UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



(Mark One)



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

For the fiscal year ended: December 31, 2008



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

For the transition period from ____________ to _____________



Commission File No. 000-53208



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
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, par value $0.0001 per share

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

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

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
Q   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.   Q

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 Q
|-------------------------- | ----------------------------------------------- | --------------------- | ---------------------------
|                           | (Do not check if
    smaller reporting company) |                       |                            

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

As of June 30, 2008 (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 $6.17 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 21,434,942 shares of the registrants
common stock outstanding as of March 31, 2009.

Documents Incorporated by Reference:

None.

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TABLE OF CONTENTS

|PART I      |                                                                                                                     |   
|----------- | ------------------------------------------------------------------------------------------------------------------- | --
|ITEM 1.     | BUSINESS.                                                                                                           | 2 
|ITEM 1A.    | RISK FACTORS.                                                                                                       | 17
|ITEM 1B.    | UNRESOLVED STAFF COMMENTS.                                                                                          | 32
|ITEM 2.     | PROPERTIES                                                                                                          | 32
|ITEM 3.     | LEGAL PROCEEDINGS                                                                                                   | 33
|ITEM 4.     | SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS.                                                          | 35
|PART II     |                                                                                                                     |   
|ITEM 5.     | MARKET FOR REGISTRANTS COMMON EQUITY,
      RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. | 35
|ITEM 6.     | SELECTED FINANCIAL DATA                                                                                             | 37
|ITEM 7.     | MANAGEMENTS DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         | 37
|ITEM 7A.    | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK.                                                   | 49
|ITEM 8.     | FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA.                                                                  | 49
|ITEM 9.     | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
      ON ACCOUNTING AND FINANCIAL DISCLOSURE.                         | 49
|ITEM 9A(T). | CONTROLS AND
      PROCEDURES                                                                                       | 49
|ITEM 9B.    | OTHER INFORMATION.                                                                                                  | 51
|PART III    |                                                                                                                     |   
|ITEM 10.    | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                              | 51
|ITEM 11.    | EXECUTIVE COMPENSATION                                                                                              | 56
|ITEM 12.    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
      AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                | 58
|ITEM 13.    | CERTAIN RELATIONSHIPS AND
      RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                     | 61
|ITEM 14.    | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                              | 62
|PART IV     |                                                                                                                     |   
|ITEM 15.    | EXHIBITS, FINANCIAL STATEMENT SCHEDULES.                                                                            | 63

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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 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 annual report to (i) China Biologic, the Company, we, us, or our,
are references to the combined business of China Biologic Products, Inc., a
Delaware corporation, and its direct and indirect subsidiaries; (ii) Logic
Express are to our subsidiary Logic Express Limited, a BVI company; (iii)
Shandong Taibang are to our subsidiary Shandong Taibang Biological Products
Co. Ltd., a sino-foreign joint venture incorporated in China; (iv) Securities
Act are to the Securities Act of 1933, as amended; (v) Exchange Act are to
the Securities Exchange Act of 1934, as amended; (vi) RMB are to Renminbi, the
legal currency of China; (vii) U.S. dollar, $ and US$ are to the legal
currency of the United States; (viii) China and PRC are to the Peoples
Republic of China; and (ix) BVI are to the British Virgin Islands.

1

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PART I

ITEM 1.

BUSINESS.

Overview of Our Business

We are a biopharmaceutical company and through our indirect
majority-owned Chinese subsidiary, Shandong Taibang, we are principally engaged
in the research, development, production and manufacturing of plasma-based
pharmaceutical products in China. Shandong Taibang operates from our
manufacturing facility located in Taian City, Shandong Province. The
plasma-based biopharmaceutical manufacturing industry in China is highly
restricted 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 and
20%/50ml. Human albumin is our top-selling product. Sales of these human albumin
products represented approximately 57.8% and 63.5% of our total revenues,
respectively, for the each of the years ended December 31, 2008 and 2007. 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. 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, 2008 and
2007, our top 5 customers accounted for approximately 16.2% and 14.9%,
respectively, of our total revenue. For the years ended December 31, 2008 and
2007, our largest customer accounted for approximately 6.4% and 5.3%, 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. However, 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.

Our Corporate History and Structure

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% -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).

2

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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, entered
into asset transfer agreements with the Shandong Provincial government to
acquire all the assets of five plasma stations in Shandong Province for
approximately $2,607,356. The value of the assets was determined by qualified
valuation experts registered in the PRC. We obtained the permit to operate the
stations in January 2007. In January 2007, Shandong Taibang entered into letters
of intent to acquire certain assets of two plasma stations in Guangxi Province,
for approximately $761,781. They obtained their operating permits in February
and April 2007, respectively. The consideration paid for these acquisitions was
determined based on independent valuations performed by qualified valuation
experts based in the PRC.

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, there can be no assurance that the acquisition of these
assets can be completed or continue on the same terms that we have initially
agreed to in the letter of intent as the permit for this station is in dispute.
Please refer to Legal Proceedings for more information regarding this dispute.

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.

Establishment of Shandong 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 5 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.

Proposed Acquisition of Equity Interest in
Dalin

On September 26, 2008, we agreed to acquire a 90% controlling
interest in Chongqing Dalin Biologic Technologies Co., Ltd., or Dalin, for a
purchase price of RMB 194,400,000 (approximately $28.4 million). Dalin owns 54%
of the equity interest in Qianfeng Biological Products Co., Ltd., or Qianfeng,
one of the largest plasma-based biopharmaceutical companies in China, located in
Guiyang, Guizhou Province. The Company has completed the legal and financial due
diligence and expects the transaction to close within a few months, subject to
the formal transfer of title to the Company. In January 2009, Logic Express
appointed three out of the four Board of Directors members to the Chongqing
Dalin to take control of Dalin.  On January 16, 2009, the shareholders of
Qianfeng Biological Products (Qianfeng), which Chongqing Dalin owns 54% equity
interest, elected four Board of Directors appointed by Chongqing Dalin as part
of its seven board members.  On January 17, 2009, the Board of Directors of
Qianfeng elected a new management team consists of all Logic Express and
Chongqing Dalins appointees, including CEO, Executive Senior Vice President,
CFO and Directors of sales.  As a result, the Company took over the control
of Qianfeng starting January 16, 2009.

As part of its due diligence investigation into Dalin and
Qianfeng, the Company discovered that the indirect interest in Qianfeng that
would be acquired under Equity Transfer Agreement will be diluted. The local AIC
records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued
equity to certain investors pursuant to a capital increase agreement, dated May
2007. Qianfeng received the consideration for the equity, but the increase in
registered capital and issuance of the equity interest has not yet been
registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that
such shareholders right of first refusal with respect to the new equity
issuance was violated. When the capital increase is registered with AIC, Dalin
will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng
shareholder was decided against such shareholder, who subsequently appealed.
Therefore, Dalins interests in Qianfeng could be diluted to as low as 41.3% as
the result of the issuance of additional equity to the shareholder, if his
appeal prevails. Even if the indirect equity interest that the Company acquires
through the proposed acquisition is diluted down to 41.3%, the Company would be
able to retain control over Qianfeng as a result of the four board membership to
the Qianfengs board. The Company does not expect this dispute to impact its
ability to complete the acquisition.

3

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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 7 of these plasma collection stations, of which 6 are currently in
operation and collecting approximately 250 tons of plasma supply per year, with
an annual capacity of 40 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 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.

Proposed Acquisition of Equity Interest in
Huitian

On October 10, 2008, our indirect majority owned subsidiary,
Shandong Taibang entered into an agreement to acquire 35% of the equity interest
in Xian Huitian Blood Products Co., Ltd., or Huitian, a biopharmaceutical
company based in Xian, Shaanxi Province, from Mr. Fan Qingchun, a PRC citizen,
for an aggregate purchase price of approximately $6,502,902 (RMB 44,327,890)
including interest of $48,102 (RMB 327,890). As of March 17, 2009, the Company
has completed the financial and legal due diligence investigations on Huitian
and the parties have successfully completed its registration with the
Administration of Industry and Commerce in XiAn, Shannxi Province to transfer
the 35% equity title from Mr. Fan Qingchun, the holder, to Shandong Taibang in
accordance with the equity transfer agreement.
The final installment payment of
approximately $3,373,119 (RMB 22,993,315), which includes the accrued interest
of approximately $145,719 (RMB 993,315), was due March 31, 2009. While the
Company is able and willing to make the final payment, the local tax authority
where Huitian is located prohibited the Company from making the final payment
due to the dispute over the Mr. Fans personal income tax rate and the
withholding tax receiving jurisdiction. The Company is awaiting the final
decision from the local tax authority and expects the payment can be made during
April, 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. 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.

