 |  
|                                                              |  |                                                          |  |   |            |  |   |                 |  
|BALANCE, December 31, 2008                                    |  | 21,434,942                                               |  | $ | 2,143      |  | $ | 10,700,032      |  
|                                                              |  |                                                          |  |   |            |  |   |                 |  
|Cumulative effect of
      reclassification of warrants       |  |                                                          |  |   |            |  |   | (738,449        | )
|Stock based compensation                                      |  |                                                          |  |   |            |  |   | 62,281          |  
|Warrants exercised                                            |  | 1,284,000                                                |  |   | 128        |  |   | 9,955,917       |  
|Convertible notes exercised                                   |  | 250,000                                                  |  |   | 25         |  |   | 2,187,305       |  
|Stock option exercised                                        |  | 87,500                                                   |  |   | 9          |  |   | 349,991         |  
|Net income                                                    |  |                                                          |  |   |            |  |   |                 |  
|Distribution declared to noncontrolling interest shareholders |  |                                                          |  |   |            |  |   |                 |  
|Noncontrolling interest acquired from
      acquisition       |  |                                                          |  |   |            |  |   |                 |  
|Adjustment to statutory
      reserve                         |  |                                                          |  |   |            |  |   |                 |  
|Foreign currency translation
      adjustments                |  |                                                          |  |   |            |  |   |                 |  
|                                                              |  |                                                          |  |   |            |  |   |                 |  
|BALANCE, December 31, 2009                                    |  | 23,056,442                                               |  | $ | 2,305      |  | $ | 22,517,077      |  

See report of independent registered public accounting
firm.
The accompanying notes are an integral part of these consolidated statements.

F-4

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS 
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

|                                                                                    |   | 2009        |   |   | 2008        |  
|----------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |   |             |   |   |             |  
|Net income attributable
      to controlling interest                               | $ | 1,264,897   |   | $ | 11,985,671  |  
|Net income attributable to
      noncontrolling interest                            |   | 16,348,489  |   |   | 3,303,841   |  
|Consolidated net income                                                             |   | 17,613,386  |   |   | 15,289,512  |  
|Adjustments to reconcile net income to cash provided by
      operating activities: |   |             |   |   |             |  
|Depreciation                                                                        |   | 2,709,623   |   |   | 1,088,155   |  
|Amortization                                                                        |   | 3,358,532   |   |   | 61,095      |  
|Loss on disposal of equipment                                                       |   | 224,548     |   |   | 214,663     |  
|Recovery of
      bad debt previously reserved                                      |   | (31,826     | ) |   | (56,462     | )
|Allowance for bad debt - accounts receivable                                        |   | 18,737      |   |   | -           |  
|Allowance
      for bad debt - other receivables and prepayments                    |   | 280,796     |   |   | 560,668     |  
|Allowance for obsolete inventories                                                  |   | 519,333     |   |   | -           |  
|Deferred
      tax assets                                                           |   | (1,053,124  | ) |   | -           |  
|Impairment of assets                                                                |   | -           |   |   | 415,873     |  
|Stock based
      compensation                                                      |   | 62,281      |   |   | 1,311,727   |  
|Change in fair value of warrant liabilities                                         |   | 29,626,189  |   |   | -           |  
|Amortization of deferred note issuance cost                                         |   | 247,199     |   |   | -           |  
|Amortization of discount on convertible notes                                       |   | 100,253     |   |   | -           |  
|Equity in
      income of unconsolidated affiliate                                  |   | (566,984    | ) |   | (175,231    | )
|Change in operating assets and
      liabilities:                                   |   |             |   |   |             |  
|Notes
      receivable                                                              |   | -           |   |   | 43,245      |  
|Accounts receivable                                                                 |   | (1,707,714  | ) |   | 81,980      |  
|Accounts
      receivable - related party                                           |   | 197,284     |   |   | -           |  
|Other receivables                                                                   |   | (1,744,794  | ) |   | (33,462     | )
|Other
      receivables -related party                                              |   | -           |   |   | 1,442       |  
|Inventories                                                                         |   | (12,456,975 | ) |   | (4,695,495  | )
|Prepayments
      and deferred expenses                                             |   | (248,794    | ) |   | (459,019    | )
|Accounts payable                                                                    |   | (58,467     | ) |   | (376,527    | )
|Other
      payables and accrued liabilities                                        |   | 7,058,773   |   |   | 2,658,552   |  
|Accrued interest - holder of noncontrolling interest                                |   | 2,068,526   |   |   | -           |  
|Customer
      deposits                                                             |   | 274,768     |   |   | 653,514     |  
|Taxes payable                                                                       |   | 3,809,437   |   |   | 3,585,237   |  
|Contingent
      liability                                                          |   | -           |   |   | (149,428    | )
|Net cash provided by operating
      activities                                     |   | 50,300,987  |   |   | 20,020,039  |  
|                                                                                    |   |             |   |   |             |  
|CASH FLOWS FROM INVESTING
      ACTIVITIES:                                         |   |             |   |   |             |  
|Cash acquired through acquisition                                                   |   | 11,946,933  |   |   | -           |  
|Proceeds from dividend
      receivable                                             |   | 384,087     |   |   | -           |  
|Payments made for acquisition                                                       |   | (10,373,854 | ) |   | -           |  
|Payments made for
      unconsolidated affiliate                                    |   | (3,225,420  | ) |   | (3,171,300  | )
|Purchase of plant and equipment                                                     |   | (1,873,371  | ) |   | (4,033,667  | )
|Additions to intangible
      assets                                                |   | (2,106,203  | ) |   | (83,259     | )
|Proceeds from sale of equipment                                                     |   | 36,771      |   |   | 73,641      |  
|Prepayments for
      potential acquisition                                         |   | -           |   |   | (14,181,800 | )
|Refunds of advances on non-current
      assets                                     |   | 1,174,346   |   |   | -           |  
|Advances on non-current
      assets                                                |   | (2,823,743  | ) |   | (270,119    | )
|Net cash used in investing activities                                               |   | (6,860,454  | ) |   | (21,666,504 | )
|                                                                                    |   |             |   |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |   |             |   |   |             |  
|Proceeds from notes
      payable                                                   |   | 19,246      |   |   | 28,830      |  
|Proceeds from warrants conversion                                                   |   | 3,649,770   |   |   | -           |  
|Proceeds from stock
      option exercised                                          |   | 350,000     |   |   | -           |  
|Proceeds from issuance of convertible
      notes                                   |   | 8,967,516   |   |   | -           |  
|Repayments of former
      shareholders loan in acquiring company                   |   | (2,841,302  | ) |   | -           |  
|Proceeds from short term loans - bank                                               |   | 13,517,442  |   |   | -           |  
|Payments on short term
      loans - bank                                           |   | (18,355,572 | ) |   | (720,750    | )
|Repayment of non-controlling
      shareholder loan                                 |   | (772,803    | ) |   | -           |  
|Proceeds from long term
      loan-bank                                             |   | -           |   |   | 5,766,000   |  
|Distribution paid to noncontrolling
      interest shareholders                     |   | (2,969,372  | ) |   | (288,300    | )
|Net cash provided by financing
      activities                                     |   | 1,564,925   |   |   | 4,785,780   |  

See report of independent registered public accounting
firm.
The accompanying notes are an integral part of these consolidated statements.

F-5

---



|EFFECTS OF EXCHANGE RATE CHANGE IN
      CASH                                                      |   | 23,877     |  |   | 665,268   | 
|-------------------------------------------------------------------------------------------------- | - | ---------- |  | - | --------- | 
|                                                                                                   |   |            |  |   |           | 
|INCREASE IN CASH                                                                                   |   | 45,029,335 |  |   | 3,804,583 | 
|                                                                                                   |   |            |  |   |           | 
|CASH and CASH EQUIVALENTS, beginning
      of year                                                 |   | 8,814,616  |  |   | 5,010,033 | 
|                                                                                                   |   |            |  |   |           | 
|CASH and CASH EQUIVALENTS, end of
      year                                                       | $ | 53,843,951 |  | $ | 8,814,616 | 
|                                                                                                   |   |            |  |   |           | 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATION                                             |   |            |  |   |           | 
|Income taxes paid                                                                                  | $ | 8,021,981  |  | $ | 1,523,867 | 
|Interest paid (net of
      capitalized interest)                                                  | $ | 1,131,271  |  | $ | 108,170   | 
|Non-cash investing and financing
      activities:                                                 |   |            |  |   |           | 
|Unpaid
      investment in unconsolidated affiliate                                                | $ | -          |  | $ | 3,218,565 | 
|Reclassification of
      warrant liability to paid-in capital upon warrants conversion            | $ | 6,306,275  |  | $ | -         | 
|Convertible notes exercised                                                                        | $ | 2,187,330  |  | $ | -         | 
|Distribution paid by
      offsetting accounts receivable - related party                          | $ | 944,036    |  | $ | -         | 
|Distribution paid in exchange of holder of noncontrolling interest loan                            | $ | 3,665,250  |  | $ | -         | 
|Distribution paid by
      offsetting loan and interest due from holder of noncontrolling interest | $ | 4,647,924  |  | $ | -         | 
|Net
      assets acquired with prepayments made in prior periods                                   | $ | 14,250,492 |  | $ | 78,905    | 
|Net assets acquired with
      unpaid investment                                                   | $ | 2,850,098  |  | $ | -         | 
|Plant and equipment
      acquired with prepayments made in prior periods                          | $ | 2,296,113  |  | $ | -         | 
|Land use
      right acquired with prepayments made in prior periods                               | $ | 146,610    |  | $ | -         | 

See report of independent registered public accounting
firm.
The accompanying notes are an integral part of these consolidated statements.

F-6

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 1  Organization background and principal activities

Principal Activities and Reorganization

China Biologic Products, Inc. (the Company or CBP) was originally incorporated in 1992 under the laws of the state of Texas. After it completed the acquisition with Logic Express Limited, it converted to a Delaware
corporation. The Company through its direct and indirect subsidiaries is principally engaged in the research, development, commercialization, manufacture and sale of human blood products to customers in the Peoples Republic of China (the
PRC) and to some extent in India.

Current Development

Dalin Acquisition and Entrustment Agreement

Logic Express Ltd. (Logic Express), CBPs wholly owned subsidiary, through Logic Holdings (Hong Kong)	 Ltd. (Logic Holdings) completed the acquisition of 90% interest in Guiyang Dalin Biologic Technologies Co. Ltd.
(Dalin), previously known as Chongqing Dalin Biologic Technologies Co. Ltd., in April 2009 upon payment of 90% of the total purchase price of approximately RMB 194,400,000 ($28,479,600). The Company is obligated to pay the remaining
10% of the purchase price, RMB 19,440,000 (approximately $2,847,960), on or before April 9, 2010, the one-year anniversary of the local Administration for Industry and Commerces approval of the equity transfer. Guiyang Qianfeng Biological
Products Co., Ltd. (Qianfeng), Dalins 54% owned subsidiary, is one of the largest plasma-based biopharmaceutical companies in China and is the only manufacturer currently operating in Guizhou Province. Qianfeng is in compliance
with Good Manufacturing Practices, or GMP standards, and has been approved by the PRCs State Food and Drug Administration or the SFDA to produce six types of plasma-based products including Human Albumin, Human Immunoglobulin, Human
Intravenous Immunoglobulin, Human Hepatitis B Immunoglobulin, Human Tetanus Immunoglobulin and Human Rabies Immune Globulin.

In accordance with the terms of the equity transfer agreement, Logic Holdings effectively became a 90% shareholder in Dalin, including the right to receive its pro rata share of the profits on January 1, 2009.

On April 6, 2009, Logic Express entered into an equity transfer and entrustment agreement, or Entrustment Agreement, among Logic Express, the Logic Express subsidiary Shandong Taibang Biological Products Co. Ltd (Shandong Taibang),
and the Shandong Institute of Biological Products (the Shandong Institute), the holder of the minority interests in Shandong Taibang, pursuant to which, Logic Express agreed to permit Shandong Taibang and the Shandong Institute to
participate in the indirect purchase of Qianfengs equity interests. Under the terms of the Entrustment Agreement, Shandong Taibang agreed to contribute 18% or RMB 35,000,000 (approximately $5,116,184) of the Dalin purchase price and the
Shandong Institute agreed to contribute 12.86% or RMB 25,000,000
(approximately $3,654,917) of the Dalin purchase price. Logic Express is obligated to repay to Shandong Taibang and the Shandong Institute their respective investment amounts on or before April 6th, 2010, along with their pro rata share, based
on their percentage of the Dalin purchase price contributed, of any distribution on the indirect equity investment in Qianfeng payable to Logic Express during 2009. Logic Express has agreed that if these investment amounts are not repaid within five
days of the payment due date, then Logic Express is obligated to pay Shandong Taibang and the Shandong Institute liquidated damages equal to 0.03% of the overdue portion of the amount due until such time as it is paid. Logic Express has also agreed
to pledge 30% of its ownership in Shandong Taibang to the Shandong Institute as security for nonpayment. If failure to repay continues for longer than three months after the payment due date, then the Shandong Institute will be entitled to any
rights associated with the pledged interests, including but not limited to rights of disposition and profit distribution, until such time as the investment amount has been repaid. Logic Express also provided a guarantee that Shandong Taibang and the
Shandong Institute will receive no less than a 6% return based on their original investment amount.

See report of independent registered public accounting firm.

F-7

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 1  Organization background and principal activities (continued)

Shandong Taibang Medical Company

On August 14, 2009, the Company changed a subsidiary, Shandong Missile Medical Co., Ltd.s name to Shandong Taibang Medical Company, or Taibang Medical.  In addition, the registered capital of Taibang Medical was increased by RMB 2,000,000
(approximately $293,400) to $733,500.

Huitian Acquisition

Shandong Taibang purchased a 35% interest in Xian Huitian Blood Products Co. Ltd (Huitian) at a purchase price of RMB 44,000,000 (approximately $6,446,000) on October 10, 2008 and paid the final installment on July 16, 2009.
Huitian is a manufacturer of plasma-based biopharmaceutical products in Shaanxi Province and is one of only 32 such manufacturers in China who are government approved. Huitian is in compliance with GMP standards and it is also approved by the SFDA
for the production of Human Albumin, Human Immunoglobulin, Human Immunoglobulin for Intravenous Injection, and Human Hepatitis B Immunoglobulin products.

Formation of Logic Holding

On December 12, 2008, the Company established Logic Holding, the Companys wholly-owned Hong Kong subsidiary of Logic Express, for the purpose of being a holding company for the majority interest in Dalin.

Formation of PRC Subsidiary

On December 21, 2009, we established Logic Management and Consulting (China) Co., Ltd. (Logic China), wholly-owned by our Hong Kong subsidiary, for the purpose of being a holding company for our majority interest in Dalin and to
facilitate our Chinese operation at the holding company level. On December 28, 2009, the Company
transferred the 90% equity interest in Guiyang Dalin from Logic Holding to Logic China to better situate the Company in PRC operations.

See report of independent registered public accounting firm.

F-8

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. All material inter-company transactions and balances have been eliminated in the
consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. For example, management estimates the fair value of stock based compensation as well as potential losses on outstanding receivables. Management believes that the estimates utilized in preparing its financial statements are reasonable and
prudent. Actual results could differ from these estimates.

Foreign Currency Translation

The reporting currency of the Company is the US dollar. The Companys functional currency is the Chinese Renminbi (RMB), also the local currency of the Companys principal operating subsidiaries.  Results of operations and cash
flows are translated at average exchange rates during the period. Assets and liabilities are translated at the unified exchange rate as quoted by the Peoples Bank of China at the end of the period. Translation adjustments resulting from this
process are included in accumulated other comprehensive income in the statements of changes in 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.

In accordance with Financial Accounting Standards Boards (FASB) accounting standard, cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

The consolidated balance sheet amounts, with the exception of equity at December 31, 2009 and 2008 were translated at RMB 6.82 to $1.00 and RMB 6.82 to $1.00, respectively. The equity accounts were stated at their
historical rate. The average translation rates applied to consolidated statements of income and cash flow for the years ended December 31, 2009 and 2008 were RMB 6.82 and RMB 6.94 to $1.00, respectively.

See report of independent registered public accounting firm.