The following chart reflects our organizational structure as of
the date of this annual report.

4

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Our principal executive offices are located at No. 14 East
Hushan Road, Taian City, Shandong, 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 annual report.

5

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Our Industry

Human Albumin and Immunoglobulin Products

Our principal products are our approved human albumin and
immunoglobulin products, with human plasma as the main ingredient. About 55% of
human blood is composed of a liquid known as plasma. The remaining 45% of human
blood is made of three major types of cells: red blood cells, white blood cells,
and platelets.

Plasma carries a large number of important proteins, including
albumin, gamma globulin, and clotting factors. Albumin is the main protein in
blood. It helps regulate the water content of tissues and blood. Gamma globulin
is composed of tens of thousands of unique antibody molecules. Antibodies
neutralize or help destroy infectious organisms. Each antibody is designed to
target one specific invading organism.

The Plasma Product Industry in China

Plasma-based biopharmaceutical products are manufactured from
healthy human plasma. The collection of plasma for the production of such
products is 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. The
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 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. China currently has a
severe shortage of plasma because the reform of the industry has led to the
closure of many stations that did not meet the governments new industry
standards.

The supply of plasma has been on the decline since 2003 from
the historical high of annual supply of approximately 7,000 tons resulting from
the PRC governments mandate to reform the countrys collection practices. 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. Recent 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.

Management estimates that in 2006, sales of plasma products in
China amounted to $1 billion, and that sale of albumin amounted to about $593
million, or approximately 59% of the market for plasma products. The Plasma
derivatives market is expect to grow at 15% per year through 2011.

In accordance with Regulations on controlling blood products
promulgated in 1996, the retail price of certain plasma products including human
albumin, IVIG and intramuscular IG are regulated by the State Pricing Bureau and
the PRC Ministry of Health.

In addition to the low usage ratio between China and other more
developed countries, there is also 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 total the
United States annual plasma-derived products, and account for approximately 8%
and 62%, respectively, of China.

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Plasma Collection in China

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 are
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 do not complete their reform by December 31, 2006, their license to
collect plasma will be revoked.

Under normal circumstances, each station can only supply plasma
to the one manufacturer that has signed the Quality Responsibility statement
with them. In addition, the manufacturer is prohibited from sourcing plasma
outside its approved list of plasma station suppliers. In the event of a supply
shortage, the manufacturer can apply to the provincial health authorities to
source plasma from other stations within the province. Moreover, if the
manufacturer wishes to source plasma from stations outside of the province, it
must first file for approval by the local provincial health authorities. The
filing must be accompanied by a report on the status of the station. The station
must also file with the local provincial health authorities on the transfer of
excess plasma. The filing must be accompanied by a report on the status of the
manufacturer. Upon approval of both provincial health authorities to the
transfer, they must separately file for approval with the State Ministry of
Health. The transfer is only legal after approval by the Ministry of Health. We
believe that although there are such practices in the market, outside sourcing
is not prevalent because (i) the manufacturer has to identify the station that
has excess supply; (ii) the station must be willing to supply to such
manufacturer, and (iii) the local provincial health authorities and the Ministry
of Health have to approve such an arrangement.

Safety Features at Collection Stations in China

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.

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.

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 Fang Cheng becomes
  operational, we hope to expand its coverage area to secure higher collection
  volumes in the future.

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- 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 six 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).
- Further strengthening of research and development capability  Webelieve 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 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 and
      20%/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%/50ml
    Same as above


|Human Immunoglobulin-5g/vial                         | Same as above                                                                                                                                                                                                                                   
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Thymopolypeptides 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)                                                                                       

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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 and 20%/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.

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 and 20%/50ml products are currently approved and are commercially
available. Accordingly, all references, in this annual report, to our
manufacture and sale of human albumin relate to our approved human albumin
products.

We have product liability insurance covering all of our
products in the amount of approximately $2,934,000 (RMB 20,000,000). However,
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.

Raw Materials

Plasma

Plasma is the principal raw material for our biopharmaceutical
products. The cost of raw materials included in our cost of sales for 2008 and
2007, were $14.0 million and $9.2 million, respectively. We completed the
acquisitions of six plasma stations in Shandong Province by the end of
2007.There are currently six plasma stations in the Shandong Province, five of
which we have recently acquired. In April 2007, we acquired certain assets of
two more plasma stations and signed letter of intent with one plasma station in
the Guangxi Province, two of which already have the necessary permit to operate. When our
production requirements exceed the plasma supply from the stations that we own
or that we will acquire in the future, we will procure the supply deficiency
from the blood centers operated by the regulators of Shandong and other
Provinces.

10

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We currently maintain sufficient plasma supply for
approximately 90 days 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 3
months before being put into production. As such, in due course we will extend
our plasma supply for approximately 4 months. We have not experienced any
interruptions to our production due to shortage of plasma.

As discussed above under the caption Our Industry, up until
the end of 2006, all the stations were owned by the PRC government. 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. In June 2006, we entered into
letters of intent with five plasma stations in Shandong. We acquired certain
assets of these five plasma stations during December 2006 and received the
permit to operate them in January 2007. The acquisition was for the assets and
the associated liabilities with consideration determined based on the valuation
by a qualified appraiser in China with reference to the attributable net asset
value of the purchased interest. The aggregate consideration for these five
plasma acquisitions amounted to RMB19.3 million (approximately $2.5 million);
RMB17.2 million (approximately $2.2 million) of which was paid prior to December
2007.

In January 2007, we entered into letters of intent with three
plasma stations in Guangxi Province, two of which we have since acquired for an
aggregate consideration of RMB5.6 million (approximately $0.8 million). However,
there is a legal dispute between the owner of the third plasma station and a
third party and there can be no assurance that its acquisition can be completed on
the terms in the original letter of intent. For details regarding this dispute,
please see our disclosure regarding the Bobai County Collection Station case
under the Legal Proceedings heading.

We believe that the acquisitions and contemplated acquisitions
of plasma stations will result in several benefits to the Company. We will have
a controlled source of plasma and will be able to oversee 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.

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.

Major Suppliers

The table below lists our major suppliers as of December 31,
2008, showing the cumulative dollar amount of raw materials purchased from them
during the fiscal year ended December 31, 2008, and the percentage of raw
materials purchased from each supplier as compared to procurement of all raw
materials.

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Rank
    Suppliers
      name
    Cumulative Amount Purchased
      During Fiscal Year 2008(US$)
    Percentage of
      Total Purchases During Fiscal Year 20081
    Chongqing Sanda
      Weiye Pharmaceutical Products
    569,653
    15.6%2
    Zibo Zhong Bao Kang Medical
      Equipment Company
    381,277
    10.4%3
    Liao Cheng
      Tiantan Plasma Station
    380,920
    10.4%4
    Taian City Ruifeng Company
    377,375
    10.3%5
    Shandong Medical
      Bottling Company
    218,558
    6.0%6
    Pall Corporation(Beijing)
    155,938
    4.3%7
    Shin Tai Yong
      Feng Company
    144,170
    3.9%8
    Beijing Zhongtianbaiyi
      Technology Development
    133,498
    3.7%Company9
    Wenzhou City Jiacheng Company
    133,482
    3.7%10
    Taian Shengrong
      Stainless Steel Company
    129,264
    3.5%Total
    2,624,135
    71.8%


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 State Province Food and Drug Administration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 a rate of RMB15 (approximately $2.0)
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 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, 2008, 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
      2008 (US$)
    Percentage of Total
      Sales During Fiscal Year 2008Handan Zhiying Medical
      Company
    2,915,461
    6.2%Zibo KangHua Medical Supply Company
    1,422,967
    3.1%Linyi Luoxin Medical Company
    1,411,582
    3.0%HeZe Mudan Medical Company
    931,538
    2.0%Wuhan JiuZhengShiJi Medical
      Company
    887,338
    1.9%Total
    7,568,886
    16.2%


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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, 2008 and 2007, direct sales to
distributors represented approximately 65.6% and 58.3%, respectively, of our
revenues.

Our five largest customers in the aggregate accounted for
approximately 16.2% and 14.9% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our largest customer accounted for
approximately 6.2% and 5.3% of our total revenues for the years ended December
31, 2008 and 2007, 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 credit of $0.1 million for 2008 and
bad debt expense of $0.2 million for 2007. 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 48.1% and 42.0% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our strategy is to focus our market marketing
efforts in Jiangsu, Zhejiang, Henan and the northeastern part of China.

Our marketing and after-sales services department currently
employs approximately 56 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, 2008 and 2007, total sales and marketing
expenses amounted to approximately $2.2 million and $4.4 million, respectively,
representing approximately 4.7% and 13.7%, respectively, of our revenues.

Our Research and Development Efforts

Shandong Taibangs predecessor, 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 to our subsidiary, Shandong Taibang. In 2005 and 2006, we
were awarded the advanced high-tech enterprise certification by the Department
of Science and Technology of Shandong Province and the Ministry of Science and
Technology of China, respectively. 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 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:

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- 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;
- 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 Taian 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 Albumin-12.5g/vial*
    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
    Awaiting approval by the SFDA.
    9Human Hepatitis B Immunoglobulin (PH4) for Intravenous
      Injection
    Same as Human Albumin.
    Approved to commence clinical trial.
    8Human Immunoglobulin for Intravenous
      Injection  10%
    Same as Human Albumin
    A technical feasibility study
      and our laboratory study on the manufacturing procedure is about to begin.
    2Human Prothrombin Complex Concentrate
    Use for coagulopathie such as Hemophilia B and
      increase concentration of coagulation factor VII, IX and X.
    Approved to commence clinical trial.
    8Human Coagulation Factor VIII
    Use for coagulopathie such as
      Hemophilia A and increase concentration of coagulation factor VIII.
    Clinical research sample and
      report submitted; in the process of onsite random sampling.
    5Human Fibrinogen
    Cure for lack of fibrinogen and increase human
      fibrinogen concentration.
    We have commenced laboratory studies of a
      manufacturing procedure.
    2


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* 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 and 20%/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 annual 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 annual
report.

For the fiscal years ended December 31, 2008 and 2007, total
research and development expenses amounted to approximately $1.2 million and
$0.6 million, respectively, representing approximately 2.5% and 1.9%,
respectively, of our revenues.

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 us. In our industry, we compete based upon product quality, product cost,
ability to produce a diverse range of products and logistical capabilities. 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., Chengdu Ronsheng Pharmaceuticals, 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.

According to a 2006 Hua Yuan Medicine Net survey of the profit
ranking of companies in the Chinese biological products industry, we are ranked
the 20th in 2006 and 25th in 2005, and in the plasma
products area, we were ranked 5th in 2006. We believe that we have
maintained the same ranking in 2008 based on our analysis 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 2009. 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.

15

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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 2009. 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.

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.

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, 2008, we employed approximately 753
full-time employees, including the recently established plasma companies and
Shandong Medical, of which approximately 131 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.

Our employees in China participate in a state pension plan
organized by Chinese municipal and provincial governments. We are required to
contribute to the plan at the rates ranging of the average monthly salary of
20%. The compensation expenses related to this plan were $220,493 and $171,802
for the fiscal years 2008 and 2007, respectively. Other major contributions
include medical insurance (7%), unemployment insurance (2%) and housing provision fund (8%) for employees seconded from the
Shandong Institute. In addition, we are required by Chinese law to cover
employees in China with various types of social insurance. We have purchased
social insurances for all of our employees.

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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 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, poses a risk to the economies in which we operate and may impact
our ability to manage normal relationships with our customers, suppliers and
creditors. 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 a depressed 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 current
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 in. 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, if at all. In addition, a lack of additional financing could force
us to substantially curtail or cease operations.

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.

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

We currently source plasma mainly from human donations to our
plasma stations in Shandong and Guangxi Provinces. 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 may become contaminated. If the plasma from these collection stations are
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 in Shandong Province and Guangxi Province 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. While we establish plasma processing procedures through processing
agreements with our plasma stations and 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 this criteria is met.
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 PRC
State Food and Drug Authority, or 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.

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We rely on a Secondment Agreement with the Shandong
Institute, which is expected to terminate before the end of 2008 upon the
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 131 of our employees out
of a total of approximately  753 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 replacement employees on time, our operations,
as well as our financial results, may suffer.

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 397 distributors located in about 27 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, 2008
and 2007, direct sales to distributors represented approximately 65.6% and
58.3%, respectively, of our total revenues. If a number of our distributors
cease to purchase our products and we are unable to find suitable replacement,
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.

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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 product liability insurance for sales in the PRC
for all of our products in the amount of approximately $2.9 million (RMB20
million). 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.

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.

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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, except
for the trademark Lu Yue that has been 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.

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.

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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 Taian 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
machinery and inventories of raw materials. 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 ability to have the
operating effectiveness of our internal controls attested to by our
independent auditors.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002,
or SOX 404, 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 this annual report. In addition, SOX 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, this annual report does not include an attestation
report because under current law, we will not be subject to these requirements
until our annual report for the fiscal year ending December 31, 2009. 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.

There is a dispute between the former shareholders of
Shandong Taibang that calls into question our ownership of 66%, or a majority,
of our primary operating subsidiary, which if not resolved in our favor will
adversely affect our business.

Mr. Zu Ying Du was one of the original equity holders in our
operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement,
among the original equity holders, Mr. Du was obligated to make a capital
contribution of RMB20 million (or approximately $2.6 million) for a 25% interest
in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the
Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed
to repay Beijing Chen Da for his loan of the capital contribution amount. Mr. Du
disputes that the money was due and owing. A Beijing court found that Beijing
Chen Da had given money to Mr. Du but found that the loan agreement failed to
comply with Chinese law. A notice was issued on July 5, 2004 by the Shenzhen
Public Security Bureau Economic Crime Investigation Unit requesting a stay of
the Beijing action pending their investigation into money laundering relating to
the 20 million RMB loan to Zu Ying Du.

Subsequently, Beijing Chen Da entered into an equity transfer
agreement with Mr. Du, pursuant to which Mr. Dus 25% equity interest in
Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB20
million debt. This agreement was signed by Mr. Dus brother who held a power of
attorney from Mr. Du. Mr. Du disputes the legitimacy of this transfer and has
argued that his brother, Du Hai Shan, exceeded the scope of the power of
attorney. Mr. Du sued his brother in the court of Jianli County, Hubei province,
relating to the propriety of the brothers actions under the power of attorney.
Initially the county court found in its judgment that the act had exceeded the
scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou
City, Hubei province, ruled on December 10, 2008 to suspend the judgment
based on the grounds that the original court lacked jurisdiction to hear the
case. The case is stated to be reviewed again by the Hubei Jingzhou Intermediate
Court.

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Missile Engineering, another original equity holder wholly
controlled by Mr. Du, was obligated to contribute RMB32.8 million (or $4.2
million) for a 41% interest in Shandong Taibang by means of cash, equipment and
patent technology. It was obligated to obtain new drug certificate and
production license of its patent technology from the government within a
stipulated period in order to be recognized as a valid capital contribution, or
in the alternative, make a cash payment. The patent technology was valued as
RMB26.4 million (or approximately $3.4 million). However, Missile Engineering
failed to obtain the new drug certificate and production license within the
stipulated period. Mr. Du also disputes whether the period for obtaining the
certificate and license had expired. Pursuant to a stockholders resolution on
September 26, 2004, Missile Engineering agreed to sell its 41% interest in
Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB26.4 million in cash. Missile Engineering
disputes this transaction and sued the brother of Mr. Du in the court of Jianli
County, Hubei province, relating to the propriety of the brothers actions under
the power of attorney. Initially the county court found in its judgment that the
act had exceeded the scope of the power of attorney. Subsequently the
Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008
to suspend the judgment based on the grounds that the original court lacked
jurisdiction to hear the case. The case is stated to be reviewed again by the
Hubei Jingzhou Intermediate Court.