F-9

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Revenue Recognition

The Company recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or
determinable, which are generally considered to be met upon delivery and acceptance of products at the customer site. Sales are presented net of any discounts given to customers. As a policy, the Company does not accept any product returns and based
on the Companys records, product returns, if any, are immaterial.

Sales revenue represents the invoiced value of goods, net of a value-added tax (VAT). All products produced by the Company and sold in the PRC are subject to a Chinese VAT at a rate of 6% of the gross sales price or at a rate approved by
the Chinese local government. No credit is available for VAT paid on purchases.

Products distributed by Taibang Medical are subjected to a 17% VAT. Credit is available for VAT paid on purchases.

Shipping and Handling

Shipping and handling costs related to costs of goods sold are included in selling expenses and totaled $304,726 and $60,164 for the years ended December 31, 2009 and 2008, respectively.

Financial Instruments

On January 1, 2008, the Company adopted FASBs accounting standard related to fair value measurements and began recording financial assets and liabilities subject to recurring fair value measurement at the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across three broad levels. Receivables, payables, short and long term loans, and derivative
liabilities qualify as financial instruments. Management concluded the carrying values of the receivables, payables and short term loans approximate their fair values because of the short period of time between the origination of such instruments
and their expected realization, and if applicable, their stated rates of interest are equivalent to interest rates currently available. The fair values of the long term debt and derivative liabilities are measured pursuant to the three levels
defined by the FASBs accounting standard as follow:

- Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

See report of independent registered public accounting firm.

F-10

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

- Level 2: inputs to the valuation methodology include quoted prices for
  similar assets and liabilities in active markets, and inputs that are
  observable for the assets or liability, either directly or indirectly, for
  substantially the full term of the financial instruments.
- Level 3: inputs to the valuation methodology are unobservable and
  significant to the fair value.

As required by FASBs accounting standard, financial assets and
liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. Depending on the product and
the terms of the transaction, the fair value of the derivative liabilities were
modeled using a series of techniques, including closed-form analytic formula,
such as the Black-Scholes Option Pricing Model, which does not entail material
subjectivity because the methodology employed does not necessitate significant
judgment, and the pricing inputs are observed from actively quoted markets.
Derivative liabilities related to warrants issued by the Company and the
liability related to derivative instruments (including the conversion option)
embedded in the Companys Senior Secured Convertible Notes are carried at fair
value, with changes in the fair value charged or credited to income. The fair
values are determined using the Black-Scholes Model or a binomial model, defined
in FASBs accounting standard related to fair value measurements as level 2
inputs.

|                                               |   | Carrying Value as of |  |   | Fair Value
      Measurements at December 31, 2009 | 
|---------------------------------------------- | - | -------------------- |  | - | -------------------------------------------------- | 
|                                               |   | December 31, 2009    |  |   | using Fair Value Hierarchy                         | 
|                                               |   |                      |  |   | Level 1                                            | 
|Derivative
      liabilities-Conversion option | $ | 19,960,145           |  | $ | -                                                  | 
|Warrants liabilities                           | $ | 12,701,262           |  | $ | -                                                  | 

The Company did not identify any other assets or liabilities
that are required to be presented on the balance sheet at fair value in
accordance with FASBs accounting standard.

Concentration Risks

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

The Company maintains balances at financial institutions which,
from time to time, may exceed Federal Deposit Insurance Corporation insured
limits for the banks located in the United States or may exceed Hong Kong
Deposit Protection Board insured limits for the banks located in Hong Kong.
Balances at financial institutions or state-owned banks within the PRC are not
covered by insurance. Total cash in banks as of December 31, 2009 and 2008
amounted to $53,576,495 and $8,689,414, respectively, $1,009,053 and $47,865 of which are covered by insurance, respectively. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on
its cash in bank accounts.

See report of independent registered public accounting firm.

F-11

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

The Companys major product, human albumin: - 20%/10ml, 20%/25ml, 20%/50ml, 10%/10ml, 10%/25ml and 10%/50ml, accounted for 49.7% and 57.8% of total revenues, for the years ended December 31, 2009 and 2008, respectively. If the market demands
for human albumin cannot be sustained in the future or if the price of human albumin decreases, it would adversely affect the Companys operating results.

All of the Companys customers are located in the PRC and India.  As of December 31, 2009 and 2008, the Company had no significant concentration of credit risk, except for the amounts due from related parties. There were no customers that
individually comprised 10% or more of the revenue during the year ended December 31, 2009 and 2008. No individual customer represented more than 10% of trade receivables at December 31, 2009 and 2008. The Company performs ongoing credit evaluations
of its customers financial condition and, generally, requires no collateral from its customers.

There were two vendors that individually comprised 10% or more of the purchase during the year ended December 31, 2009. One vendor represented more than 10% of accounts payables at December 31, 2009. The Companys top three vendors comprised
48.3% and 36.3% of the Companys purchases for the year ended December 31, 2009 and 2008, respectively. Accounts payable to these vendors amounted $702,163 and $448,016 as of December 31, 2009 and 2008, respectively.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC, Hong Kong and the United States. The Company considers all highly liquid investments with original maturities of three
months or less at the time of purchase to be cash equivalents.

Accounts Receivable

During the normal course of business, the Company extends unsecured credit to its customers. Management reviews its accounts receivable on a regular basis to determine if the allowance for doubtful accounts is adequate.  An estimate for doubtful
accounts is made when collection of the full amount is no longer probable. Account balances are written-off after management has exhausted all efforts of collection.

See report of independent registered public accounting firm.

F-12

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Inventories

Inventories are stated at the lower of cost or market using the
weighted average method. The cost of finished goods included direct costs of raw
materials as well as direct labor used in production. Indirect production costs
such as utilities and indirect labor related to production such as assembling,
shipping and handling for raw material costs are also included in the cost of
inventories.

The Company reviews its inventory periodically for possible
obsolete goods and cost in excess of net realizable value to determine if any
reserves are necessary. As of December 31, 2009, the Company reserved $519,333
as allowance for obsolete inventory for raw material plasma that may not qualify
for production due to the 90-day quarantine period rules implemented by SFDA on
July 1, 2008.

Plant and Equipment

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 with 5% residual value.

Estimated useful lives of the assets are as follows:

|                                               | Estimated Useful Life
|---------------------------------------------- | ---------------------
|Buildings and improvement                      | 30 years             
|Machinery and equipment                        | 10 years             
|Furniture, fixtures and office
      equipment | 5-10 years           

Construction in progress represents the costs incurred in
connection with the construction of buildings, new additions, and capitalized
interest incurred in connection with the Companys plant facilities. In
accordance with the provisions of FASBs accounting standard related to
capitalization of interest, interest incurred on borrowings is capitalized to
the extent that borrowings do not exceed construction in progress. The credit is
a reduction of interest expense. No depreciation is provided for construction in
progress until such time as the assets are completed and placed into service.
Maintenance, repairs and minor renewals are charged directly to expenses as
incurred. Major additions and betterment to property and equipment are
capitalized.

The Company periodically evaluates the carrying value of
long-lived assets in accordance with FASBs accounting standard related to
accounting for impairment and disposal of long-lived assets. When estimated cash
flows generated by those assets are less than the carrying amounts of the asset,
the Company recognizes an impairment loss. Based on its review, the Company
believes that, as of December 31, 2009 and 2008, there were no impairments of
its long-lived assets.

See report of independent registered public accounting firm.

F-13

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Investment in Unconsolidated Affiliate

Equity method investments are recorded at original cost and
adjusted to recognize the Companys proportionate share of the investees net
income or losses and additional contributions made and distributions received.
The Company recognizes a loss if it is determined that other than temporary
decline in the value of the investment exists. Subsidiaries in which the Company
has the ability to exercise significant influence, but does not have a
controlling interest is accounted for using the equity method. Significant
influence is generally considered to exist when the Company has an ownership
interest in the voting stock between 20% and 50%, and other factors, such as
representation on the Board of Directors, voting rights and the impact of
commercial arrangements, are considered in determining whether the equity method
of accounting is appropriate. The Company accounts for investments with
ownership less than 20% using cost method.

Intangible Assets

Intangible assets are stated at cost (estimated fair value upon
contribution or acquisition), less accumulated amortization. Amortization
expense is recognized on the straight-line basis over the estimated useful lives
of the assets as follows:

|Intangible assets                                 | Estimated useful lives
|------------------------------------------------- | ----------------------
|Land use rights                                   | 50 years              
|Permits and licenses                              | 5-10 years            
|Blood donor network                               | 10 years              
|Software                                          | 3.8 years             
|Good Manufacturing Practice
      certificate     | 5-10 years            
|Long-term customer-relationship intangible assets | 4 years               

All land in the PRC is owned by the government; however, the
government grants land use rights. The Company has obtained rights to use
various parcels of land for 50 years. The Company amortizes the cost of the land
use rights over their useful life using the straight-line method.

Other intangible assets represent permits, licenses, blood
donor network, software, Good Manufacturing Practice (GMP) certificate and
long-term customer-relationship intangible assets. The Company amortized the
cost of these intangible assets over their useful life using the straight-line
method.

Intangible assets of the Company are reviewed at least annually
or more often if circumstances dictate, to determine 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 years of amortization to determine whether
subsequent events and circumstances warrant revised estimates of useful lives.
As of December 31, 2009, the Company expects these assets to be fully
recoverable.

See report of independent registered public accounting firm.

F-14

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Goodwill

Goodwill represents the excess of the cost of an acquisition
over the fair value of the Companys share of the net identifiable assets of the
acquired subsidiary at the date of acquisition. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment losses. Impairment
losses on goodwill are not reversed. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.

Revenues

The Companys revenues are primarily derived from the
manufacture and sale of human blood products. The Companys revenues by
significant types of product for the years ended December 31, 2009 and 2008 are
as follows:

|                                                         |   | 2009        |  |   | 2008       | 
|-------------------------------------------------------- | - | ----------- |  | - | ---------- | 
|Human Albumin  10% and 20% in 10ml,
      25ml and 50ml | $ | 59,160,664  |  | $ | 27,021,733 | 
|Human Hepatitis B Immunoglobulin                         |   | 3,462,979   |  |   | 3,203,901  | 
|Human Immunoglobulin for Intravenous
      Injection     |   | 43,748,854  |  |   | 10,307,294 | 
|Human Rabies Immunoglobulin                              |   | 4,745,205   |  |   | 3,619,622  | 
|Human Tetanus Immunoglobulin                             |   | 2,600,071   |  |   | 1,492,421  | 
|Human Immunoglobulin                                     |   | 2,159,246   |  |   | -          | 
|Others                                                   |   | 3,121,136   |  |   | 1,106,189  | 
|Totals                                                   | $ | 118,998,155 |  | $ | 46,751,160 | 

The Company is engaged in sale of human blood products to
customers in China and India. The amount sold in India was approximately 1% of
total sales for the year ended December 31, 2009.

Research and Development Costs

Research and development costs are expensed as incurred.

Retirement and Other Post Retirement Benefits

Contributions to retirement schemes (which are defined
contribution plans) are charged to the statement of operations as and when the
related employee service is provided.

Product Liability

The Companys products are covered by two product liability
insurances of approximately $2,934,000 (RMB 20,000,000) each for Shandong
Taibang and Guiyang Qianfeng. As of December 31, 2009 and 2008, no claim on
the insurance policy was filed. However, there are two pre-existing potential claim against Qianfengs products, which are still pending which we believe to be immaterial to the Companys financial statements for the year ended December
31, 2009.

See report of independent registered public accounting firm.

F-15

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Government Grants

The Companys subsidiary, Shandong Taibang, is entitled to receive grants from the Taian municipal government due to its operation in the high and new technology business sector. For the years ended December 31, 2009 and 2008, no
non-refundable grants were received from the Taian municipal government. Grants received from the Taian municipal government can be used for enterprise development and technology innovation purposes.

Income Taxes

The Company reports income taxes pursuant to FASBs accounting standard for income taxes. Under the asset and liability method of accounting for income taxes as required by this accounting standard, deferred income tax liabilities and assets
are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is
recorded when it is more likely than not that some of the deferred tax assets will not be realized. FASBs accounting standard for accounting for uncertainty in income taxes requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the financial statements or tax returns. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. A tax position is recognized as a
benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50%
likely of being realized on examination. For tax positions not meeting the more likely than not test, no tax benefit is recorded. Provision for income taxes consist of taxes currently due plus deferred taxes.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis
used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probably that taxable profit will be
available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or
charged directly to equity, in which case the deferred tax is also dealt with in equity.

See report of independent registered public accounting firm.

F-16

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Value Added Tax

Enterprises or individuals, who sell products, engage in repair and maintenance or import and export goods in the PRC are subject to a VAT in accordance with Chinese laws. The VAT rate applicable to the Company is 6% of the gross sales price. No
credit is available for VAT paid on purchases.

Products sold by Taibang Medical subjected to a 17% VAT of the gross sales prices. Credit is available for 17% VAT paid on purchases.

Stock-based Compensation

The Company accounts and reports stock-based compensation pursuant to FASBs accounting standard related to accounting for stock-based compensation which defines a fair-value-based method of accounting for stock based employee compensation and
transactions in which an entity issues its equity instruments to acquire goods and services from non-employees. Stock compensation for stock granted to non-employees has been determined in accordance with this standard as the fair value of the
consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Noncontrolling Interest

Effective January 1, 2009, the Company adopted FASBs accounting standard regarding non-controlling interest in consolidated financial statements. Certain provisions of this statement are required to be adopted retrospectively for all periods
presented. Such provisions include a requirement that the carrying value of noncontrolling interests (previously referred to as minority interests) be removed from the mezzanine section of the balance sheet and reclassified as equity.

Further, as a result of adoption this accounting standard, net income attributable to noncontrolling interests is now excluded from the determination of consolidated net income.

Recently Issued Accounting Pronouncements

In January 2009, the Financial Accounting Standards Board issued an accounting
standard which amended the impairment model by removing its exclusive reliance
on market participant estimates of future cash flows used in
determining fair value. Changing the cash flows used to analyze other-than-temporary impairment from the market participant view to a holders estimate of whether there has been a probable adverse change in estimated
cash flows allows companies to apply reasonable judgment in assessing whether an other-than-temporary impairment has occurred. The adoption of this accounting standard did not have a material impact on the Companys consolidated financial
statements because all of the investments in debt securities are classified as trading securities.

See report of independent registered public accounting firm.

F-17

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

In April 2009, the FASBs accounting standard regarding fair value measurements and disclosures providing additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly
decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly for fair value measurements. This guidance shall be applied prospectively with retrospective application not permitted. The adoption of this
guidance did not have a material impact on the Companys consolidated financial statements.

In April 2009, the Financial Accounting Standards Board issued an accounting standard that makes the other-than-temporary impairments guidance more operational and improves the presentation of other-than-temporary impairments in the financial
statements. This standard replaced the existing requirement that the entitys management assert it has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the
intent to sell the security, and it is more likely than not it will not have to sell the security before recovery of its cost basis. This standard provides increased disclosure about the credit and noncredit components of impaired debt securities
that are not expected to be sold and also requires increased and more frequent disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. Although this standard does not result in a change in the
carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related to a credit loss for a held-to-maturity security be recognized in a new category of other comprehensive income and be amortized
over the remaining life of the debt security as an increase in the carrying value of the security. The Company adopted this accounting standard, but it did not have a material impact on its consolidated financial statements.

In April 2009, the Financial Accounting Standards Board issued an accounting standard that requires disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this accounting standard, fair values for these assets and liabilities were only disclosed annually. This standard applies to all financial instruments within its scope and requires all entities to disclose the
method(s) and significant assumptions used to estimate the fair value of financial instruments. This standard does not require disclosures for earlier periods presented for comparative purposes at initial adoption, but in periods after the initial
adoption, this standard requires comparative disclosures only for periods ending after initial adoption. The Company adopted this accounting standard, but it did not have a material impact on the disclosures related to its consolidated financial
statements.

See report of independent registered public accounting firm.

F-18

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

In June 2009, the Financial Accounting Standards Board issued an accounting standard amending the accounting and disclosure requirements for transfers of financial assets. This accounting standard requires greater transparency and additional
disclosures for transfers of financial assets and the entitys continuing involvement with them and changes the requirements for derecognizing financial assets. In addition, it eliminates the concept of a qualifying special-purpose entity
(QSPE). This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2009, and the Company does not expect this standard to have a material effect on its consolidated financial
statements.