In June 10, 2005, Beijing Chen Da also sold its equity interest
in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a
share transfer agreement, which became effective on September 2, 2005, upon
approval by the Shandong Provincial Department of Foreign Trade and Economic
Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity
interests in Shandong Taibang to Logic Express, our subsidiary.

In 2006, Missile Engineering applied for arbitration before the
China International Economic and Trade Arbitration Commission, or CIETAC, to
challenge the effectiveness of the transfer to Up-Wing Investments Limited, of
the equity interests in Shandong Taibang formerly owned by Missile Engineering.
The equity transfer had been approved by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile
Engineering later voluntarily withdrew this application and instead applied for
administrative reconsideration of the equity transfer, but this application was
rejected by the Ministry of Commerce in 2007. Missile Engineering applied with
the District Court of Lixia District, Jinan City, Shandong province requesting
revocation of Shandong COFTECs approval of the equity transfer to Up-wing by
Missile Engineering. Missile Engineering later voluntarily withdrew the action.
In April 2007, Logic Express initiated an arbitration proceeding before the
Shandong Taian Arbitration Committee, to establish that Logic Express is the
lawful shareholder of Shandong Taibang. The parties to that proceeding were
Logic Express Ltd. and Shandong Taibang Biological Products Co., Ltd. The
Arbitration Committees decision on September 6, 2007 confirmed that Logic
Express had legitimate ownership as a result of the transfer of Shandong
Taibang. Up-Wing started an action in the Intermediate Court of Taian City,
Shandong province requesting the court to establish that Up-Wing is the lawful
shareholder of Shandong Taibang. The Intermediate Court of Taian City, Shandong
province on December 20, 2007 rejected the application on the basis that the
same matter had been tried by the arbitration panel.

Up-Wing filed a defamation case in the District Court of
Hi-technology and Industry Development District, Taian City, Shandong province
claiming defamation against Mr. Du and the 21st Century Economic
Report Newspaper. Judgment in favor of Up-Wing was rendered on July 22, 2008
ordering the newspaper and Mr. Du to apologize on the newspaper to Up-Wing.

Mr. Du and Missile Engineering have filed two actions in the
Intermediate Court of Wuhan City, Hubei province, against the following
defendants, Du Hai Shan, his brother, Beijing Chen Da and Logic Express. Mr. Du
and Missile Engineering have requested that the Wuhan Intermediate Court to
restore the equity interests originally held by the plaintiffs, 25% equity
interest held by Mr. Du and 41% equity interest held by Missile Engineering. The
Wuhan Intermediate Court has issued a preliminary order attaching 66% of the
equity of Shandong Taibang pending the outcome of the case.

Dr. Du has alleged that Mr. Lam, the current CEO of our
subsidiary Taibang, was formerly known as Lin Zepin and that the individual, Lin
Zepin, was court martialed for smuggling in Fujian in 1999. Dr. Du alleges that
Lin Zepin was released from prison in 2003. Mr. Lam denies these statements and
has provided an affidavit stating that he was never know as Lin Zepin and has
not been convicted of any crime. If it were determined that Mr. Lam, the CEO of
Taibang, was formerly known as Lin Zepin and was in fact convicted of a crime,
our business and results of operations could be adversely affected.

For failure to resolve these disputes in our favor may
adversely affect our business and operations.

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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, poses a risk to the economies in which we operate that 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 and the amount of our allowance for
doubtful accounts as of December 31, 2008 and 2007 was $1,581,139 and
$1,268,052, respectively. The bad debt (credit) expenses for the years ended
December 31, 2008 and 2007 were ($56,462) and $221,813, 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, entirely comprising of
long-term bank loan, as of December 31, 2008 was $5.9 million. The interest rate
on this long-term bank loan is fixed at 7.02% 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.

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 $2.5 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.

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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, 2008 and 2007, the cost of plasma used by us for production accounted for
approximately 76% and 73%, 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 due
to an ease in 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, 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 and /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 federal 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 federal 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.

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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.

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.

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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. 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 stockholders.

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. Because the New EIT Law and its implementing rules are new, no
official interpretation or application of this new resident enterprise
classification is available. Therefore, it is unclear how tax authorities will
determine tax residency based on the facts of each case.

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If the PRC tax authorities determine that China Biologic is 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 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 stockholders and
with respect to gains derived by our non-PRC stockholders from transferring our
shares. We are actively monitoring the possibility of resident enterprise
treatment for the 2009 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.

We may be exposed to liabilities under the Foreign
Corrupt Practices Act, and any determination that we violated the Foreign
Corrupt Practices Act 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 sales in
China. 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 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.

RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY

Our common stock is quoted on the OTC Bulletin Board
which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board. The OTC
Bulletin Board is a significantly more limited market than the New York Stock
Exchange or Nasdaq system. The quotation of our shares on the OTC Bulletin Board
may result in a less liquid market available for existing and potential
stockholders to trade shares of our common stock, could depress the trading
price of our common stock and could have a long-term adverse impact on our
ability to raise capital in the future.

We cannot assure you that the common stock will become
liquid or that it will be listed on a securities exchange.

We plan to list our common stock as soon as practicable.
However, we cannot assure you that we will be able to meet the initial listing
standards of any stock exchange, or that we will be able to maintain any such
listing. In this venue, however, an investor may find it difficult to obtain
accurate quotations as to the market value of the common stock. In addition, if
we failed to meet the criteria set forth in SEC regulations, various
requirements would be imposed by law on broker-dealers who sell our securities
to persons other than established customers and accredited investors. Consequently, such regulations may deter
broker-dealers from recommending or selling the common stock, which may further
affect its liquidity. This would also make it more difficult for us to raise
additional capital.

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We may be subject to penny stock regulations and
restrictions and you may have difficulty selling shares of our common
stock.

The SEC has adopted regulations which generally define
so-called penny stocks to be an equity security that has a market price less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exemptions. If our common stock becomes a penny stock, we may
become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule.
This rule imposes additional sales practice requirements on broker-dealers that
sell such securities to persons other than established customers and accredited
investors (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. As a result, this rule may
affect the ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in penny stock, of a disclosure
schedule prepared by the SEC relating to the penny stock market. Disclosure is
also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.

There can be no assurance that our common stock will qualify
for exemption from the Penny Stock Rule. In any event, even if our common stock
were exempt from the Penny Stock Rule, we would remain subject to Section
15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any
person from participating in a distribution of penny stock, if the SEC finds
that such a restriction would be in the public interest.

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 Taian City,
Shandong Province. Shandong Taibang is required to make payments totaling
approximately $20,015 (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 $325,390 and $305,571 as of December 31, 2008 and
2007, respectively, determined using present value of annual payments over 50
years.

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.

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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.

Misuse of Company Seal

In July 2006, one of the Companys sales employees
misappropriated goods and resold them to other parties using a counterfeit
Company seal. The amount involved was approximately $0.15 million (RMB1.16
million). The incident was revealed during a routine reconciliation of account
receivables. The Company reported the misappropriation to the police and the
employee was arrested and criminal charges were brought against him. To date,
the Company recovered approximately $0.05 million (cash of RMB 350,000 and goods
valued at approximately RMB30,000). The Company will continue to pursuit the
recovery of the balance in 2009, pursuant to a financial guarantee and repayment agreement
between the Company and the employee, witnessed by officials at the Taian City
Police Station.

Transfers of Equity Interests

Mr. Zu Ying Du was one of the original equity holders in our
operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement,
among the original equity holders, Mr. Du was obligated to make a capital
contribution of RMB20 million (or approximately $2.6 million) for a 25% interest
in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the
Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed
to repay Beijing Chen Da for his loan of the capital contribution amount. Mr. Du
disputes that the money was due and owing. A Beijing court found that Beijing
Chen Da had given money to Mr. Du but found that the loan agreement failed to
comply with Chinese law. A notice was issued on July 5, 2004 by the Shenzhen
Public Security Bureau Economic Crime Investigation Unit requesting a stay of
the Beijing action pending their investigation into money laundering relating to
the 20 million RMB loan to Zu Ying Du.

On September 26, 2004, Beijing Chen Da entered into an equity
transfer agreement with Mr. Du, pursuant to which Mr. Dus 25% equity interest
in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB20
million debt. This agreement was signed by Mr. Dus brother who held a power of
attorney from Mr. Du. This transfer was approved by Shandong COFTEC on March 17,
2005. Mr. Du disputes the legitimacy of this transfer and has argued that his
brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued
his brother in the court of Jianli County, Hubei province, relating to the
propriety of the brothers actions under the power of attorney. Initially the
county court found in its judgment that the act had exceeded the scope of the
power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei
province, ruled on December 10, 2008 to suspend the judgment based on the
grounds that the original court lacked jurisdiction to hear the case. The case
is stated to be reviewed again by the Hubei Jingzhou Intermediate Court.

Missile Engineering, another original equity holder wholly
controlled by Mr. Du, was obligated to contribute RMB32.8 million (or $4.2
million) for a 41% interest in Shandong Taibang by means of cash, equipment and
patent technology. It was obligated to obtain a new drug certificate and
production license of its patent technology from the government within a
stipulated period in order to be recognized as a valid capital contribution, or
in the alternative, make a cash payment. The patent technology was valued as
RMB26.4 million (or approximately $3.4 million). However, Missile Engineering
failed to obtain the new drug certificate and production license within the
stipulated period. Mr. Du also disputes whether the period for obtaining the
certificate and license had expired. Pursuant to a stockholders resolution on
September 26, 2004, Missile Engineering agreed to sell its 41% interest in
Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB26.4 million in cash. This transfer was approved by Shandong
COFTEC on March 17, 2005. Missile Engineering disputes this transaction and sued
Mr. Dus brother in the court of Jianli County, Hubei province, relating to the
propriety of the brothers actions under the power of attorney. Initially the
county court found in its judgment that the act had exceeded the scope of the
power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei
province, ruled on December 10, 2008 to suspend the judgment based on the
grounds that the original court lacked jurisdiction to hear the case. The case
is stated to be reviewed again by the Hubei Jingzhou Intermediate Court.

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In June 10, 2005, Beijing Chen Da also sold its equity interest
in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a
share transfer agreement, which became effective on September 2, 2005, upon
approval by the Shandong Provincial Department of Foreign Trade and Economic
Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity
interests in Shandong Taibang to Logic Express, our subsidiary.

In 2006, Missile Engineering applied for arbitration before the
China International Economic and Trade Arbitration Commission, or CIETAC, to
challenge the effectiveness of the transfer to Up-Wing Investments Limited, of
the equity interests in Shandong Taibang, formerly owned by Missile Engineering.
The equity transfer had been approved by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile
Engineering later voluntarily withdrew this application and instead applied for
administrative reconsideration of the equity transfer, but this application was
rejected by the Ministry of Commerce in 2007. Missile Engineering applied with
the District Court of Lixia District, Jinan City, Shandong province requesting
revocation of Shandong COFTECs approval of the equity transfer to Up-wing by
Missile Engineering. Missile Engineering later voluntarily withdraw the action.
In April 2007, Logic Express initiated an arbitration proceeding before the
Shandong Taian Arbitration Committee, to establish that Logic Express is the
lawful shareholder of Shandong Taibang. The parties to that proceeding were
Logic Express Ltd. and Shandong Taibang Biological Products Co., Ltd. The
Arbitration Committees decision on September 6, 2007 confirmed that Logic
Express had legitimate ownership as a result of the transfers of Shandong
Taibang. Up-Wing started an action in the Intermediate Court of Taian City,
Shandong province requesting the court to establish that Up-wing is the lawful
shareholder of Shandong Taibang. The intermediate court rejected the application
by Up-Wing on the basis that the same matter had been tried by the arbitration
panel.

Mr. Du and Missile Engineering have filed actions in the
Intermediate Court of Wuhan City, Hubei province, against the following
defendants, Du Hai Shan the brother of Mr. Du, Beijing Chen Da and Logic
Express. Mr. Du and Missile Engineering have requested that the Wuhan
Intermediate Court to restore the equity interests originally held by the
plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by Missile
Engineering. The Wuhan Intermediate Court has issued preliminary orders
attaching 66% of the equity of Shandong Taibang pending the outcome of the case.

Bobai County Collection Station

In January 2007, the Companys PRC subsidiary, Shandong
Taibang, advanced approximately $413,697 (RMB 3.0 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., or 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., or 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 Taian 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 Henan Province High Court. In November 2007, the High Court
affirmed the judgment against the three defendants and increased the amount of
the joint financial judgment to approximately $405,954 (RMB3,000,000).

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In January 2008, Hua Lan enforced the judgment granted by the
High Court and the Companys bank accounts containing an aggregate of
approximately $507,270 (RMB3,700,000) were frozen and are expected to remain
unavailable until the action is resolved. Shandong Taibang has filed a separate
action against Hua Lan before the Taian City District Court to seek recovery of
any losses in connection with Hua Lans claim and to request that the Taian 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 Taian 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
withdraw. 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 light of the foregoing, it is unlikely that the Companys
planned acquisition of the assets of Bobai will go forward.

ITEM 4.

SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted during the fourth quarter of our 2008
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 on the OTC Bulletin Board trades
under the symbol CBPO. 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 Bid Prices (1)** | 
|---------------------------- |  | -------------------------- | 
|                             |  | High                       | 
|Year Ended December 31, 2008 |  |                            | 
|First Quarter                |  | 5.85                       | 
|Second Quarter               |  | 4.32                       | 
|Third Quarter                |  | 4.70                       | 
|Fourth Quarter               |  | 2.79                       | 
|Year Ended December 31, 2007 |  |                            | 
|First Quarter                |  | N/A                        | 
|Second Quarter               |  | 3.15                       | 
|Third Quarter                |  | 3.40                       | 

|Fourth Quarter |  | 15.00 |  |  | 3.80 | 
|-------------- |  | ----- |  |  | ---- | 

__________________

(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 15, 2009, there were approximately 450 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

We have 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
2008 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
    -
    -
    -Equity compensation plans not approved by security holders
      (1)
    997,500
    4.00
    4,002,500Total
    997,500
    
    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, 2008 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 2008
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, 2008.

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 engaged in the research, development, manufacturing,
marketing, distribution and sales of biologic products through our indirect
majority-owned PRC subsidiary, Shandong Taibang, established under the laws of
China. We are currently the only plasma based biopharmaceutical products
manufacturer in Shandong province approved by the government. Since our
establishment, all of our revenues have been derived primarily from the sales of
human albumin and various types of immunoglobulin.

Our industry is competitive and subject to numerous government
regulations. Retail prices of certain of our biopharmaceutical products in the
PRC are subject to the control of the relevant federal 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 federal or provincial level are subject to price
control. Many competitive factors may affect our sales of products, including
product efficacy, safety, price and cost effectiveness, marketing effectiveness,
quality control and quality assurance of our manufacturing operations, and
research and development of new products.

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.

During the fiscal year ended December 31, 2008 our revenues
were derived primarily from the sale of our approved human albumin and
immunoglobulin products. Our revenues increased 44.3%, or $14.4 million, to
$46.8 million during the fiscal year ended December 31, 2008, compared to
revenues of $32.4 million for the fiscal year ended December 31, 2007. Our
approved human albumin products accounted for $27.0 million, or 57.8% of our
revenues during 2008.

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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.

Recent Developments

Proposed Acquisition of Equity Interest in Dalin

On September 26, 2008, we agreed to acquire a 90% controlling
interest in Chongqing Dalin Biologic Technologies Co., Ltd., or Dalin, for a
purchase price of RMB 194,400,000 (approximately $28.4 million). Dalin owns 54%
of the equity interest in Qianfeng Biological Products Co., Ltd., or Qianfeng,
one of the largest plasma-based biopharmaceutical companies in China, located in
Guiyang, Guizhou Province. As of December 31, 2008, the Company has completed
the financial and legal due diligence investigations on Dalin and Qianfeng and
expects to close the transaction within a few months, subject to the formal
transfer of title to the Company. In January 2009, Logic Express appointed three
out of the four directors to Dalin, thereby taking control of Dalin, and on
January 16, 2009, the shareholders of Qianfeng elected four directors appointed
by Dalin as part of its seven board members. On January 17, 2009, Qianfeng's
directors elected a new management team consisting of executives appointed by
Logic Express and Dalin, including a CEO, Executive Senior Vice President, CFO
and Directors of Sales.