In June 2009, the Financial Accounting Standards Board also issued an accounting standard amending the accounting and disclosure requirements for the consolidation of variable interest entities (VIEs). The elimination of the concept of a
QSPE, as discussed above, removes the exception from applying the consolidation guidance within this accounting standard. Further, this accounting standard requires a company to perform a qualitative analysis when determining whether or not it must
consolidate a VIE. It also requires a company to continuously reassess whether it must consolidate a VIE. Additionally, it requires enhanced disclosures about a companys involvement with VIEs and any significant change in risk exposure due to
that involvement, as well as how its involvement with VIEs impacts the companys financial statements. Finally, a company will be required to disclose significant judgments and assumptions used to determine whether or not to consolidate a VIE.
This accounting standard is effective for financial statements issued for fiscal years beginning after November 15, 2009, and the Company does not expect this standard to have a material effect on its consolidated financial statements.

In August 2009, the Financial Accounting Standards Board issued an Accounting Standards Update (ASU) regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair
value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of valuation techniques, as defined.
This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this guidance did not have a material impact on the Companys consolidated financial statements.

In October 2009, the Financial Accounting Standards Board issued an ASU regarding accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing. This ASU requires that at the date of issuance of the
shares in a share-lending arrangement entered into in contemplation of a convertible debt offering or other financing, the shares issued shall be measured at fair value and be recognized as an issuance cost, with an offset to additional paid-in
capital. Further, loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs, at which time the loaned shares would be included in the basic and diluted earnings-per-share calculation.
This ASU is effective for fiscal years beginning on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the beginning
of those fiscal years. The adoption of this ASU did not have a material impact on its consolidated financial statements.

See report of independent registered public accounting firm.

F-19

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

In November 2009, the FASB issued an ASU regarding accounting for stock dividends, including distributions to shareholders with components of stock and cash. This ASU clarifies that the stock portion of a distribution to shareholders that contains
components of cash and stock and allows shareholders to select their preferred form of the distribution (with a limit on the amount of cash that will be distributed in total) should be considered a stock dividend and included in EPS calculations as
a share issuance. The adoption of this guidance did not have a material impact on the Companys consolidated financial statements

In December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of
Financial Assetsan amendment of FASB Statement No. 140. The amendments in this Accounting Standards Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and
the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a
transferor continues to be exposed to because of its continuing involvement in transferred financial assets. Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the
requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of
Financial Assetsan amendment of FASB Statement No. 140.The amendments in this Accounting Standards Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the
exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a
transferor continues to be exposed to because of its continuing involvement in transferred financial assets. Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the
requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-01- Accounting for Distributions to Shareholders with Components of Stock and Cash. The amendments in this Update clarify that the stock portion of a distribution to shareholders that allows them to elect to
receive cash or stock with a potential limitation on the total amount of cash that all
shareholders can elect to receive in the aggregate is considered a share
issuance that is reflected in EPS prospectively and is not a stock dividend for
purposes of applying Topics 505 and 260 (Equity and Earnings Per Share). The
amendments in this update are effective for interim and annual periods ending on
or after December 15, 2009, and should be applied on a retrospective basis. The
adoption of this ASU did have a material impact on the Companys consolidated
financial statements.

See report of independent registered public accounting firm.

F-20

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

In January 2010, FASB issued ASU No. 2010-02  Accounting and Reporting for Decreases in Ownership of a Subsidiary  a Scope Clarification. The amendments in this Update affect accounting and reporting by an entity that experiences a
decrease in ownership in a subsidiary that is a business or nonprofit activity. The amendments also affect accounting and reporting by an entity that exchanges a group of assets that constitutes a business or nonprofit activity for an equity
interest in another entity. The amendments in this update are effective beginning in the period that an entity adopts SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements  An Amendment of ARB No. 51. If an
entity has previously adopted SFAS No. 160 as of the date the amendments in this update are included in the Accounting Standards Codification, the amendments in this update are effective beginning in the first interim or annual reporting period
ending on or after December 15, 2009. The amendments in this update should be applied retrospectively to the first period that an entity adopted SFAS No. 160. The adoption of this ASU did not have a material impact on the Companys consolidated
financial statements.

In January 2010, FASB issued ASU No. 2010-06  Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A
reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. 2) Activity in Level 3 fair value measurements. In the
reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net
number). This update provides amendments to Subtopic 820-10 that clarify existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A
class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities. 2) Disclosures about inputs and
valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value
measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company
is currently evaluating the impact of this ASU, however, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

See report of independent registered public accounting firm.

F-21

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 2  Summary of significant accounting policies (continued)

Reclassifications

Certain prior period amounts have been reclassified to conform
to the current period presentation. These reclassifications have no effect on
net income or cash flows.

Note 3  Related party transactions

The material related party transactions undertaken by the
Company with related parties as of December 31, 2009 and 2008 are presented as
follows:

|Assets                                                        |  | Purpose          |  |   | December 31, 2009       |  |   | December 31, 2008 | 
|------------------------------------------------------------- |  | ---------------- |  | - | ----------------------- |  | - | ----------------- | 
|Accounts receivable  related
      party(1)                  |  | Processing fees  |  | $ | 222,617                 |  | $ | -                 | 
|                                                              |  |                  |  |   |                         |  |   |                   | 
|Liabilities                                                   |  | Purpose          |  |   | December 31,
      2009 |  |   | December 31, 2008 | 
|Short term loans  holder of noncontrolling
      interest(2) |  | Loan             |  | $ | -                       |  | $ | 773,277           | 
|Short term loans  holder of
      noncontrolling interest(3) |  | Loan             |  |   | 3,652,500               |  |   | -                 | 
|Total                                                         |  |                  |  | $ | 3,652,500               |  | $ | 773,277           | 
|                                                              |  |                  |  |   |                         |  |   |                   | 
|Accrued interest  holder of noncontrolling
      interest(3) |  | Interest payable |  | $ | 2,068,526               |  | $ | -                 | 
|                                                              |  |                  |  |   |                         |  |   |                   | 
|Other payable  related parties(4)                            |  | Loan             |  | $ | 2,122,772               |  | $ | -                 | 
|Other payable  related
      parties(5)                      |  | Contribution     |  |   | 964,168                 |  |   | -                 | 
|Total                                                         |  |                  |  | $ | 3,086,940               |  | $ | -                 | 

(1) Qianfeng provides processing services for
Guizhou Eakan, one of the Qianfengs non-controlling shareholders. The total
processing services income amounted to $705,018 for the year period ended
December 31, 2009. As of December 31, 2009, Guizhou Eakan owes Qianfeng
processing fees in an amount of $222,617. This balance has been paid in cash at
the end of February 2010.

(2) As of December 31, 2008, the loan in the amount
of $773,277 has been paid in advance to its noncontrolling interest shareholder,
Shandong Institute, which is due by December 2010 with an annual interest rate
of 6%.

(3) On April 6, 2009, Logic Express entered
into an equity transfer and entrustment agreement, or Entrustment Agreement,
among Logic Express, Shandong Taibang, and the Shandong Institute of Biological
Products, or the Shandong Institute, the holder of the noncontrolling interests
in Shandong Taibang, pursuant to which, Logic Express agreed to permit Shandong
Taibang and the Shandong Institute to participate in the indirect purchase of
Qianfeng's equity interests. Under the terms of the Entrustment Agreement,
Shandong Institute agreed to contribute 12.86% or $3,652,500 (RMB 25,000,000) of
the Dalin purchase price. Logic express is obligated to repay to the Shandong
Institute their investment amount on or before April 6th, 2010, along with their
pro rata share, based on their percentage of the Dalin purchase price
contributed, of any distribution on the indirect equity investment in Qianfeng payable to Logic Express during 2009. The accrued
interest  holder of noncontrolling interest amounted to $2,068,526 represents
the pro rata share of equity investment income pursuant of Entrustment Agreement
for the year ended December 31, 2009.

See report of independent registered public accounting firm.

F-22

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 3  Related party transactions (continued)

(4) Qianfeng has payables to Guizhou Eakan
Investing Corp. in the amount of approximately $2,122,772 (RMB14, 470,160).
Guizhou Eakan Investing Corp. is one of the shareholders of Guizhou Eakan, one
of the Qianfengs minority shareholders. The Company borrowed the amount for
working capital purposes. The balance is due on demand in the form of cash.

(5) In 2007, Qianfeng received additional
contributions from Guizhou Jiean, a holder of non-controlling interest in
Qianfeng, in the amount of approximately $964,168 (RMB 6,569,840) to maintain
Jiean ownership interest in the Company at 9%. However, due to legal dispute
among Shareholders over Raising Additional Capital as stated in legal proceeding
section, commitment and contingent liabilities, the money may be returned to
Jiean.

Note 4  Accounts receivable

Trade accounts receivable consist of the following:

|                                      |   | December 31, 2009 |   |   | December 31, 2008 |  
|------------------------------------- | - | ----------------- | - | - | ----------------- | -
|Trade accounts receivable             | $ | 3,022,031         |   | $ | 1,581,139         |  
|Less: Allowance for doubtful accounts |   | (1,254,955        | ) |   | (1,268,052        | )
|Total                                 | $ | 1,767,076         |   | $ | 313,087           |  

The activity in the allowance for doubtful accounts for trade
accounts receivable for the years ended December 31, 2009 and 2008 is as
follows:

|                                                |   | December 31, 2009 |   |   | December 31, 2008 |  
|----------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|Beginning allowance for doubtful
      accounts | $ | 1,268,052         |   | $ | 1,238,772         |  
|Additional charged to bad debt
      expense    |   | 18,737            |   |   | -                 |  
|Recovery of
      amount previously reserved    |   | (31,826           | ) |   | (56,462           | )
|Write-off charged against the
      allowance   |   | -                 |   |   | -                 |  
|Foreign currency
      translation adjustment   |   | (8                | ) |   | 85,742            |  
|Ending allowance for doubtful accounts          | $ | 1,254,955         |   | $ | 1,268,052         |  

Note 5  Inventories

Inventories consisted of the following:

|                                               |   | December 31, 2009 |   |   | December 31, 2008 | 
|---------------------------------------------- | - | ----------------- | - | - | ----------------- | 
|Raw materials                                  | $ | 19,720,420        |   | $ | 7,043,349         | 
|Work-in-process                                |   | 8,407,319         |   |   | 4,801,768         | 
|Finished goods                                 |   | 7,524,318         |   |   | 3,104,079         | 
|Total                                          |   | 35,652,057        |   |   | 14,949,196        | 
|Less: Allowance for obsolete
      inventories |   | (519,333          | ) |   | -                 | 
|Inventories, net                               | $ | 35,132,724        |   | $ | 14,949,196        | 

See report of independent registered public accounting firm.

F-23

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 6 Other receivables, prepayments and deferred expense

Other receivables represent deposits the Company paid to
suppliers or service providers, as well as receivables from employees, and
amounted to $2,186,441 and $356,957 as of December 31, 2009 and 2008,
respectively. In 2009, the Shandong Taibang sponsored two separate housing
projects with local developers to assist 107 of its employees to purchase houses
to be constructed. Developers required deposits of at least 80% of the total
purchase price before it starting on the project. Employees are required to
deposit at least 30% and up to 80% of the total purchase prices and Shandong
Taibang advanced $1,512,583 in total, which represents the difference between
the required deposits by the developer and the actual deposits made by the
employees, on behalf of the employees to the developer. The advances to the
employees are expected to be re-paid within one year.

Prepayments and deferred expense represent partial payments for
deposits on material purchases, prepaid leases and prepayment for insurance
expenses. Prepayments and deferred expenses are amounted to $1,299,125 and
$614,704 as of December 31, 2009 and 2008, respectively.

Prepayments  non-current represent partial payments or
deposits on plant and equipment and intangible assets purchases and amounted to
$3,223,960 and $955,874 as of December 31, 2009 and 2008, respectively.

Note 7  Plant and equipment, net

Plant and equipment consist of the following:

|                                                        |   | December 31, 2009 |   |   | December 31, 2008 |  
|------------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|Buildings and improvements                              | $ | 12,901,205        |   | $ | 5,809,724         |  
|Machinery and equipment                                 |   | 23,428,848        |   |   | 12,308,174        |  
|Furniture, fixtures, office
      equipment and vehicle |   | 3,862,385         |   |   | 1,501,946         |  
|Total depreciable assets                                |   | 40,192,438        |   |   | 19,619,844        |  
|Accumulated depreciation                                |   | (13,953,793       | ) |   | (3,099,259        | )
|Plant and equipment, net                                |   | 26,238,645        |   |   | 16,520,585        |  
|Construction in progress                                |   | 2,634,768         |   |   | 2,778,779         |  
|Total                                                   | $ | 28,873,413        |   | $ | 19,299,364        |  

Depreciation expense for the years ended December 31, 2009 and
2008 amounted to $2,709,623 and $1,088,155, respectively. No interest was
capitalized into construction in progress in either of the years ended December
31, 2009 and 2008.

See report of independent registered public accounting firm.

F-24

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 8  Investment in unconsolidated affiliate

On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement (the "Huitian Agreement") with Mr. Fan Qingchun (the
"Transferor"), a PRC citizen holding 35% of the equity interest in Huitian, a
PRC limited liability company. Pursuant to the Huitian Agreement, the Transferor
agrees to sell to Shandong Taibang, and Shandong Taibang agrees to purchase from
the Transferor, 35% equity interest in Huitian for an aggregate purchase price
of $6,502,901 (or RMB 44,327,890) including interest of $48,101 (RMB 327,890).
Huitian is one of the 32 government approved plasma-based product producers in
China, and it is in compliance with Good Manufacturing Practices (GMP)
standards. It is also approved by the PRCs State Food and Drug Administration
(SFDA) to produce four types of plasma-based products.

Logic Express also entered into an investment entrustment
agreement (the "Investment Agreement") with the minority shareholder in Shandong
Taibang, Shandong Institute, pursuant to which Logic Express agrees to provide
the investment amount for the acquisition and the Shandong Institute agree to
entrust Shandong Taibang to acquire the 35% equity interest of Huitian in its
name. In exchange Logic Express is also obligated to pay Shandong Taibang
approximately $17,604 (or RMB120,000) per year as consideration for Shandong
Taibang's performance under this agreement. Under the Investment Agreement,
after the acquisition, Logic Express will be in charge of Huitian's daily
operation and management, will bear the costs, expenses, liabilities and losses
incurred in its operation, and will enjoy its profits. Shandong Taibang will
perform relevant tasks according to Logic Express's instruction, and will not
exercise any management right over Huitian or derive any financial return from
Huitian. Logic Express agreed to indemnify Shandong Taibang for any loss in
connection with the investment and pledged its equity interest in Shandong
Taibang as collateral against such losses.

Summarized unaudited financial information of Huitian is as
follows:

|                                                 |   | December 31, 2009 |  |   | December 31, 2008 | 
|------------------------------------------------ | - | ----------------- |  | - | ----------------- | 
|Current assets                                   | $ | 9,912,775         |  | $ | 8,039,180         | 
|Non-current assets                               |   | 10,195,357        |  |   | 10,145,248        | 
|Total assets                                     |   | 20,108,132        |  |   | 18,184,428        | 
|Current liabilities                              |   | 4,031,033         |  |   | 2,747,573         | 
|Non-current liabilities                          |   | -                 |  |   | -                 | 
|Shareholders' equity                             |   | 16,077,099        |  |   | 15,436,855        | 
|Total liabilities and shareholders'
      equity | $ | 20,108,132        |  | $ | 18,184,428        | 

The portion of the difference between the cost of an investment
and the amount of underlying equity in net assets of Huitian that is recognized
as goodwill shall not be amortized, but instead should continue to be reviewed
for impairment in accordance with FASBs accounting standard.

See report of independent registered public accounting firm.