As part of its due diligence investigation into Dalin and
Qianfeng, the Company discovered that the indirect interest in Qianfeng that
would be acquired under Equity Transfer Agreement will be diluted. The local AIC
records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued
equity to certain investors pursuant to a capital increase agreement, dated May
2007. Qianfeng received the consideration for the equity, but the increase in
registered capital and issuance of the equity interest has not yet been
registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that
such shareholders right of first refusal with respect to the new equity
issuance was violated. When the capital increase is registered with AIC, Dalin
will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng
shareholder was decided against such shareholder, who subsequently appealed.
Therefore, Dalins interests in Qianfeng could be diluted to as low as 41.3% as
the result of the issuance of additional equity to the shareholder, if his
appeal prevails. Even if the indirect equity interest that the Company acquires
through the proposed acquisition is diluted down to 41.3%, the Company would be
able to retain control over Qianfeng as a result of the four board membership to
the Qianfengs board. The Company does not expect this dispute to impact its
ability to complete the acquisition.

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 7 of these plasma collection stations, of which 6 are currently in
operation and collecting approximately 250 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 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.

Proposed Acquisition of Equity Interest in Huitian

On October 10, 2008, Shandong Taibang entered into an equity
transfer agreement with Mr. Fan Qingchun, a PRC citizen holding 35% of the
equity interest in Huitian, a PRC limited liabilities company, for a price of
approximately $6,502,902 (RMB 44,327,890) including interest of $48,102 (RMB
327,890). In accordance with the agreement, we made payments of $1,467,000
(RMB10,000,000) and $1,760,400 (RMB 12,000,000) in September 2008 and November
2008, respectively. On March 17, 2009, the Shandong Taibang and Huitian
successfully completed the registration process with the Administration of
Industry and Commerce in XiAn, Shannxi Province to transfer the 35% equity
title from Mr. Fan Qingchun to Shandong Taibang.
The final installment payment of
approximately $3,373,119 (RMB 22,993,315), which includes the accrued interest
of approximately $145,719 (RMB 993,315), was due March 31, 2009. While the
Company is able and willing to make the final payment, the local tax authority
where Huitian is located prohibited the Company from making the final payment
due to the dispute over the Mr. Fans personal income tax rate and the
withholding tax receiving jurisdiction. The Company is awaiting the final
decision from the local tax authority and expects the payment can be made during
April, 2009.

Since November 14, 2008, the date of second installment
payment, the Company has exercised its rights as a shareholder of Huitian,
pursuant to cooperation agreements among Taibang and the other Huitian
shareholders, including the right to re-elect directors to Huitians board of
directors and board of supervisors and engagement of new executive officers. In
January 2009, Shandong Taibang received approximately $147,256 (RMB 1,003,789)
from Huitian for its share of 2008 dividends declared by Huitian according to
the equity transfer agreement.

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. 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.

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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.

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.

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. As a result, we expect
the enhanced economic conditions in China will result 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 can only supply
plasma to the one manufacturer that has signed the Quality Responsibility
statement with them. In Shandong Province, there are six plasma collection
stations and we had annual plasma supply contracts with three of them indicating
the estimated cost for each ton of plasma until December 2006. 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.

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 government.
Plasma stations, that did not complete their reform by December 31, 2006, risked
revocation of their license to collect plasma. In December 2006, we signed
agreements to acquire certain assets of five of the six plasma stations in
Shandong, which we have since acquired. On January 1, 2007 we obtained the
permit to operate these stations. These acquisitions will allow us to have
direct influence on the operation of these collection stations in the future and
secure a stable source of plasma supply for production.

In January 2007, we entered into letters of intent to acquire
certain assets of three plasma stations in Guangxi Province, two of which we
acquired in February and April 2007 and obtained their permit to operate.
However, there can be no assurance that the acquisition of the remaining plasma
station can be completed or continue on the same terms that we have initially
agreed to in the letter of intent as the permit for this station is in dispute.
Please refer to Legal Proceedings for more information regarding this dispute.

Through Shandong Taibang, we formed separate subsidiaries that
acquired the assets of the five plasma stations in Shandong and two of the
plasma stations in Guangxi Province, and we will form a subsidiary to acquire
the assets of the remaining plasma station in Guangxi Province. The wholly-owned
subsidiaries of Shandong Taibang holding 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, the Zhang Qiu Plasma Company
and Pu Bei Plasma Company, which is still under construction. The other 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. Our acquisition of
each plasma station was conditioned on the governments issuance to our
acquiring subsidiaries all permits necessary to operate the acquired assets which we have
now obtained. We have also made employment offers to all or substantially all of
the employees of each plasma station that we have acquired.

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We do not expect any material differences in our cost structure
as a result of the acquisition of the plasma stations. However, we expect that
our plasma supply will increase due to improved management. Although we have
generally been able to pass substantially all cost increases in recent years on
to our customers, there is no assurance that we can continue to do that in the
future.

Prices of Our Products

In recent years, due to market demand, we were able to increase
the selling price of most of our key products.

Demand for Our Products

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 and
the current credit crisis will result in slower economic growth in China and a
depressed economic environment which in turn may make our products less
affordable to more patients. In spite of the slowdown, we expect that in light
of the ongoing shortage for our products and the fact that there is no medical
alternative to our products in treating certain medical diseases, such
reductions and disruptions could have a less material adverse effect on our
business operations than it could have on the health care industry in
general.

In addition, we are trying to mitigate any possible impact of
these conditions by expanding our product range and markets through the
introduction of new products required by customers. We believe that our
technical expertise is important in introducing products that are in demand.

Production Capacity

Prior to the completion of our newly constructed facility with
700 metric tons annual production capacity in July 2008, our sales volume is
limited by our annual production capacity.

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 us. In our industry, we compete based upon product quality, product cost,
ability to produce a diverse range of products and logistical capabilities. 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.
Please refer to Competition for more information regarding this factor.

Taxation

United States

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.

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British Virgin Islands

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-invested 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.

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 organizations 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.

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.

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China Biologic and Subsidiaries

|                                          |   |            |  |   |            |  |   | $          |   |  | Percentage |  
|----------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- | - |  | ---------- | -
|                                          |   | 2008       |  |   | 2007       |  |   | Increase   |   |  | Increase   |  
|                                          |   |            |  |   |            |  |   | (Decrease) |   |  | (Decrease) |  
|Revenue                                   | $ | 46,751,160 |  | $ | 32,398,669 |  | $ | 14,352,491 |   |  | 44.3%      |  
|Cost of revenue                           |   | 14,040,602 |  |   | 9,945,921  |  |   | 4,094,681  |   |  | 41.2%      |  
|Gross profit                              |   | 32,710,558 |  |   | 22,452,748 |  |   | 10,257,810 |   |  | 45.7%      |  
|Gross profit as a percentage of revenue   |   | 70.0%      |  |   | 69.3%      |  |   | 0.7%       |   |  |            |  
|Operating expenses                        |   | 12,374,787 |  |   | 9,695,333  |  |   | 2,679,454  |   |  | 27.6%      |  
|Other expense                             |   | 449,656    |  |   | 511,577    |  |   | (61,921    | ) |  | (12.1%     | )
|Income before taxes and minority interest |   | 19,886,115 |  |   | 12,245,838 |  |   | 7,640,277  |   |  | 62.4%      |  
|Income taxes                              |   | 4,596,603  |  |   | 2,074,560  |  |   | 2,522,043  |   |  | 121.6%     |  
|Net income before minority interests      | $ | 15,289,512 |  | $ | 10,171,278 |  | $ | 5,118,234  |   |  | 50.3%      |  

Comparison of Fiscal Years Ended December 31, 2008 and
2007

Revenues.Our revenues are derived primarily from
the sales of human albumin and various types of immunoglobulin. Our revenues
increased 44.3%, or $14,352,491, to $46,751,160 for the fiscal year ended
December 31, 2008, compared to revenues of $32,398,669 for the fiscal year ended
December 31, 2007. The increase in revenues during fiscal year 2008 is primarily
attributable to a general increase in the price of plasma based products, which
was partially offset by a decrease in our sales volume except for one of our
products. Among the factors that contributed to the growth in revenue, foreign
exchange translation accounted for 12.5% of the increase. All of our approved
products, except human rabies immunoglobulin, recorded price increases ranging
from 29.7% to 227.7% . For the fiscal year ended December 31, 2008, the average
price for our approved human albumin products, which contributed 57.8% to our
total revenues, increased 29.7%, the average price for our approved human
immunoglobulin for intravenous injection, which contributed 22.0% to our
revenues, increased 102.8%, and the average price for our approved human tetanus
immunoglobulin, which contributed 3.2% to our revenue, increased 76.3%, as
compared to the same period in 2007. During fiscal year 2008, the SFDA
implemented the new 90-day quarantine period on plasma raw material effective
July 1, 2008. This new measure further tightens the raw material that is
available for production, and has adversely impacted the already short supply of
plasma-based products. As a result, volume in sales for our human albumin, human
hepatitis B immunoglobulin, human rabies immunoglobulin and human tetanus
immunoglobulin products decreased by 7.4%, 41.7%, 27.1% and 30.3%, respectively,
while the sales volume for approved our human immunoglobulin for intravenous use
increased by 39.2%, respectively, for the fiscal year ended December 31 2008, as
compared to the same period in 2007.

Price increase of our products between 2007 and 2008 was
primarily attributable to the governments stringent control on the quality
standard of the plasma-based production industry, which resulted in a shortage
in the supply of finished 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. In addition, there is a shortage in the market supply for
human albumin products which has increased the value of our products in the
market place. According to the SFDA spokeswoman, Ms. Yan Jiang Ying in a
September 2007 press conference, there is a critical shortage in the market
supply of human albumin due to the shortage of plasma raw material. According to
Ms. Yan, the overall market supply of human albumin was 117, 127 and 48 metric
tons during 2005, 2006 and the first 8 months of 2007, respectively. Our sales
of human albumin products for 2005, 2006 and 2007 were 4.2, 6.0 and 5.9 metric
tons, respectively, which we believe, in light of the SFDA supply data,
represents a steady increase in our market share for the periods 2005, 2006 and
2007 from 3.6%, to 4.7% and to 8.2%, respectively. The plasma-based industry has
been immune from the impact of the on-going global financial crisis as the
demand for our products has out-paced supply. As a result, our selling price,
cost of revenue and operating expenses during the fiscal year 2008 were not
impacted by the global financial turmoil.

Cost of Revenues.Our cost of sales increased
$4,094,681, or 41.2%, to $14,040,602 for the year ended December 31, 2008, from
$9,945,921 during the same period in 2007. This increase was mainly due to a
12.2% increase in foreign exchange translation, in addition to the actual 28.9%
increase in cost of revenues. The increase in cost of revenues is primarily due
to the increase in cost of raw material. The raw material cost as a percentage
of total cost of revenues is 76% in 2008, as compared to the 73% in 2007.
Cost of revenues as a percentage of sales was 30.0% for the fiscal year
ended December 31, 2008, as compared to 30.7% during the same period in 2007.
The decrease in cost of revenue as a percentage of sales is primarily due to
the favorable selling price increase, as well as our managements ability to
maintain efficiencies in our production process.

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Gross Profit.The gross profit increased by
$10,257,810, or 45.7%, to $32,710,558 for the fiscal year ended December 31,
2008 from $22,452,748 for the same period in 2007. As a percentage of sales
revenue, our gross profit increased by 0.7% to 70.0% for the fiscal year ended
December 31, 2008, from 69.3% for the same period in 2007. The increase in our
gross profit as a percentage of revenues is due primarily to the increase in
selling prices, as well as our managements ability to maintain efficiencies in
our production process.

Operating Expenses. Our total operating expenses
increased by $2,679,454, or 27.6%, to $12,374,787 for the fiscal year ended
December 31, 2008, from $9,695,333 for the same period in 2007. As a percentage
of sales revenue, total expenses decreased by 3.4% to 26.5% for the fiscal year
ended December 31, 2008 from 29.9% for the same period in 2007. The increase was
primarily attributable to the 65.2% increase in our general and administrative
expenses during the 2008 period, which was offset by the 50.1% decrease in
selling expense.

Selling Expenses. For the
fiscal year ended December 31, 2008, our selling expenses decreased to
$2,212,073, from $4,434,721 for the fiscal year ended December 31, 2007, a
decrease of $2,222,648, or 50.1% . As a percentage of sales, our selling
expenses for the fiscal year ended December 31, 2008 decreased by 9.0%, to 4.7%,
from 13.7% for the fiscal year ended December 31, 2007. The substantial decrease
in selling expenses is the reflection of the normalization of the marketing
strategy that initiated on the third quarter last year. Specifically, we awarded
sales bonuses of $0.36 million to sales personnel for their outstanding
achievement in generating revenue in 2007. Moreover, we aggressively launched
marketing efforts by holding more conferences in conjunction with our
distributors in most major cities, at an additional cost of approximately $1.4
million for the year ended December 31, 2007. In connection with these marketing
efforts, our sales force also incurred additional expenses of approximately $0.3
million. With the marketing efforts in 2007, the Company was able to obtain a
higher sales with a substantial lower level of selling expenses in 2008.

General and Administrative
Expenses. For the fiscal year ended December 31, 2008, our general and
administrative expenses increased to $7,684,493, from $4,651,434 for the fiscal
year ended December 31, 2007, a $3,033,059, or 65.2% increase. General and
administrative expenses as a percentage of sales increased by 2.0% to 16.4% for
the fiscal year 2008 from 14.4% for the fiscal year 2007. The dollar and
percentage increase was mainly due to the increase of personnel cost of $0.9
million, increase of professional expenses related to the costs of being a
public reporting company of $0.2 million and write off of $0.9 million bad debt.

Research and Development
Expenses. For the fiscal years ended December 31, 2008 and 2007, our
research and development expenses were $1,166,494 and $609,178, respectively, an
increase of $557,316 or 91.5% . As a percentage of revenues, our research and
development expenses for the fiscal year ended December 31, 2008 and 2007 were
2.5% and 1.9%, respectively. The dollar and percentage increase was primarily
due to the cost of research activities and the clinical trial on our new
products during the period.

Non-cash Employee
Compensation. Effective May 9, 2008, our board of directors adopted the
2008 Plan under which a total of 5,000,000 shares of our common stock may be
issued. During the year ended December 31, 2008, we granted an aggregate of
937,500 immediately vested options to purchase shares of our common stock to our
employees and consultants under the 2008 Plan and granted ten-year options to
purchase an additional 60,000 shares of common stock, with one-half scheduled to
vest on January 24, 2009 and the remaining half scheduled to vest on July 24,
2009, to our three independent directors. Non-cash employee compensation for the
year ended December 31, 2008 increased to $1,311,727, from $0 for the same
period in 2007, primarily as a result of our adoption of the 2008 Plan and
grants to employees and consultants made thereunder. The $1,311,727 compensation
expense represents the 937,500 shares of options fully vested on June 1, 2008
and the amortization of the compensation expense of options to purchase 30,000
shares that will vest on January 24, 2009.

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Income Tax Expense.Our provision for income taxes
increased $2,522,043, or 121.6%, to $4,596,603 for the year ended December 31,
2008, from $2,074,560 for the same period in 2007. Our effective tax rate for
the year ended December 31, 2008 was 23.1%, and our 2007 effective tax rate was
16.9% .

Net Income before Minority Interest.Our net income
before minority interest increased $5,118,234, or 50.3%, to $15,289,512 for the
year ended December 31, 2008, from $10,171,278 for the same period in 2007.
Income before taxes and minority interest as a percentage of revenues was 32.,7%
and 31.4% for the year ended December 31, 2008 and 2007, respectively. The
increase is due directly to an increase in the selling prices of our products
and the reduction of the selling expenses during the year ended December 31,
2008.