F-25

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 8  Investment in unconsolidated affiliate
(continued)

Summarized unaudited financial information of Huitian is as
follows:

|                              |   | December 31, 2009 | 
|----------------------------- | - | ----------------- | 
|Net sales                     | $ | 8,951,234         | 
|Gross profit                  |   | 4,840,412         | 
|Income before taxes           |   | 2,100,164         | 
|Net income                    |   | 1,619,951         | 
|Companys share of net income | $ | 566,984           | 

The rollforward of investment in Huitian in the balance sheet
is shown below:

|                                                       |   | Huitian - 35% |  
|------------------------------------------------------ | - | ------------- | -
|                                                       |   | Ownership     |  
|December 31, 2007                                      | $ | -             |  
|Investment made                                        |   | 6,502,902     |  
|Net income from 2008                                   |   | 175,231       |  
|Dividend declared                                      |   | (147,256      | )
|Foreign currency translation
      gain                |   | 3,100         |  
|December 31, 2008                                      |   | 6,533,977     |  
|Net income from the year ended
      December 31, 2009 |   | 566,984       |  
|Dividend declared                                      |   | (473,952      | )
|Foreign currency translation
      gain                |   | 346           |  
|December 31, 2009                                      | $ | 6,627,355     |  

Note 9  Intangible assets, net

Intangible assets consisted of the following:

|                                |   | December 31, 2009 |   |   | December 31, 2008 |  
|------------------------------- | - | ----------------- | - | - | ----------------- | -
|Land use rights                 | $ | 4,163,140         |   | $ | 848,982           |  
|Permits and licenses            |   | 11,261,611        |   |   | 389,709           |  
|Blood donor network             |   | 2,347             |   |   | 22,885            |  
|Software                        |   | 145,897           |   |   | 40,758            |  
|GMP certificate                 |   | 2,327,885         |   |   | -                 |  
|Long-term customer-relationship |   | 6,941,170         |   |   | -                 |  
|Total                           |   | 24,842,050        |   |   | 1,302,334         |  
|Accumulated amortization        |   | (3,661,728        | ) |   | (299,773          | )
|Intangible assets, net          | $ | 21,180,322        |   | $ | 1,002,561         |  

Total amortization expense for the years ended December 31,
2009 and 2008 amounted to $3,358,532 and $61,095 respectively. The amortization
expense related to the acquisition of Dalin is $3,172,680 for the year ended
December 31, 2009.

See report of independent registered public accounting firm.

F-26

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 9  Intangible assets, net (continued)

Amortization expense for intangible assets for the next five
fiscal years is as follows:

|                     |   | 2010      |  |   | 2011      |  |   | 2012      |  |   | 2013      |  |   | 2014      |  |   | Thereafter | 
|-------------------- | - | --------- |  | - | --------- |  | - | --------- |  | - | --------- |  | - | --------- |  | - | ---------- | 
|Amortization expense | $ | 3,352,780 |  | $ | 3,352,528 |  | $ | 3,345,980 |  | $ | 1,583,071 |  | $ | 1,485,393 |  | $ | 8,060,570  | 

Note 10  Debt

Short term loans and current maturities of long term
loan

Short term loans represent renewable loans due to various banks
which are normally due within one year.

The Companys bank loans consisted of the following:

|                                                                    |  |                    |  |  | Annual         |  |   | December 31, |  |   | December 31, | 
|------------------------------------------------------------------- |  | ------------------ |  |  | -------------- |  | - | ------------ |  | - | ------------ | 
|Loans                                                               |  | Due by             |  |  | interest rates |  |   | 2009         |  |   | 2008         | 
|Short term loans:                                                   |  |                    |  |  |                |  |   |              |  |   |              | 
|Short term
      bank loan, secured(1)                              |  | June 1,
      2010 |  |  | 5.40%          |  | $ | 1,467,000    |  | $ | -            | 
|Short term bank loan,
      un-secured                              |  | January 7, 2010    |  |  | 5.31%          |  |   | 2,934,000    |  |   | -            | 
|Short term
      loan, un-secured                                   |  | On demand          |  |  | 0.00%          |  |   | 73,350       |  |   | -            | 
|Subtotal                                                            |  |                    |  |  |                |  |   | 4,474,350    |  |   | -            | 
|                                                                    |  |                    |  |  |                |  |   |              |  |   |              | 
|                                                                    |  |                    |  |  |                |  |   |              |  |   |              | 
|Long term bank loan, secured
      by buildings and land use rights |  | August 3, 2010     |  |  | 7.02%          |  |   | -            |  |   | 5,868,000    | 
|                                                                    |  |                    |  |  |                |  |   |              |  |   |              | 
|Total                                                               |  |                    |  |  |                |  | $ | 4,474,350    |  | $ | 5,868,000    | 

Interest expense totaling $1,098,939 and $494,040 was incurred
during the years ended December 31, 2009 and 2008, respectively.

(1)The loan is secured by Shandong Taibangs land
use rights and buildings located in Taian, Shandong Province, PRC, with carrying
net values as follows:

|                                   |   | December 31, 2009 |  |   | December 31, 2008 | 
|---------------------------------- | - | ----------------- |  | - | ----------------- | 
|Buildings in Taian, Shandong       | $ | 1,238,010         |  | $ | 1,417,138         | 
|Land use rights in Taian, Shandong |   | 433,793           |  |   | 195,691           | 
|Total                              | $ | 1,671,803         |  | $ | 1,612,829         | 

See report of independent registered public accounting firm.

F-27

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 10  Debt (continued)

Other payables and accrued liabilities

Other payables and accrued liabilities consist of the
following:

|                                                        |   | December 31, 2009 |  |   | December 31, 2008 | 
|------------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
|Other payables (1)                                      | $ | 7,465,640         |  | $ | 319,699           | 
|Accruals for promotion costs and others
      (2)       |   | 5,281,843         |  |   | -                 | 
|Accruals for salaries and welfare                       |   | 2,341,874         |  |   | 830,388           | 
|Accruals for RTO expenses                               |   | 245,657           |  |   | 245,657           | 
|Accruals for selling commission and
      promotion fee |   | 691,858           |  |   | 1,508,102         | 
|Other payable - government grant                        |   | 143,488           |  |   | 114,148           | 
|Other payable - deposit received                        |   | 160,683           |  |   | 283,826           | 
|Other payable - funds                                   |   | 2,383,501         |  |   | 627,157           | 
|Accrued interest                                        |   | 81,264            |  |   | 33,954            | 
|Others(3)                                               |   | 451,006           |  |   | -                 | 
|Total                                                   | $ | 19,246,814        |  | $ | 3,962,931         | 

|(1) | The other payables mainly comprise of deposits by potential strategic
      investors in the amount of $7,465,640. As of December 31, 2009, Qianfeng
      has received in an aggregate amount of $7,465,640 from potential private
      strategic investors in connection with subscribing shares from Qianfeng
      pursuant to Equity Purchase Agreement. The registration of the new
      investors as Qianfengs shareholders and the related increase in
      registered capital of Qianfeng with the Administration for Industry and
      Commerce (AIC) is not complete due to shareholders dispute as disclosed
      in below legal proceedings section below.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) | Accruals for promotions and others mainly represent the payables for
      donors promoting expenses, payables to employees, and payables to vendors
      or subcontractors for construction in plasma stations in Qianfeng.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | Others mainly comprise of the contingent liability due to the pending,
      outcome of the proceeding relating to Qianfengs Guarantee to a Third
      Party as disclosed in below legal proceedings section below, Qianfeng
      provisioned a loss contingency reserve during its third quarter of 2009
      for approximately $451,006 (RMB 3,074,342) to cover its share of the
      enforcement of this judgment.                                                                                                                                                                                                                                                    

Other payable - land use right

In July 2003, Shandong Taibang obtained certain land use rights
from the Taian municipal government. Shandong Taibang is required to make
payments totaling approximately $20,369 (RMB 138,848) per year to the local
state-owned entity, for the 50-year life of the rights or until Biological
Institute completes its privatization process. The Company recorded land use
rights equal to other payable  land use rights totaling $ 323,687 and
$325,390 as of December 31, 2009 and 2008, respectively, determined using
present value of annual payments over 50 years.

Note 11  Convertible notes

|                                                                          |   | December 31, 2009 |   |   | December 31, 2008 | 
|------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | 
|$9,554,140, 3.8% Senior Secured
      Convertible Notes, due June 5, 2011 | $ | 9,554,140         |   | $ | -                 | 
|Less: converted                                                           |   | (1,000,000        | ) |   | -                 | 
|unamortized discount                                                      |   | (8,464,380        | ) |   | -                 | 
|Notes payables, net                                                       | $ | 89,760            |   | $ | -                 | 

See report of independent registered public accounting firm.

F-28

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 11  Convertible notes (continued)

On June 5, 2009, the Company entered into a securities purchase agreement (the Purchase Agreement) with certain accredited investors (collectively, the Investors), pursuant to which the Company agreed to issue to the
Investors, 3.8% Senior Secured Convertible Notes in the aggregate principal amount of $9,554,140 (the Notes) and warrants (the Warrants and together with the Notes, the Subscribed Securities) to purchase up to
1,194,268 shares of common stock of the Company (the Warrant Shares and together with the Conversion Shares, the Underlying Securities). The transaction closed on June 10, 2009. Other than with respect to this transaction,
none of the Investors have had a material relationship with the Company or any of the Companys officers, directors or affiliates or any associate of any such officer or director.

The Notes accrue interest at 3.8% per annum (the Interest Rate), from the closing until repayment, whether on maturity on June 5, 2011, by acceleration or otherwise. Interest on the Notes is due and payable in cash semi-annually on
September 30 and March 31 of each year, commencing September 30, 2009, but the Company has the option to pay the interest due through the issuance of its common stock at a conversion price of $4.00 per share. If the Company defaults in the
payment of the principal of or interest on the Notes when due, then upon the Investors election, the Company is obligated to either (a) redeem all or a portion of the Notes pursuant to the redemption rights discussed below or (b) pay interest
on such defaulted amount at a rate equal to the Interest Rate plus 2.0% . The Notes are convertible at any time before maturity into shares of our common stock at a conversion price of $4.00 per share, subject to certain adjustments as specified
in the Notes.

The Companys obligations under the Notes are secured by the pledge by Siu Ling Chan, our board chair and a principal shareholder, of 3,000,000 shares of common stock held by her, pursuant to the terms of a Guarantee and Pledge Agreement among
the Company, the investors and Ms. Chan.  To induce Ms. Chan to enter into the Guarantee and Pledge Agreement with the Investors, the Company has agreed to indemnify her for all damages, liabilities, losses and expenses of any kind
(losses), which may be sustained or suffered by her, arising out of or in connection with any enforcement action instituted by the Investors pursuant to the Guarantee and Pledge Agreement. The Companys indemnification obligation is
limited to losses that arise as the result of any negligent or unlawful conduct of the Company that is caused unilaterally by the Company and is beyond Ms. Chans control in her capacity as a director of the Company, and will not exceed the
fair market value of the pledged shares as of the closing of the transaction.

The Warrants have a term of 3 years, an exercise price of $4.80 per share, subject to adjustments as provided in the Warrants, from time to time pursuant to anti-dilution and other customary provisions, and are exercisable by the Investors at
any time after the date on which their related Notes are converted, except that if any of the Notes is converted in part, the Investors may only exercise a corresponding portion of the related Warrant.

See report of independent registered public accounting firm.

F-29

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 11  Convertible notes (continued)

The Company has granted the Investors demand and piggy-back registration rights with respect to the Underlying Securities, pursuant to a registration rights agreement among the Company and the Investors.

The Company paid its placement agent a cash fee of 6.1% of the proceeds received in connection with the issuance of the Notes and also issued to the placement agent a 3-year warrant to purchase 93,750 shares of the Companys common stock at an
exercise price of $6.00 per share, expiring after 3 years. The aggregate $870,417 fees paid to the placement agent, including the fair value of the warrant issued to them was deferred and is being amortized over the life of the Notes.

The Company allocated $6,552,504 of the proceeds received to the fair value of the derivative instruments embedded in the Notes (including the conversion option) and $3,826,897 to the fair value of the Warrants issued to the Investors. As a
result, the Company recognized an initial charge to income of $825,261 for the amount by which the fair value of these liabilities exceeded the face amount of the Notes for the year ended December 31, 2009. The Notes are being accreted to their
redemption value over the period to maturity, using an effective interest method.

The fair values of the embedded derivatives and the warrants issued to the Investors and the placement agents were determined using a binomial model, based on the market price of the Companys common stock, volatility estimated at 130% based on
a review of the historic volatility of the Companys common stock, an expected dividend yield of zero, the remaining life of the instruments and risk-free rates of return of 1.11% - 1.88% .

For the year ended December 31, 2009, the Company recorded a loss of $24,987,940 related to the change in the fair value of the embedded derivative instruments in the Notes and the warrants. On December 22, 2009, two of the Companys Note
holders exercised their rights to convert $1,000,000 of their Notes into an aggregate of 250,000 shares of the Companys common stock. The fair value market of conversion options of $2,168,287, carrying value of $10,493 and accrued
interest of $8,550 were included in additional paid-in-capital upon conversion of the convertible notes. As a result, only Notes in the principal amount of $8,554,140 is outstanding as of December 31, 2009.

Note 12 - Earnings per share

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is calculated by dividing net income by the weighted average number of common
shares outstanding and dilutive potential common shares outstanding during the period.

The following is a reconciliation of the basic and diluted earnings per share computations for the years ended December 31:

See report of independent registered public accounting firm.

F-30

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 12 - Earnings per share (continued)

Basic earnings per share

|                                                                                   |   | 2009       |  |   | 2008       | 
|---------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Net income attributable to
      controlling interest for basic earnings per share | $ | 1,264,897  |  | $ | 11,985,671 | 
|Weighted average shares used in basic computation                                  |   | 21,754,911 |  |   | 21,434,942 | 
|Earnings per share - Basic                                                         | $ | 0.06       |  | $ | 0.56       | 

Diluted earnings per share

|                                                                                     |   | 2009       |  |   | 2008       | 
|------------------------------------------------------------------------------------ | - | ---------- |  | - | ---------- | 
|Net income attributable to
      controlling interest for basic earnings per share   | $ | 1,264,897  |  | $ | 11,985,671 | 
|Add: interest of convertible notes                                                   |   | 302,010    |  |   |            | 
|Net income attributable to
      controlling interest for diluted earnings per share | $ | 1,556,907  |  | $ | 11,985,671 | 
|                                                                                     |   |            |  |   |            | 
|Weighted average shares used in
      basic computation                              |   | 21,754,911 |  |   | 21,434,942 | 
|Diluted effect of convertible debentures (as if)                                     |   | 268,327    |  |   | -          | 
|Diluted effect of warrants attached
      to convertible notes                       |   | 28,247     |  |   | -          | 
|Diluted effect of warrants and options                                               |   | 592,857    |  |   | 121,400    | 
|Weighted average shares used in
      diluted computation                            |   | 22,644,342 |  |   | 21,556,342 | 
|Earnings per share:                                                                  |   |            |  |   |            | 
|Basic                                                                                | $ | 0.06       |  | $ | 0.56       | 
|Diluted                                                                              | $ | 0.07       |  | $ | 0.56       | 

For the year ended December 31, 2009, 93,750 warrants at
exercise price of $6.00 were excluded from the calculation because of their
anti-dilutive nature.

For the year ended December 31, 2008, 937,500 options at an
average exercise price of $4.00 were excluded from the calculation because of
their anti-dilutive nature.

Note 13  Taxes

Income taxes

Starting from January 1, 2008, all of the Companys Chinese
subsidiaries, except plasma companies, became subject to 25% income tax rate
according to the newly issued Income Tax Laws of PRC. According to PRCs central
government policy, certain new technology or high technology companies will
enjoy preferential tax treatment of 15%, instead of 25%.

See report of independent registered public accounting firm.

F-31

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 13  Taxes (continued)

On February 12, 2009, Shandong Taibang received the new
technology or high technology certification from Shandong provincial government.
The Certification allows the Company to receive the 15% preferential income tax
rate, for a period of three years starting from January 1, 2008.

Qianfeng is currently enjoying the preferential income tax rate
of 15% also under the 10-year Western Development Tax Concession, which started
on January 2001 and ends on December 2010. The PRC tax authority is studying the
possibility of extending the concession, especially for those industries that
encouraged by the PRC government, such as ours. In the event that PRC tax
authorities discontinue the concession, Qianfeng will apply for the new or high
technology preferential tax treatment of 15% like Shandong Taibang.

All of the  plasma companies are qualified as small
scale taxpayers and are subject to a tax rate of 6% in 2009, except for Puding
plasma company in Guizhou which is subjected to 17% tax rate. The Company
appealed to the local tax authority in 2009 and was granted with 6% tax rate
effective January 1, 2010.

Starting from January 1, 2008, all dividends paid to foreign
parents are subject to a 10% income tax. As a result, Logic Holdings recorded
$374,073 and $0 income tax expense for the years ended December 31, 2009 and
2008, respectively, for dividends Dalin paid to its foreign parent, Logic
Holdings. However, the Company did not accrue 10% income tax provisions on the
unpaid portion of $9,494,143 of the dividends declared by its subsidiaries,
Shandong Taibang and Dalin, because the Company will reinvest the unpaid
dividend back into the Companys PRC operations, that will not be subject for
10% provision income tax.

The following table reconciles the U.S. statutory rates to the
Companys effective tax rate for the years ended December 31, 2009 and 2008:

|                                        |  | 2009   |   |  | 2008   |  
|--------------------------------------- |  | ------ | - |  | ------ | -
|U.S. Statutory rates                    |  | 34.0   | % |  | 34.0   | %
|Foreign Income                          |  | (34.0  | ) |  | (34.0  | )
|China Tax rates                         |  | 25.0   |   |  | 25.0   |  
|China income tax exemption              |  | (10.0  | ) |  | (10.0  | )
|Temporary differences
      (China) (1) |  | (3.7   | ) |  | -      |  
|Other items (2)                         |  | 26.1   |   |  | 8.1    |  
|Effective income tax
      rates        |  | 37.4 % |   |  | 23.1 % |  

(1) The (3.7) % represents the
unrecognized tax benefits of $1,053,124 for the year ended December 2009, if recognized, would
favorably affect the Companys effective tax rate.

(2)The 26.1% represents the $29.6 million
derivative mark-to-market expense as disclosed in below note 16 and the $6.6
million expenses incurred by CBP, Logic Express and Logic Holding that are not
deductible in PRC for the year ended December 31, 2009. The 8.1% represents the
$1.2 million expenses incurred by CBP and Logic Express that are not deductible
in PRC for the year ended December 31, 2008.

The estimated tax savings due to the tax exemption for the
years ending December 31, 2009 and 2008 amounted to $6,772,020 and $2,443,657,
respectively. The net effect on earnings per share if the income tax had been
applied would decrease basic earnings per share for the years ended December 31,
2009 and 2008 by $0.31 and $0.11, respectively. The net effect on earnings per share if the
income tax had been applied would decrease diluted earnings per share for the
years ended December 31, 2009 and 2008 by $0.30 and $0.11, respectively.

See report of independent registered public accounting firm.

F-32

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 13  Taxes (continued)

The provision for income taxes consists of the following for
the years ended December 31, 2009 and 2008:

|                           |   | 2009       |   |   | 2008      | 
|-------------------------- | - | ---------- | - | - | --------- | 
|Current                    |   |            |   |   |           | 
|U.S.                       | $ | -          |   | $ | -         | 
|Foreign
      (China)      |   | 11,566,224 |   |   | 4,596,603 | 
|                           |   | 11,566,224 |   |   | 4,596,603 | 
|Deferred                   |   |            |   |   |           | 
|U.S.                       |   | -          |   |   | -         | 
|Foreign
      (China)      |   | (1,053,124 | ) |   | -         | 
|                           |   | (1,053,124 | ) |   | -         | 
|                           |   |            |   |   |           | 
|Provision for income taxes | $ | 10,513,100 |   | $ | 4,596,603 | 

Deferred taxes

In assessing the realizability of deferred tax assets, the
Company considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the future operation during the periods in
which those temporary differences are utilized. Based upon an assessment of the
historical operations and factors, the Company believes that it will be able to
realize the deferred tax assets.

The Companys deferred taxes reflect the tax effect of
temporary differences recorded as assets for financial reporting purposes and
the comparable amounts recorded for income tax purpose. The deferred tax assets
are measured using the enacted tax rates and law. Significant components of the
deferred tax assets as of December 31, 2009 and 2008 are as follows:

|                                                                           |   | 2009      |  |   | 2008      | 
|-------------------------------------------------------------------------- | - | --------- |  | - | --------- | 
|Current                                                                    |   |           |  |   |           | 
|Accrued
      salary and bonus expenses                                    | $ | 512,586   |  | $ | -         | 
|Accrued selling and
      marketing expenses                               |   | 108,112   |  |   | -         | 
|Accrued
      interest and penalty payable to Qianfeng strategic investors |   | 172,145   |  |   | -         | 
|Accrued cost of raw
      material                                         |   | 260,928   |  |   | -         | 
|U.S. loss
      carryforwards                                              |   | 599,689   |  |   | 378,623   | 
|                                                                           |   | 1,653,460 |  |   | 378,623   | 
|                                                                           |   |           |  |   |           | 
|Non-Current                                                                |   |           |  |   |           | 
|U.S. loss
      carryforwards                                              |   | 1,018,941 |  |   | 640,318   | 
|                                                                           |   |           |  |   |           | 
|Deferred tax assets                                                        |   | 2,672,401 |  |   | 1,018,941 | 

|Valuation allowance     |   | (1,618,630 | ) |   | (1,018,941 | )
|----------------------- | - | ---------- | - | - | ---------- | -
|Net deferred tax assets | $ | 1,053,771  |   | $ | -          |  

See report of independent registered public accounting firm.

F-33

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 13  Taxes (continued)

CBP was incorporated in the United States and has incurred net
operating losses for income tax purposes for the year ending December 31, 2009.
The estimated net operating loss carry forwards for United States income taxes
amounted to $4,760,677 and $2,996,885 as of December 31, 2009 and 2008,
respectively, which may be available to reduce future years taxable income.
These carry forwards will expire, if not utilized, from 2026 through 2029.
Management believes that the realization of the benefits from these losses
appears uncertain due to the Companys limited operating history and continuing
losses for United States income tax purposes. Accordingly, the Company has
provided a 100% valuation allowance on the deferred tax asset benefit from CBP
to reduce the asset to zero. Management reviews this valuation allowance
periodically and makes adjustments as warranted. The following table represents
the rollforward of the deferred tax valuation allowance:

|                           |   | For the year ended December
      31, | 
|-------------------------- | - | ------------------------------------- | 
|                           |   | 2009                                  | 
|Balance of January 1,      | $ | 1,018,941                             | 
|Increase                   |   | 599,689                               | 
|Balance as of December 31, | $ | 1,618,630                             | 

The Company has cumulative undistributed earnings of foreign
subsidiaries of approximately $54.6 million as of December 31, 2009, which is
included in consolidated retained earnings and will continue to be indefinitely
reinvested in international operations. Accordingly, no provision has been made
for U.S. deferred taxes related to future repatriation of these earnings, nor is
it practicable to estimate the amount of income taxes that would have to be
provided if we concluded that such earnings will be remitted in the future.

Value added tax

VAT on sales amounted to $8,585,743 and $3,098,977 for the
years ended December 31, 2009 and 2008, respectively. Sales are recorded net of
VAT collected and paid as the Company acts as an agent for the government. VAT
taxes are not impacted by the income tax holiday.

Taxes payable consisted of the following:

|                                |   | December 31, 2009 |  |   | December 31, 2008 | 
|------------------------------- | - | ----------------- |  | - | ----------------- | 
|VAT tax payable                 | $ | 1,110,216         |  | $ | 331,505           | 
|Income tax payable              |   | 7,479,279         |  |   | 3,630,878         | 
|Other miscellaneous tax payable |   | 184,584           |  |   | 97,627            | 
|                                | $ | 8,774,079         |  | $ | 4,060,010         | 

See report of independent registered public accounting firm.

F-34

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities

Capital and lease commitments

The Companys 82.76% owned subsidiary, He Ze Plasma Company, entered into a lease agreement on January 13, 2005, with the Yun Cheng Lan Tian Transportation Company in Yun Cheng County, Shandong Province, to lease land use rights for a period of
10 years. The annual lease amount is approximately $1,751 (RMB 12,000) with no early termination penalty. The Company has the right of first refusal to renew the lease after the ten year lease term.

The Companys 82.76% owned subsidiary, Qi He Plasma Company, entered into a lease agreement on April 26, 2007, with the Zhang Bo Shi Village in Qi He County, Shandong Province, to lease land use rights for a period of 50 years. The annual lease
amount is approximately $4,566 (RMB 31,144) with no early termination penalty.

The Companys 82.76% owned subsidiary, Zhang Qiu Plasma Company, leased land use right and the use of building and equipment for a period of 10 year from January 1, 2007 with annual lease payment of $43,977 (RMB300,000). The lease was
terminated in March 2008. The Company entered into a lease agreement on April 1, 2008, with the Zhang Qiu Red Cross Blood Center, to lease land use rights and the use building and equipment for a period of 10 years. The annual lease payment is
approximately $1,466 (RMB 10,000) with no early termination penalty.

The Companys 48.6% indirectly owned subsidiary, Qianfeng, entered into a lease agreement on June 1, 2006 with a group of individuals in an area located next to its production facility, to lease and use the space for processing industrial waste
for 10 years. The annual lease amount is approximately $1,530 (RMB 10,438).

The Companys indirectly owned subsidiary, Huang Ping Plasma Company, entered into a lease with Huang Ping County Finance Department on April 28, 2007, Guizhou Province, to lease land use rights and use a building and equipment for a period of
3 years. The annual lease payment is approximately $10,261 (RMB 70,000).

The Companys indirectly owned subsidiary, Pu Ding Plasma Company, entered into a lease with Pu Ping County Health Department, Guizhou Province on March 31, 2007, to lease land use rights and use a building and equipment for a period of 3
years. The annual lease payment is approximately $21,989 (RMB 150,000).

The Companys indirectly owned subsidiary, Na Yong Plasma Company, entered into a lease with Na Yong County Health Department, Guizhou Province on March 31, 2007, to lease land use rights and use a building and equipment for a period of 3
years. The annual lease payment is approximately $21,989 (RMB 150,000).

The Companys indirectly owned subsidiary, Wei Ning Plasma Company, entered into a lease with Wei Ning County Health Department, Guizhou Province on April 9, 2007, to
lease land use rights and use building and equipment for a period of 3 years.
The annual lease payment is approximately $11,727 (RMB 80,000).

See report of independent registered public accounting firm.

F-35

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities (continued)

During the fiscal year 2009, the Company invested approximately
$4.0 million in capital expenditure to upgrade its property and equipment in
production equipment and Qianfengs plasma collection facilities. As of December
31, 2009, there is $904,140 of the property and equipment that the Company
committed under contracts but not yet delivered by the suppliers.

The Company recognizes lease expense on a straight line basis
over the term of the lease in accordance to FASBs accounting standard related
to leases. Total operating lease commitments outstanding for the fiscal year
ended December 31:

|                                               |   | 2010    |  |   | 2011   |  |   | 2012  |  |   | 2013  |  |   | 2014  |  |   | Thereafter | 
|---------------------------------------------- | - | ------- |  | - | ------ |  | - | ----- |  | - | ----- |  | - | ----- |  | - | ---------- | 
|Property and equipment,
      not yet received | $ | 904,140 |  | $ | -      |  | $ | -     |  | $ | -     |  | $ | -     |  | $ | -          | 
|Lease                                          |   | 75,342  |  |   | 26,622 |  |   | 9,327 |  |   | 9,327 |  |   | 9,327 |  |   | 205,172    | 
|Total                                          | $ | 979,482 |  | $ | 26,622 |  | $ | 9,327 |  | $ | 9,327 |  | $ | 9,327 |  | $ | 205,172    | 

For the years ended December 31, 2009 and 2008, total rent
expense amounted to $172,922 and $21,717, respectively.

Legal proceedings

Bobai County Collection Station

In January 2007, the Company's PRC subsidiary, Shandong
Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20% minority
shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. (Bobai) in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. (Hua Lan) filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Tai'an City. A hearing was held on June 25, 2007 and judgment
was entered against the defendants
along with a $226,780 (RMB1,700,000) joint financial judgment. The Company appealed the District Court judgment to the Xinxiang City Intermediate Court. In November 2007, the Intermediate Court affirmed the judgment against the three defendants
and increased the amount of the joint financial judgment to approximately $405,954 (RMB3,000,000).

See report of independent registered public accounting firm.

F-36

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities (continued)

In January 2008, Hua Lan enforced the judgment granted by the Intermediate Court to freeze the Company's bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Tai'an City District Court to seek recovery of any losses
in connection with Hua Lan's claim and to request that the Tai'an City District Court preserve Hua Lan's property or freeze up to approximately $411,300 (RMB 3 million) of Hua Lan's assets to secure the return of such funds to the Company. The
intermediate court in Tai'an City accepted the application on February 14, 2008 but the matter is still pending. Pending the outcome of the proceedings, Shandong Taibang increased its loss contingency reserve during its fourth quarter of 2007 from
approximately $75,593 (RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the enforcement of this judgment. During the fourth quarter of 2008, full amount of the judgment, including Feng Lin and Keliang Huang's portions of the
judgment and the related fees, approximately $456,222 (RMB 3,109,900) has been withdrawn from Shandong Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of the judgment, approximately $304,143 (RMB2,073,234), as
receivable as a result of the withdrawal. As of December 31, 2008, the Company determined that it is unlikely that the Company will be able to recover such receivable from those two individuals and wrote off the receivable as bad debt expense.

In October 2009, the Shandong Taibang appealed to the High Court of Henan Province requesting the court to reverse judgments from the Hong Qi District Court based on
Shandong Taibang's belief that Hua Lans involvement in Bobai was in violation of PRC Blood
Products Regulations as Hua Lan did not invest, as Shandong Taibang did, in Bobai as required by the Regulation. The Company was awaiting the judgment of the Henan High Court as of the date of this report. In light of the foregoing, it is unlikely that the
Company's planned acquisition of the assets of Bobai will go forward.

Dispute among Qianfeng Shareholders over Raising Additional Capital

On May 28, 2007, a 91% majority of Qianfeng's shareholders approved a plan to raise additional capital from private strategic investors through the issuance of an additional 20,000,000 shares of Qianfeng equity interests at RMB 2.80 per share. The
plan required all existing Qianfeng shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority holder of Qianfeng's shares, the Guizhou Jie'an Company, or Jie'an, did not support the plan
and did not agree to waive its right of first refusal. On May 29, 2007, the majority shareholders caused Qianfeng to sign an Equity Purchase Agreement with certain investors, pursuant to which the investors agreed to invest an aggregate of RMB
50,960,000 (approximately $7,475,832) in exchange for 18,200,000 shares, or 21.4%, of Qianfeng's equity interests. At the same time, Jie'an also subscribed for 1,800,000
shares, representing its 9% pro rata share of the 20,000,000 shares being offered. The proceeds from all parties were received by Qianfeng in accordance with the agreement.

See report of independent registered public accounting firm.

F-37

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities (continued)

In June 2007, Jie'an brought suit in the High Court of Guizhou province, China, against Qianfeng and the three other original Qianfeng shareholders, alleging the illegality of the Equity Purchase Agreement. In its complaint, Jie'an alleged that it
had a right to acquire the shares waived by the original Qianfeng shareholders and offered to the investors in connection with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High Court ruled against Jie'an and sustained the Equity
Purchase Agreement, but on November 2008, Jie'an appealed the Guizhou High Court judgment to the People's Supreme Court in Beijing. On May 13, 2009, the People's Supreme Court sustained the original ruling and denied the rights of first refusal of
Jie'an over the additional shares waived by the original Qianfeng's shareholders. The registration of the new investors as Qianfeng's shareholders and the related increase in registered capital of Qianfeng with the Administration for Industry and
Commerce are still pending. On January 27, 2010, the strategic investors brought suit in the High Court of Guizhou Province against Qianfeng alleging Qianfengs failure to register their equity interest in Qianfeng with the local AIC and
requesting the distribution of their share of Qianfengs dividends. Dalin was also joined as a co-defendant as it is the majority shareholder and exercises control over Qianfengs day-to-day operations. The Company does not expect the
strategic investors to prevail because, upon evaluation of the Equity Purchase Agreement, the Company believes that the agreement is void due to certain invalid pre-conditions and the absence of shareholder authorization of the initial investment.
In the event that Qianfeng is required to return their original investment amount to the strategic investors, Qianfeng has set aside the strategic investors funds, along with RMB 7,313,387 (approximately $1,072,216) in accrued interest,
and RMB 519,600 (approximately $74,712) for the 1% penalty imposed by the agreement for any breach.  If the strategic investors prevail in their suit, Dalin's interests in Qianfeng may be reduced to approximately 41.3% . The High Court of
Guizhou is scheduled to hear the case in early April, 2010.

Dispute over Qianfeng Technical Consulting Agreement

In 1997, Qianfeng entered into a Technical Cooperation Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide certain fractionation equipment and transfer processing know-how to Qianfeng. In August 2004, Sin filed a law suit against
Qianfeng with the Intermediate Court in Guiyang City, China, alleging non-payment of RMB 100,000 (approximately, $14,670) for his fractionation equipment and RMB 5,000,000 (approximately, $733,500) for the transfer of his technological
know-how. The Intermediate Court ruled in favor of Sin and found that Qianfeng owed Sin RMB 10,376,160 (approximately, $ 1,522,183), but Qianfeng appealed the Intermediate Court ruling to the Guizhou High Court. The Guizhou High Court agreed in
part with Qianfeng's grounds for appeal and reduced the amount of know-how transfer fee to RMB 1,970,413 (approximately, $289,060). In May 2007, Sin appealed the Guizhou High Court's decision to the People's Supreme Court in Beijing. The
People's Supreme Court heard in April 2008 and ruled on December 29, 2009 for Qianfeng pay RMB 4,700,000 (approximately, $689,490)
as compensation to Sin for technology transfer and RMB 100,000 (approximately, $14,670) for unpaid equipment purchase. Qianfeng has accrued and accounted for all these expenses as of December 31, 2009.

See report of independent registered public accounting firm.

F-38

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities (continued)

Administration Interference

Qianfeng is party to an administrative proceeding against the government of the Qiandongnan Autonomous Region, or the Qiandongnan Authorities, in Guizhou Province, China, in connection with the ownership of three of Qianfeng's eight plasma stations
in Guizhou Province. Qianfeng was authorized to acquire a total of eight plasma stations in Guizhou Province based on several national and provincial administrative authorizations issued by the PRC State Council and the Guizhou Ministry of Health
between 2006 and 2007, but to date, the governmental authorizations have not been fully implemented by the Qiandongnan Authorities. In early 2007, Qianfeng submitted RMB 8,010,000 (approximately $1,173,465) to the local finance department of
Sansui County, Qiandongnan, for acquiring the Sansui Plasma Collection Station (Sansui), but the local finance department refused to honor the purchase and returned the full consideration to Qianfeng. Furthermore, subsequent local
rulings published by the Qiandongnan Authorities February 28, 2008 appear to authorize another private company to acquire the Sansui and two other stations, the Zhengyuan Plasma Collection Station and the Shibing Plasma Collection Station. In
December 2008 Qianfeng filed an administrative review application with the People's Government of Guizhou Province, or the Guizhou Provincial Government, but the Guizhou Provincial Government has delayed making a final decision pending further
review of regulations regarding administrative authorizations. Qianfeng has received verbal notification from staff in the Guizhou Provincial Government that the Qiandongnan Authorities have withdrawn the local rulings. As a result, Qianfeng has
withdrawn its application with the Guizhou Provincial Government to facilitate
further negotiation with Qiandongnan Authorities on its right to
acquire all eight plasma stations in Guizhou Province. In addition, Qianfeng has set aside the funds necessary to purchase Sansui pending the outcome of the administrative review. There have been no further developments on this case as of the date of
this report.

Dispute over Raw Plasma Supply Agreement with Xintai

On March 10, 2009, Henan Xintai Medicine Company (previously known as Henan Zhongtai Medicine, Xintai) brought suit against Shandong Taibang and its two wholly-owned plasma collecting subsidiaries in Shandong for breach of a raw plasma
supply agreement. The suit was subsequently withdrawn by Xintai on May 31, 2009. The agreement, signed by Shandong Taibang and Xintai on October 10, 2006, requires the two subsidiaries to provide to Xintai 45 metric tons of raw plasma per year from
2007 to 2009. The subsidiaries provided more than 34 metric tons of plasma to Xintai during 2007 in accordance with the agreement. On October 31, 2007, PRC State Department published the Regulation on Plasma Collection Stations. The Company believes
the agreement is invalid because it violates clause 43 of the new Regulation, which prohibits plasma collecting stations from providing raw plasma to any manufacturer other than their direct parent. To comply with the Regulation, the subsidiaries
ceased supplying
plasma to Xintai in late 2007. On March 12, 2009, Shandong Taibang filed a suit in the Shandong Tai'an Middle Court against Xintai seeking damages of RMB50,000 (approximately, $7,335) for the plasma already supplied to Xintai during 2007. On
June 29, 2009, Xintai re-filed the suit in Shandong Tai'an Middle Court against Shandong Taibang and the two subsidiaries seeking compensation of RMB6,000,000 (approximately, $880,200) for contract breach and demanding that Shandong Taibang and
the subsidiaries continue to honor the agreement. On October 20, 2009, the Tai'an Middle Court combined and heard the two suits and ruled on January 20, 2010 in favor of Shandong Taibang on all accounts.

See report of independent registered public accounting firm.

F-39

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 14  Commitments and contingent liabilities (continued)

Qianfeng's Guarantee to a Third Party

In 2007, as a condition to purchase Huang Ping Plasma Station, Qianfeng entered into an agreement with Guizhou Zhongxin Investment Company (Zhongxin) in which Qianfeng agreed to repay Zhongxin's debt out of Qianfeng's payables to
Zhongxin arising from plasma purchased from Zhongxin. In the same agreement, Qianfeng also guaranteed to the Huang Ping County Hospital (Huang Ping Hospital), which was the co-owner with Zhongxin of the Huang Ping Plasma Station, for the
amount of RMB3,074,342 (approximately $451,006) of debt that Zhongxin owed to Huang Ping Hospital. On June 1, 2009, Huang Ping Hospital brought suit, in Huang Ping Country People's Court of Guizhou Province, against Zhongxin for non-payment of
its payables and debt due to Huang Ping Hospital and Qianfeng as the guarantor. On November 2, 2009, the court ruled in favor of the plaintiff and Qianfeng will need to repay the Zhongxins debt to Huang Ping Hospital on behalf of Zhongxin as
the guarantor. In October 2009, Qianfeng appealed to the Middle Court of Kaili District in Guizhou Province and was accepted by the court in January 2010. 
The hearing is expected to be held by the end of April 2010. The Equity Transfer Agreement pursuant to which we acquired a 90% interest in Dalin,
Qianfeng's majority shareholder, provides that the sellers will be responsible, in accordance with their equity proportion in Qianfeng, for damages incurred by Qianfeng from Zhongxin's debt and shall repay Dalin the sellers' proportionate share of
payments made by Qianfeng to creditors in connection with Zhongxin's debt within 10 days after payment by Qianfeng.
The $451,006 guarantee amount and proportionate share of the liability to be
recovered from the sellers were properly reflected in the financials as of
December 31, 2009 as discussed in Note 10.

Note 15  Warrants and options

Warrants

On July 18, 2006, the Company entered into a securities purchase agreement with certain accredited investors and completed the sale of 2,200,000 shares of common stock and 1,070,000 warrants with an exercise price of $2.8425 per share
(2006 Warrants). The warrants have a 5-year term and are callable by the Company if the shares trade at 160% of the exercise price for 15 consecutive trading days. On July 28, 2006, the Company also issued 214,000
warrants with an exercise price at $2.8425 (Placement Agent Warrant) to Lane Capital Markets, LLC, the placement agent. These warrants have a 5-year term and are non-callable.

See report of independent registered public accounting firm.

F-40

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 15  Warrants and options (continued)

Effective January 1, 2009, 1,284,000 warrants previously treated as equity pursuant to the derivative treatment exemption are no longer afforded equity treatment because the strike price of the warrants is denominated in US dollar, a currency other
than the Companys functional currency, the Chinese Renminbi. As a result, the warrants are not considered indexed to the Companys own stock, and as such, all future changes in the fair value of these warrants will be recognized currently
in earnings until such time as the warrants are exercised or expired.

As such, effective January 1, 2009, the Company reclassified the original fair value of these warrants of $738,449 from equity to a liability, as if these warrants were treated as a derivative liability since their date of issue in July 2006. On
January 1, 2009, the Company reclassified from additional paid-in capital, as a cumulative effect adjustment, $929,577 from beginning retained earnings and $1,668,026 to a long-term derivative liability to recognize the fair value of such
warrants on such date.

In September 2009, as authorized by the board of directors, the Company redeemed all of its outstanding 2006 Warrants with an exercise price of $2.8425 per share, in connection with the above-mentioned Securities Purchase Agreement dated July
18, 2006.  In addition, there were 145,500 shares of Placement Agent Warrants were converted into common stock. As a result, as of December 31, 2009, both the 2006 Warrants and Placement Agent Warrant were converted into the Companys common
stock. The fair value of these warrants at the conversion date totaled $6,306,275 was transferred to equity. As such the Company recognized a loss of $4,638,249 from the change in fair value of these warrants for year ended December 31,
2009.

On June 5, 2009, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which the Company issued 3.8% Senior Secured Convertible Notes in the aggregate principal amount of $9,554,140 and Warrants
to purchase up to 1,194,268 shares of common stock of the Company. The Warrants have a term of 3 years, an exercise price of $4.80 per share, as adjusted from time to time pursuant to anti-dilution and other customary provisions, and are
exercisable by the Investors at any time after the date on which their related Notes are converted, except that if any of the Notes is converted in part, the Investors may only exercise a corresponding portion of the related Warrant. The Company
also issued to the placement agents 93,750 Warrants to purchase common stock at an exercise price of $6.00 per share, expiring after 3 years.

These common stock purchase warrants were not issued with the intent of
effectively hedging any future cash flow, fair value of any asset, liability or
any net investment in a foreign operation. The warrants do not qualify for hedge
accounting, and as such, all future changes in the fair value of these warrants
will be recognized currently in earnings until such time as the warrants are
exercised or expire. These common stock purchase warrants do not trade in an
active securities market, and as such, the Company estimated the fair value of
these warrants using the Black-Scholes option pricing model, based on the market price of the
Companys common stock, volatility estimated at 130% based on a review of the
historic volatility of the Companys common stock, an expected dividend yield of
zero, the remaining life of the warrants and risk-free rates of return of 1.11%
- 1.88% .

See report of independent registered public accounting firm.

F-41

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 15  Warrants and options (continued)

Historical volatility was computed using daily pricing
observations for recent periods that correspond to the term of the warrants. The
Company believes this method produces an estimate that is representative of our
expectations of future volatility over the expected term of these warrants. The
Company has no reason to believe future volatility over the expected remaining
life of these warrants likely to differ materially from historical volatility.
The expected life is based on the remaining term of the warrants. The risk-free
interest rates used are based on the yield on U.S. Treasury securities with a
similar according to the remaining term as the warrants.

The summary of warrant activity is as follows:

|                  |  |             |   |   | Weighted       |  |  | Average          | 
|----------------- |  | ----------- | - | - | -------------- |  |  | ---------------- | 
|                  |  | Warrants    |   |   | Average        |  |  | Remaining        | 
|                  |  | Outstanding |   |   | Exercise Price |  |  | Contractual Life | 
|December 31, 2007 |  | 1,284,000   |   | $ | 2.84           |  |  | 3.55             | 
|Granted           |  |             |   |   |                |  |  |                  | 
|Forfeited         |  |             |   |   |                |  |  |                  | 
|Exercised         |  |             |   |   |                |  |  |                  | 
|September30, 2008 |  | 1,284,000   |   | $ | 2.84           |  |  | 2.80             | 
|Granted           |  |             |   |   |                |  |  |                  | 
|Forfeited         |  |             |   |   |                |  |  |                  | 
|Exercised         |  |             |   |   |                |  |  |                  | 
|December 31, 2008 |  | 1,284,000   |   | $ | 2.84           |  |  | 2.55             | 
|Granted           |  | 1,288,018   |   |   | 4.89           |  |  | 2.44             | 
|Forfeited         |  |             |   |   |                |  |  |                  | 
|Exercised         |  | (1,284,000  | ) |   | 2.84           |  |  | 1.80             | 
|December 31, 2009 |  | 1,288,018   |   | $ | 4.89           |  |  | 2.44             | 

Options

On May 9, 2008, the Company adopted the 2008 Equity Incentive
Plan, which provides up to 5,000,000 shares of Companys Common Stock to be made
available to employees and directors at various prices as established by the
Board of Directors of the Company. On May 9, 2008, the Company granted options
to purchase an aggregate of 937,500 shares of the Companys common stock under
the 2008 Plan to certain directors and employees, pursuant to stock option
agreements between the Company and each of these directors or employees. The
options have an exercise price of $4.00 per share, will vest immediately and
will expire on June 1, 2018. On July 24, 2008, the Company granted options to
purchase an aggregate of 60,000 shares of the Companys common stock under the
2008 plan to its three independent directors. These options have an exercise
price of $4.00 per share and 30,000 shares were vested on January 24, 2009 and
the remaining 30,000 shares were vested on July 24, 2009, with the expiration
date of July 24, 2018. As of December 31, 2009, there were 4,090,000 shares
available under the plan.

See report of independent registered public accounting firm.

F-42

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 15  Warrants and options (continued)

The fair value of each option granted on May 9, 2008 and July
24, 2008 are estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions:

|Granted on                           |  | May 9, 2008 |  |  | July 24, 2008 | 
|------------------------------------ |  | ----------- |  |  | ------------- | 
|Expected dividend yield              |  | 0%          |  |  | 0%            | 
|Risk-free interest rate              |  | 3.56%       |  |  | 3.56%         | 
|Expected life (in years)             |  | 5           |  |  | 5             | 
|Weighted average expected volatility |  | 59.4%       |  |  | 81.2%         | 

The volatility of the Companys common stock was estimated by
management based on the historical volatility of the Companys common stock, the
risk free interest rate was based on Treasury Constant Maturity Rates published
by the U.S. Federal Reserve for periods applicable to the estimated life of the
options, and the expected dividend yield was based on the Companys current and
expected dividend policy. The value of the options was based on the Companys
common stock price on the date the options were granted. Because the Company
does not have a history of employee stock options, the Company utilized the
simplified method to estimate the life of the options which is the same as
assuming that the options are exercised at the mid-point between the vesting
date and expiration date. For the years ended December 31, 2009 and 2008, the
Company expensed $62,281 and $1,311,727 in compensation expense. The options are
accounted for as equity under FASBs accounting standard related to derivative
instruments and hedging activities. The options activity is as follows:

|                  |  |             |   |  |             |   |   | Weighted |  |  | Average     |  |   |           | 
|----------------- |  | ----------- | - |  | ----------- | - | - | -------- |  |  | ----------- |  | - | --------- | 
|                  |  |             |   |  |             |   |   | Average  |  |  | Remaining   |  |   | Aggregate | 
|                  |  | Options     |   |  | Options     |   |   | Exercise |  |  | Contractual |  |   | Intrinsic | 
|                  |  | Outstanding |   |  | Exercisable |   |   | Price    |  |  | Life        |  |   | Value     | 
|December 31, 2007 |  | -           |   |  | -           |   | $ | -        |  |  | -           |  | $ | -         | 
|Granted           |  | 997,500     |   |  | 937,500     |   |   | 4.00     |  |  | 10.00       |  |   | -         | 
|Forfeited         |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|Exercised         |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|December 31, 2008 |  | 997,500     |   |  | 937,500     |   | $ | 4.00     |  |  | 9.68        |  | $ | -         | 
|Granted           |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|Forfeited         |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|Exercised         |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|December 31, 2008 |  | 997,500     |   |  | 937,500     |   | $ | 4.00     |  |  | 9.43        |  | $ | -         | 
|Granted           |  | -           |   |  | 60,000      |   |   | 4.00     |  |  | 9.06        |  |   | -         | 
|Forfeited         |  | -           |   |  | -           |   |   | -        |  |  | -           |  |   | -         | 
|Exercised         |  | (87,500     | ) |  | (87,500     | ) |   | 4.00     |  |  | 8.42        |  |   | -         | 
|December 31, 2009 |  | 910,000     |   |  | 910,000     |   | $ | 4.00     |  |  | 8.43        |  | $ | -         | 

See report of independent registered public accounting firm.

F-43

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 16  Change in fair value of derivative liabilities

Loss on change in fair value of derivative liabilities for the
year ended December 31, 2009 comprised as following:

|                                                         |  | Fair value at |  |  | Fair value at |  |  |               |  |  |               |  |  | Change in fair | 
|-------------------------------------------------------- |  | ------------- |  |  | ------------- |  |  | ------------- |  |  | ------------- |  |  | -------------- | 
|                                                         |  | January 1,    |  |  | dates of      |  |  | Fair value at |  |  | Fair value at |  |  | value at       | 
|                                                         |  | 2009 or       |  |  | warrants      |  |  | date of notes |  |  | December 31,  |  |  | December 31,   | 
|Change in fair value of derivative
      liabilities of: |  | issuance date |  |  | exercised     |  |  | conversion    |  |  | 2009          |  |  | 2009           | 

|Conversion option of
      convertible notes          | $ | 6,552,504  |  | $ | -         |  | $ | 2,168,287 |  | $ | 19,960,145 |  | $ | 15,575,928 | 
|----------------------------------------------------- | - | ---------- |  | - | --------- |  | - | --------- |  | - | ---------- |  | - | ---------- | 
|Warrants attached to convertible notes                |   | 3,826,896  |  |   | -         |  |   | -         |  |   | 11,804,252 |  |   | 7,977,356  | 
|Warrants issued to
      placement agent              |   | 287,615    |  |   | -         |  |   | -         |  |   | 897,010    |  |   | 609,395    | 
|Warrants issued with prior placements                 |   | 1,668,026  |  |   | 6,306,275 |  |   | -         |  |   | -          |  |   | 4,638,249  | 
|Initial charge to
      income from convertible notes |   | 825,261    |  |   | -         |  |   | -         |  |   | -          |  |   | 825,261    | 
|Total                                                 | $ | 13,160,302 |  | $ | 6,306,275 |  | $ | 2,168,287 |  | $ | 32,661,407 |  | $ | 29,626,189 | 

Note 17  Interest expense (income), net

Interest expense (income), net for the years ended December 31,
2009 and 2008 comprised as following:

|Interest expense (income), net                                    |   | 2009      |   |   | 2008     |  
|----------------------------------------------------------------- | - | --------- | - | - | -------- | -
|Interest expense  bank and other loans                           | $ | 1,098,939 |   | $ | 494,040  |  
|Interest
      expense  due to holder of noncontrolling interest |   | 2,068,897 |   |   | -        |  
|Interest expense  due to strategic investors                     |   | 1,072,216 |   |   | -        |  
|Interest expense  convertible notes                              |   | 302,010   |   |   | -        |  
|Interest income                                                   |   | (611,813  | ) |   | (120,543 | )
|Total                                                             | $ | 3,930,249 |   | $ | 373,497  |  

Note 18  Statutory reserves

In accordance with the Law of the PRC on Joint Ventures Using
Chinese and Foreign Investment and the Companys Articles of Association,
appropriations from net profit should be made to the Reserve Fund and the
Enterprise Expansion Fund, after offsetting accumulated losses from prior years,
and before profit distributions to the investors. The percentages to be
appropriated to the Reserve Fund and the Enterprise Expansion Fund are
determined by the Board of Directors of the Company.

Reserve fund

10% of the net income determined in accordance with PRC
accounting rules and regulations are transferred to a statutory surplus reserve
fund until such reserve balance reaches 50% of the Companys registered capital.
As of December 31, 2009, approximately $2 million still needs to be transferred
to statutory reserve. The transfer to this reserve must be made before
distribution of any dividend to shareholders. 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 stockholders 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.

See report of independent registered public accounting firm.

F-44

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 18  Statutory reserves (continued)

Enterprise expansion fund

The enterprise fund may be used to acquire plant and equipment
or to increase the working capital to expend on production and operation of the
business. The Companys policy is to transfer 5% of the Shandong Taibangs net
income to this fund determined in accordance with the Companys policy.

Note 19  Retirement benefit plans

Regulations in the PRC require the Company to contribute to a
defined contribution retirement plan for the benefit of all permanent employees.
All permanent employees are entitled to an annual pension equal to their basic
salaries at retirement. The PRC government is responsible for the benefit
liability to these retired employees. The Company is required to make
contributions to the state retirement plan at 20% of the monthly base salaries
of the current employees. For the years ended December 31, 2009 and 2008, the
Company made pension contributions in the amount of $498,973 and $220,493,
respectively.

Note 20 - Noncontrolling interest and distribution

The roll forward of noncontrolling interest in the balance
sheet is shown below:

|                                         |   | Fang Cheng |   |   | Shandong   |   |   | Guizhou   |   |   | Guiyang    |   |   | Guiyang   |   |   |                |  
|---------------------------------------- | - | ---------- | - | - | ---------- | - | - | --------- | - | - | ---------- | - | - | --------- | - | - | -------------- | -
|                                         |   | Plasma Co. |   |   | Taibang    |   |   | Renyuan   |   |   | Qianfeng   |   |   | Dalin     |   |   |                |  
|                                         |   | Minority   |   |   | Minority   |   |   | Minority  |   |   | Minority   |   |   | Minority  |   |   | Total          |  
|                                         |   | Owner      |   |   | Owner      |   |   | Owners    |   |   | Owners     |   |   | Owner     |   |   | Noncontrolling |  
|                                         |   | (20%)      |   |   | (17.24%)   |   |   | (75%)     |   |   | (46%)      |   |   | (10%)     |   |   | interest       |  
|December 31, 2007                        | $ | 82,994     |   | $ | 3,802,898  |   | $ | -         |   | $ | -          |   | $ | -         |   | $ | 3,885,892      |  
|Net income(loss)                         |   | (83,938    | ) |   | 3,387,779  |   |   | -         |   |   | -          |   |   | -         |   |   | 3,303,841      |  
|Foreign currency translation gain/(loss) |   | 944        |   |   | 3,162      |   |   | -         |   |   | -          |   |   | -         |   |   | 4,106          |  
|Distribution declared                    |   | -          |   |   | (2,982,045 | ) |   | -         |   |   | -          |   |   | -         |   |   | (2,982,045     | )
|December 31, 2008                        | $ | -          |   | $ | 4,211,794  |   | $ | -         |   | $ | -          |   | $ | -         |   | $ | 4,211,794      |  
|Dalin acquisition                        |   | -          |   |   | -          |   |   | 2,444,304 |   |   | 17,317,066 |   |   | 1,763,689 |   |   | 21,525,059     |  
|Net income(loss)                         |   | (12,670    | ) |   | 5,321,061  |   |   | (111,753  | ) |   | 9,884,220  |   |   | 1,267,631 |   |   | 16,348,489     |  
|Foreign currency translation gain/(loss) |   | -          |   |   | (186       | ) |   | -         |   |   | -          |   |   | -         |   |   | (186           | )
|Distribution declared                    |   | -          |   |   | (1,212,834 | ) |   | -         |   |   | (7,327,205 | ) |   | (415,353  | ) |   | (8,955,392     | )
|December 31, 2009                        | $ | (12,670    | ) | $ | 8,319,835  |   | $ | 2,332,551 |   | $ | 19,874,081 |   | $ | 2,615,967 |   | $ | 33,129,764     |  

Distributions declared are split pro rata between the
shareholders according to their ownership interest. The payment of the distributions
may occur at different times to the shareholders resulting in distributions
which do not appear to be reflective of the minority ownership percentages. As
of December 31, 2009, minority shareholders owned 17.24% of the Shandong Taibang, 10% of Dalin and 46% of Qianfeng. The table below shows the minority
shareholder and distributions outstanding.

See report of independent registered public accounting firm.

F-45

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 20 - Noncontrolling interest and distribution
(continued)

|                                               |   | Shandong       |   |   | Guiyang        |   |   | Guiyang        |   |   |                |  
|---------------------------------------------- | - | -------------- | - | - | -------------- | - | - | -------------- | - | - | -------------- | -
|                                               |   | Taibang        |   |   | Qianfeng       |   |   | Dalin          |   |   | Total          |  
|                                               |   | Noncontrolling |   |   | Noncontrolling |   |   | Noncontrolling |   |   | Noncontrolling |  
|                                               |   | shareholder    |   |   | shareholder    |   |   | shareholder    |   |   | shareholder    |  
|Distribution payable,
      December 31, 2007  | $ | 506,626        |   | $ | -              |   | $ | -              |   | $ | 506,626        |  
|Distribution declared                          |   | 2,982,045      |   |   | -              |   |   | -              |   |   | 2,982,045      |  
|Distribution paid                              |   | (288,300       | ) |   | -              |   |   | -              |   |   | (288,300       | )
|Foreign currency translation
      adjustments |   | 51,983         |   |   | -              |   |   | -              |   |   | 51,983         |  
|Distribution payable,
      December 31, 2008  | $ | 3,252,354      |   |   | -              |   | $ | -              |   | $ | 3,252,354      |  
|Distribution declared                          |   | 1,212,834      |   |   | 7,327,205      |   |   | 415,353        |   |   | 8,955,392      |  
|Distribution paid                              |   | (4,479,381     | ) |   | (7,330,671     | ) |   | (415,353       | ) |   | (12,225,405    | )
|Foreign currency translation
      adjustments |   | 14,780         |   |   | 3,466          |   |   | -              |   |   | 18,246         |  
|Distribution payable,
      December 31, 2009  | $ | 587            |   | $ | -              |   | $ | -              |   | $ | 587            |  

Note 21  Business combinations

On September 26, 2008, Logic Express (Party B) entered into
an equity transfer agreement with Dalin, a PRC limited liability company, and
Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang, the shareholders of Dalin
(collectively Party A), relating to the purchase of an aggregate 90% equity
interest in Dalin, for a total purchase price of RMB194,400,000 (approximately
$28,479,600), due in four installments. The parties agreed that (i) if Logic
will have paid 90% of the purchase price of approximately $25,632,000 (or RMB
174,960,000) on or before April 7, 2009, then Logic will be entitled to its
share of Dalins portion of the profit generated by Qianfeng starting from
January 1, 2009, and (ii) if Logic fails to pay the said amount, the profit
generated by Qianfeng from January 1, 2009 until the day of payment of said
amount will be shared by Party A and Party B (i.e., Logic will be entitled to
its share of Dalin's portion of the profit generated by Qianfeng calculated
according to the proportion of the purchase price paid by it, and Party A will
be entitled to the rest of Dalins portion of the profit generated by Qianfeng).
The Company timely initiated the third installment payment to achieve 90% of the
purchase price on April 7, 2009, in accordance with the instructions provided by
the Dalin shareholders, which was subsequently paid on April 8 and April 14,
2009. The transaction was deemed by the Party A that Party B fulfilled its
obligations under the agreement. As a result, Logic Holdings, the Hong Kong
subsidiary, is now entitled to all the rights and privileges of a 90%
shareholder in Dalin, including the right to receive its pro rata share of the
profits generated by Dalin's 54% majority-owned operating subsidiary, Qianfeng
Biological Products Co., Ltd., or Qianfeng, as of January 1, 2009, subject to a
possible dilution to as low as 41.3%, if a dissenting Qianfeng shareholder
prevails in a pre-existing suit to obtain additional equity interests in
Qianfeng. The Company is obligated to pay the fourth and final installment,
representing the remaining 10% of the Dalin purchase price, on or before April
9, 2010, the one-year anniversary of the local Administration for Industry and
Commerce's approval of the equity transfer.

According to the Equity Transfer Agreement, as amended, the
Company can exercise the shareholder's rights, as well as taking over all the
corporate seals and license, of Dalin upon the payment of the second
installment. The Company paid the second installment according to the agreement
on December 14, 2008; however Dalin's related voting power over its main operating entity, Qianfeng,
was not transfered to the Company until the Company's nominees gained
control of the board of directors and the management positions of Qianfeng on January 16, 2009. The Company's four nominees were elected to Qianfeng's seven-member board of directors in a special meeting of Qianfeng's shareholders, including Dalin,
on that date, and on January 16, 2009, the Qianfeng's Board of Directors elected a new management team consisting of all Logic Express' and Dalin's appointees, including a new Chief Executive Officer, Executive Senior Vice President, Chief Financial
Officer and Director of Sales. Until that time, the Company could not exercise any control over, or retain any financial interest in Qianfang. Therefore, the Company believes that January 16, 2009, the date on which the Company legally obtained
control, acquired the assets, assumed the liabilities and became entitled to Dalin's share of the profit generated by Qianfeng as the acquisition date for the accounting purpose according to the FASBs accounting standard related to business
combination. The results of Dalin's and its subsidiaries' operations from January 1, 2009 through December 31, 2009 are included in the Company's Consolidated Statements of Income and Comprehensive Income

See report of independent registered public accounting firm.

F-46

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 21  Business combinations (continued)

Effective January 1, 2009, the Company adopted FASBs accounting standard related to business combination which required acquisition method of accounting to be used for all business combinations and for an acquirer to be identified for each
business combination. This accounting standard requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions. It also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the
acquiree, at the full amounts of their fair values (or other amounts determined in accordance with the standard).

The Companys acquisition of Dalin was accounted for in accordance with this standard and the Company has allocated the purchase price of Dalin based upon the fair value of the net assets acquired and liabilities assumed and the fair value of
the noncontrolling interest measured at the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the business combination standard issued by FASB and,
except for cash and cash equivalents, fair value was estimated using level 3 inputs under FASBs accounting standard related to fair value measurements. Level 3 inputs for the nonfinancial assets included a valuation report (prepared by a third
party appraisal firm) that primarily utilized a combination of Income approach, cost approach and Market approach valuation techniques. Level 3 inputs for other assets and liabilities included present value techniques applied to after-tax income,
expected after-tax cash flows and estimated selling prices (less costs of disposal and profit allowance) for inventories. In accordance with FASBs accounting standard related to goodwill and other intangible assets, indefinite lived
intangibles and goodwill are not being amortized.

See report of independent registered public accounting firm.

F-47

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 21  Business combinations (continued)

The following table summarizes the net book value and the fair
value of the assets acquired and liabilities assumed at the date of acquisition,
which represents the purchase price allocation at the date of the acquisition of
Dalin based on valuation report which was prepared by a third party appraisal
firm:

|                                   |   | Net Book Value |   |   | Fair Value  |  
|---------------------------------- | - | -------------- | - | - | ----------- | -
|Current assets                     | $ | 26,883,246     |   | $ | 26,883,246  |  
|Property, plant and equipment, net |   | 6,060,024      |   |   | 8,098,959   |  
|Intangibles                        |   | 1,729,112      |   |   | 21,471,408  |  
|Other non-current assets           |   | 3,449,162      |   |   | 3,449,162   |  
|Goodwill                           |   | -              |   |   | 12,425,589  |  
|Total assets                       |   | 38,121,544     |   |   | 72,328,364  |  
|Total liabilities                  |   | (21,911,373    | ) |   | (21,911,373 | )
|Net assets                         | $ | 16,210,171     |   | $ | 50,416,991  |  

The Company determined the $50.4 million fair value of the
acquired assets of Dalin based on an evaluation by an independent appraisal and
the final asset evaluation by the management. The excess of the cost of an
acquired entity over the net of the amounts assigned to assets acquired and
liabilities assumed shall be recognized as goodwill. As a result, the $12.4
million of goodwill was due to the acquisition purchase price over the fair
value of the assets acquired. As of December 31, 2009, the Company did not
record any impairment charge from write-downs of purchased intangible assets
since the Company do not identify any trends caused a reduction in expected
future cash flows.

The following table presents the details of the fair value
purchased intangible assets acquired through business combinations as of January
16, 2009:

|                                                        |  | Useful life |  |   |            | 
|------------------------------------------------------- |  | ----------- |  | - | ---------- | 
|                                                        |  | (in years)  |  |   | Fair Value | 
|Plasma collection permits                               |  | 10          |  | $ | 10,891,092 | 
|Land use rights                                         |  | 40          |  |   | 1,285,968  | 
|Long-term customer-relationship
      intangible assets |  | 4           |  |   | 6,955,384  | 
|GMP certificate                                         |  | 5.8         |  |   | 2,332,652  | 
|Software                                                |  | 3.8         |  |   | 6,312      | 
|Total                                                   |  |             |  | $ | 21,471,408 | 

In addition, the Company determined the $21.5 million fair
value of the noncontrolling interest of Dalin based on an evaluation by an
independent third party appraisal firm. Level 3 inputs for noncontrolling
interest included considering average control premium in relevant Merger and
Acquisition premium.

See report of independent registered public accounting firm.

F-48

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 21  Business combinations (continued)

Pro Forma

The following unaudited pro forma condensed income statement
for the year ended December 31, 2008 were prepared under generally accepted
accounting principles as if the acquisition of Dalin has occurred on January 1,
2008. The pro forma information may not be indicative of the results that
actually would have occurred if the acquisition had been in effect from and on
the date indicated.

|                                                               |   | December, 2008 | 
|-------------------------------------------------------------- | - | -------------- | 
|Revenues                                                       | $ | 79,943,285     | 
|Cost of revenues                                               |   | 25,543,884     | 
|Gross profit                                                   |   | 54,399,401     | 
|Operating expenses                                             |   | 16,731,924     | 
|Other expenses, net                                            |   | 857,728        | 
|Provision for Income taxes                                     |   | 7,280,803      | 
|Net income before noncontrolling
      interest                |   | 29,528,946     | 
|Less: net income attributable to noncontrolling
      interest |   | 10,054,974     | 
|Net income attributable to
      controlling interest          | $ | 19,473,972     | 
|Basic - earning per share                                      |   |                | 
|Weighted average number of
      shares                        |   | 21,434,942     | 
|Earnings per share                                             | $ | 0.91           | 
|Diluted - earning per share                                    |   |                | 
|Weighted average number of shares                              |   | 21,556,342     | 
|Earnings per share                                             | $ | 0.90           | 

Note 22  Subsequent Events

Shandong Jinxiang Medical
Device Company

On January 13, 2010, the 17.26% minority shareholder of
Shandong Taibang, Shandong Institute, and forty two (42) employees of the
Company seconded from Shandong Institute purchased 52.3% and 27.7%,
respectively, of the equity interest in one of the Companys existing suppliers and agents Shandong Jinxiang Medical
Device Company or Jinxiang, from its owner. Since November 2003, Jinxiang
has been one of the Companys suppliers for chemicals and diagnostic reagents
that are used in the fractionation process. Purchases from Jinxiang accounted
for 1.0%, or RMB 679,127 (approximately $99,567), of the Companys total
purchases from suppliers in 2009. Jinxiang also acts as a commissioned agent for
the Companys products. During 2009, Shandong Taibang sold to or through
Jinxiang RMB 1,292,800 (approximately $189,537) in products, representing
less than 0.2% of the Companys net sales, and Jinxiang was entitled to commissions totaling RMB 117,312 (approximately $17,199).

See report of independent registered public accounting firm.

F-49

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 22  Subsequent Events (continued)

Distributions declaration by Guiyang Dalin

On February 3, 2010, the Board of Directors of Guiyang Dalin declared a RMB 4,500,000 (approximately $660,150) distribution to its 90% shareholder Logic China and the 10% shareholder Fan Shao Wen.  The funds have been subsequently transferred to
their accounts as instructed on February 5, 2010.

Distributions declaration by Guiyang Qianfeng

On January 29, 2010, the Board of Directors of Guiyang Qianfeng declared a RMB 60,000,000 (approximately $8,802,000) distribution to its 54% shareholder Guiyang Dalin, the 19% shareholder Guizhou Eakan, the 18% shareholder Shenzhen
Yigongshengda, and the 9% shareholder Guizhou Jiean. The funds have been subsequently transferred to their accounts as instructed on February 5, 2010.

Renew of bank loan

On January 8, 2010, Shandong Taibang repaid its RMB 20 million (approximately $2,934,000) outstanding bank loan to Taishan Sub-Branch of the Bank of China per loan agreement. On January 29, 2010, Shandong Taibang entered into a new short term
loan agreement with the Taishan Sub-Branch of the Bank Of China, pursuant to which the bank loaned Shandong Taibang RMB 20 million (approximately $2,934,000). The Loan has an annual interest rate of 5.31% on all outstanding principal and is due
and payable in full on January 28, 2011. Shandong Taibang is obligated under the loan agreement to pay the interest quarterly and repay the principal along with any remaining unpaid interest in full on the maturity date. Shandong Taibang may not
prepay the loan without the prior written notice to the bank, which should be solicited no later than 10 days before such prepayment. If the loan is not paid in full by the maturity date, the interest rate will be increased to 7.97%, until full
payment is made. In addition, if the loan is used for any other purpose than to fund the purchase of raw materials, the bank will have the right to increase the interest rate to 7.97% on the misused portion of the loan, effective as of the date such
funds are misused, until the misused portion is repaid in full. Furthermore, if the quarterly interest payments required under the loan agreement are not timely made during the term, the bank will have the right to increase the interest rate to
7.97%, . Shandong Taibang currently plans to use the loan to fund the purchase of raw materials.

Appointment of new independent director and issuance of stock options

On February 4,2010, in conjunction with the appointment of Dr. Xiangmin
Cui as an independent director, the Company granted Dr. Cui, options to purchase
20,000 shares of the Company's common stock under the Company's
2008 Equity Incentive Plan (the "2008 Plan"), which at exercise price of $10.66, and will vest in two equal portions over 12 months, with an initial vesting date of August 4, 2010 and a final vesting date of February 4, 2010.

See report of independent registered public accounting firm.

F-50

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2009

Note 22  Subsequent Events (continued)

Redemption of the convertible notes and exercise of warrants

On January 13, 2010, two of the Companys Note holders, subsequent to their December 22, 2009 their conversion of $1,000,000 convertible note as described in the Note 11 above, exercised their rights to convert remaining $1,054,140 of
their Notes into an aggregate of 263,535 shares of the Companys common stock. As a result, only in the principal amount of $7,500,000 of the convertible notes is outstanding as of the date of this report.
On February 9, 2010, the same two Note holders exercised all of
their warrants, granted along with the convertible note, into an aggregate of
143,575 shares of the Company's common stock. On February 10, 2010, the agent
warrants, granted to the agent along with the convertible note, were exercised,
through cashless feature, into 37,251 shares of the Company's common stock.

Acquisition of Yuncheng Ziguang Biotechnology

On January 22, 2010, Shandong Taibang entered into an Equity Transfer Agreement with Yuncheng Ziguang Biotechnology Co., Ltd., which is located in Yuncheng, Shandong Province. Under the terms of the Equity Transfer Agreement, Shandong Taibang agreed
to purchase 100% of Yuncheng Ziguangs equity interest at a purchase price of RMB 10,066,672 (approximately $1,216,054), which was subsequently paid as of February 24, 2010. Yuncheng Ziguangs main business is manufacturing, packing
and selling of health drinks and foods. Among its assets, Yuncheng Ziguang owns six buildings and a right to acquire a land use right with approximately 323,000 square feet in size. The purpose of this acquisition is mainly for relocation of
Shandong Taibangs Yun Cheng plasma station, which is adjacent to Yuncheng Ziguang, into the existing building and the land that Yuncheng Ziguang currently owns or entitled
to own. Yun Cheng plasma station is the oldest and smallest among the Company's five
stations in Shandong. Shandong Taibang expects that the relocation of the plasma station into the new facility will increase its plasma collection capacity with a low investment cost.

See report of independent registered public accounting firm.

F-51

---

SIGNATURES

In accordance with section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report
on Form 10-K to be signed on its behalf by the undersigned, thereto duly
authorized individual.

Date: March 23, 2010

CHINA BIOLOGIC PRODUCTS, INC.By:
    /s/ Chao Ming
      ZhaoChao Ming ZhaoChief Executive
    Officer


In accordance with 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/ Siu Ling
      Chan      | Chairwoman of the Board                      | March 23, 2010
|Siu Ling Chan                |                                              |               
|                             |                                              |               
|/s/ Chao Ming
      Zhao     | Chief Executive Officer                      | March 23, 2010
|Chao Ming Zhao               | (Principal Executive Officer)                |               
|                             |                                              |               
|/s/ Yu-Yun Tristan
      Kuo | Chief Financial Officer                      | March 23, 2010
|Yu-Yun Tristan Kuo           | (Principal Financial and Accounting Officer) |               
|                             |                                              |               
|/s/ Lin Ling
      Li        | Director                                     | March 23, 2010
|Lin Ling Li                  |                                              |               
|                             |                                              |               
|/s/ Sean Shao                | Director                                     | March 23, 2010
|Sean Shao                    |                                              |               
|                             |                                              |               
|/s/ Xiangmin
      Cui       | Director                                     | March 23, 2010
|                             |                                              |               
|/s/ Tong Jun
      Lin       | Director                                     | March 23, 2010
|Tong Jun Lin                 |                                              |               

---

EXHIBIT INDEX

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |  |                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                 
|2.1     |  | Share Exchange Agreement
      between the Company, Logic Express Limited and the selling stockholders
      signatory thereto, dated as of July 18, 2006 (incorporated by reference to
      Exhibit 2 of the registration statement on Form SB-2, filed by the Company
      on September 5, 2007)                                                                            
|3.1     |  | Certificate of Incorporation of the Company
      (incorporated by reference to Exhibit 3.1 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                                                                        
|3.2     |  | Amended and Restated By-Laws,
      adopted on March 31, 2009                                                                                                                                                                                                                                                                                                                   
|4.1     |  | Securities Purchase Agreement between the
      Company, Logic Express Limited, Shandong Taibang Biological Products Co.,
      Ltd., and the selling stockholders and investors signatory thereto, dated
      as of July 18, 2006 (incorporated by reference to Exhibit 4.1 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
|4.2     |  | Registration Rights Agreement,
      between the Company and certain investors signatory thereto, dated as of
      July 18, 2006 (incorporated by reference to Exhibit 4.2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)                                                                                                  
|4.3     |  | Form of Stockholder Warrant to purchase Common
      Stock, dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                                                                                                              
|4.4     |  | Lane Warrant, dated as of July
      19, 2006 (incorporated by reference to Exhibit 4.4 of the registration
      statement on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                                                                            
|4.5     |  | Share Escrow Agreement, between the Company,
      Lane, as investor representative, the Escrow Agent, and the selling
      stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.5 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)                                             

---

|4.6   |  | Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006
      (incorporated by reference to Exhibit 4.6 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                                                                                   
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.7   |  | Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                          
|4.8   |  | Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                 
|4.9   |  | Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)                                                  
|4.10  |  | Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                   
|4.11  |  | Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)
|4.12  |  | Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)   
|4.13  |  | Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)    
|4.14  |  | Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)      
|4.15  |  | Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                  
|4.16  |  | Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).                                                                                                                                                                                                                
|4.17  |  | Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).                                                                                                                                                                                                                     
|4.18  |  | Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5, 2009)                                                                                                                                                                                                                                                                 
|10.1. |  | China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)                                                                                                                                                                                                                
|10.2. |  | Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current
      report on Form 8-K, filed by the Company on May 13, 2008)                                                                                                                                                                                                   

---

|10.3.  |  | Group Secondment Agreement,
      dated October 28, 2002, between Shandong Taibang Biological Products Co.,
      Ltd. and the Shandong Institute (English Translation) (incorporated by
      reference to Exhibit 10.1 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                                         
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4.  |  | Amended and Restated Joint Venture Agreement,
      between Logic Express Limited and the Shandong Institute, dated as of
      March 12, 2006 (English Translation) (incorporated by reference to Exhibit
      10.2 of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                             
|10.5.  |  | Letter of Intent for Equity
      Transfer, between Logic Express Limited and the Shandong Institute, dated
      as of June 10, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.3 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)                                                                      
|10.6.  |  | Raw Plasma Supply Agreement, between Shandong
      Taibang Biological Products Co., Ltd. and Qihe Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.4 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)                                          
|10.7.  |  | Raw Plasma Supply Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and the Xiajin
      Plasma Collection Station, dated as of December 30, 2005 (English
      Translation) (incorporated by reference to Exhibit 10.5 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)                              
|10.8.  |  | Raw Plasma Supply Agreement, between Shandong
      Taibang and the Zhangqiu Plasma Collection Station, dated as of December
      30, 2005 (English Translation) (incorporated by reference to Exhibit 10.6
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)                                                                
|10.9.  |  | Plasma Processing Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and Qi He An Tai
      Plasma Collection Co., Ltd., dated as of January 2, 1007 (English
      Translation) (incorporated by reference to Exhibit 10.9 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                           
|10.10. |  | Plasma Processing Agreement, between Shandong
      Taibang Biological Products Co., Ltd. and the Xia Jin An Tai Plasma
      Collection Co., Ltd., dated as of January 2, 2007 (English Translation)
      (incorporated by reference to Exhibit 10.10 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)                          
|10.11. |  | Plasma Processing Agreement,
      between Shandong Taibang Biological Products Co., Ltd. and the Zhang Qiu
      An Tai Plasma Collection Co., Ltd., dated as of January 2, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.11 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                  
|10.12. |  | Asset Purchase Agreement, between Zhang Qiu An
      Tai Plasma Collection Co., Ltd. and Zhang Qiu Plasma Collection Station,
      dated as of December 31, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.12 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                        
|10.13. |  | Asset Purchase Agreement,
      between Guang Xi Huan Jiang Missile Plasma Collection Co., Ltd. and Huan
      Jiang Maonan Autonomous County Plasma Collection Station, dated as of
      April 24, 2007 (English Translation) (incorporated by reference to Exhibit
      10.13 of the registration statement on Form SB-2/A, filed by the Company
      on December 3, 2007)
|10.14. |  | Asset Purchase Agreement, between Qi He An Tai
      Plasma Collection Co., Ltd. and Qi He County Plasma Collection Station,
      dated as of November 9, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.14 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)                                          
|10.15. |  | Asset Purchase Agreement,
      between Xia Jin An Tai Plasma Collection Co., Ltd. and Xia Jin County
      Plasma Collection Station, dated as of October 20, 2006 (English
      Translation) (incorporated by reference to Exhibit 10.15 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                
|10.16. |  | Asset Purchase Agreement, between Liao Cheng An
      Tai Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station, dated as of November 3,
      2006 (English Translation) (incorporated by reference to Exhibit 10.16 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)                                   

---

|10.17. |  | Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)                                                                                                      
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18. |  | Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)                                                                                 
|10.19. |  | Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)                                                                    
|10.20. |  | Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                           
|10.21. |  | Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)                                                              
|10.22. |  | Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)        
|10.23. |  | Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)
|10.24. |  | Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)                        
|10.25. |  | Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)                                                                                                                                                  
|10.26. |  | Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)                                                                                     
|10.27. |  | Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16, 2008)                                                     
|10.28. |  | (Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16, 2008)                                                                                                                          
|10.29. |  | Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)                                                                                                                                                                                        

---

|10.30. |  | Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                            
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.31. |  | Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
|10.32. |  | Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Taian Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)                                       
|10.33. |  | China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Taian Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)        
|10.34. |  | Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)                                                                  
|10.35. |  | Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                           
|10.36. |  | Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                         
|10.37. |  | Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)                                                                                                         
|10.38. |  | Form of Directors Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)                                                                                                                                         
|10.39. |  | Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)                                                                                                                                        
|10.40. |  | Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2 of the current report on
      Form 8-K, filed by the Company on July 30, 2008)                                                                                                                                                   
|10.41  |  | Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).                                                                                                                                                     
|10.42  |  | Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).                                                                                                                                                          
|14     |  | Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)                                                                                                                                                                                                
|21*    |  | Subsidiaries of China Biologic Products, Inc.                                                                                                                                                                                                                                                                                                   
|31.1*  |  | Certifications of Chief Executive Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                       
|31.2*  |  | Certifications of Chief Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                       
|32.1*  |  | Certification of Chief Executive Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        
|32.2*  |  | Certification of Chief Financial Officer
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                        



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