Liquidity and Capital Resources

Cash Flow and Working Capital

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. We had one bank loan outstanding as of
December 31, 2008 for the amount of approximately $5,868,000 (RMB 40,000,000).

As of December 31, 2008, we had approximately $8.8 million in
cash and cash equivalents, primarily consisting of cash on hand and demand
deposits. 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)

|                                                          |   | 2008        |   |   | 2007       |  
|--------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|Net Cash provided by Operating activities                 | $ | 20,020,039  |   | $ | 12,650,904 |  
|Net Cash used in Investing activities                     |   | (21,666,504 | ) |   | (9,210,814 | )
|Net Cash provided by/(used in) Financing
      activities |   | 4,785,780   |   |   | (3,122,278 | )
|Effects of Exchange Rate Change in Cash                   |   | 665,268     |   |   | 424,001    |  
|Net Increase in Cash and Cash Equivalents                 |   | 3,804,583   |   |   | 741,813    |  
|Cash and Cash Equivalent at Beginning of the Year         |   | 5,010,033   |   |   | 4,268,220  |  
|Cash and Cash Equivalent at End of the Year               |   | 8,814,616   |   |   | 5,010,033  |  

Operating activities

Net cash provided by operating activities was $20.0 million for
the fiscal year ended December 31, 2008, as compared to $12.7 million net cash
provided by operating activities for the same period in 2007. The increase in
net cash provided by operating activities was mainly due to the increase in net
income of $3.8 million to $12.0 million for the fiscal year ended December 31,
2008, as compare to $8.2 million in the same period of 2007. For the year ended
December 31, 2008, the non-cash activities of $6.7 million and the increase in
other payables and taxes payable provided $2.7 million and 3.6 million,
respectively, in net cash, which was offset by the $4.7 million increase in
inventory.

Investing activities

Net cash used for investing activities for the fiscal year
ended December 31, 2008 was $21.7 million, as compared to $9.2 million in the
same period of 2007. The increase of net cash used for investing activities was
mainly attributable to advances for potential acquisition of $14.2 million,
payment for unconsolidated affiliate of $3.2 million, and the additional capital
expenditures in plant and equipment for production and plasma collecting
operations to support continued strong growth in our business.

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Financing activities

Net cash provided by financing activities for the year ended
December 31, 2008 totaled $4.8 million as compared to $3.1 million used in
financing activities in the same period of 2007. The increase of the cash
provided by financing activities was mainly attributable to the proceeds from
long-term loans of $5.8 million, which was offset by the repayment of short-term
bank loan of $0.7 million.

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. In addition, we have an approximately $5.8
million additional bank facility that we can draw down in the event that
unforeseen liquidity requirements arise. The company believes that it will be
able to secure the large majority of the financing required for the two above
mentioned acquisitions from domestic bank facilities and available cash
resources.

Obligations Under Material Contracts

Below is a summary of our current obligations under material
contracts.

- On September 26, 2008, we agreed to acquire a 90% controlling interest in
  or Dalin for a purchase price of RMB 194,400,000 (approximately $28.4
  million). Dalin owns 54% of the equity interest in Qianfeng Biological
  Products Co., Ltd., or Qianfeng, one of the largest plasma-based
  biopharmaceutical companies in China, located in Guiyang, Guizhou Province.
  The Company has completed the financial and legal due diligence investigations
  and expects the transaction to close within a few months, subject to the
  formal transfer of title to the Company.
- On October 10, 2008, our indirect majority owned subsidiary, Shandong
  Taibang entered into an agreement to acquire 35% of the equity interest in or
  Huitian, a biopharmaceutical company based in Xian, Shaanxi Province, from
  Mr. Fan Qingchun, a PRC citizen, for an aggregate purchase price of
  approximately $6,502,902 (RMB 44,327,890) including interest of $48,102 (RMB
  327,890). The Company has completed the financial and legal due diligence
  investigations and expects the transaction to close upon the final payment on
  March 31, 2009. On March 17, 2009, the Shandong Taibang successfully completed
  the registration process with Administration of Industry and Commerce in the
  City of XiAn, Shaanxi Province to transfer the 35% equity title from Mr. Fan
  Qingchun to Shandong Taibang according to the Equity Transfer Agreement.

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

Statement of Financial Accounting Standards (SFAS) 107,
Disclosures about Fair Value of Financial Instruments requires disclosure of
the fair value of financial instruments held by the Company. SFAS 107 defines financial instruments. 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.

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On January 1, 2008, we adopted SFAS 157, Fair Value
Measurements, which defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosures
requirements for fair value measures. The three levels are defined 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 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, 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 (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 Shandong
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. No
provision for inventory write down was required for 2008 and 2007, respectively.

Total inventories amounted to $14.9 million and $9.5 million as
of December 31, 2008 and 2007, respectively. 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.

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. There was no
impairment charges recognized for the  year ended December 31,  2007.

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Use of Estimates

The preparation of consolidated financial statements in
accordance with US 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

In February 2007, the FASB issued SFAS 159, The Fair Value
Option for Financial Assets and Financial Liabilitiesincluding an amendment of
FASB Statement No. 115 which permits companies to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The objective of SFAS 159 is to
provide opportunities to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
hedge accounting provisions. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The Company adopted SFAS 159 on January 1, 2008, and chose not to
elect the option to measure the fair value of eligible financial assets and
liabilities.

In June 2007, the FASB issued FASB Staff Position No. EITF
07-3, Accounting for Nonrefundable Advance Payments for Goods or Services
Received for use in Future Research and Development Activities (FSP EITF
07-3), which addresses whether nonrefundable advance payments for goods or
services that used or rendered for research and development activities should be
expensed when the advance payment is made or when the research and development
activity has been performed. The adoption of FSP EITF 07-3 did not impact the
Companys consolidated financial statements

In December 2007, the FASB issued SFAS 160, Noncontrolling
Interests in Consolidated Financial Statements - an amendment of Accounting
Research Bulletin No. 51, which establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The Company
believes adopting SFAS 160 will significantly impact its financial statements
for purchases of minority ownership completed after December 31, 2008.

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In December 2007, the FASB issued SFAS 141(R), Business
Combinations to replace SFAS 141, Business Combinations.SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141R 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.
This replaces SFAS 141s cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141R 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 SFAS 141R).
SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The Company believes adopting SFAS 141R will significantly
impact its financial statements for all business combinations completed after
December 31, 2008.

In March 2008, the FASB issued SFAS 161, Disclosures about
Derivative Instruments and Hedging Activities  An Amendment of SFAS No. 133.
Effective on January 1, 2009, SFAS 161 seeks to improve financial reporting for
derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, SFAS 161 requires (1) the
disclosure of the fair value of derivative instruments and gains and losses in a
tabular format; (2) the disclosure of derivative features that are credit
risk-related; and (3) cross-referencing within the footnotes. The Company is in
the process of evaluating the new disclosure requirements under SFAS 161.

In May 2008, the FASB issued SFAS 162, "The Hierarchy of
Generally Accepted Accounting Principles". SFAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. GAAP for nongovernmental entities.
SFAS 162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles." SFAS 162
has no impact on the Companys financial condition, operations or cash
flows.

In June 2008, the FASB issued EITF 07-5 Determining whether an
Instrument (or Embedded Feature) is indexed to an Entitys Own Stock. This
Issue is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 Accounting for
Derivatives and Hedging Activities specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Companys own stock and (b) classified in stockholders equity in the statement
of financial position would not be considered a derivative financial instrument.
EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuers own stock
and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This
standard triggers liability accounting on all options and warrants exercisable
at strike prices denominated in any currency other than the functional currency
of the operating entity in China (Renminbi). EITF 07-5 is effective for fiscal
years beginning after December 15, 2008, and is expected to materially affect
the Companys financial statements to carry all warrants and options as
liabilities at fair value and to reflect the change in fair value as a gain
(loss).

In June 2008, FASB issued EITF 08-4, Transition Guidance for
Conforming Changes to Issue No. 98-5. The objective of EITF 08-4 is to provide
transition guidance for conforming changes made to EITF 98-5, Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios, that result from EITF 00-27 Application of Issue
No. 98-5 to Certain Convertible Instruments, and SFAS 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity. This Issue is effective for financial statements issued for fiscal
years ending after December 15, 2008. Early application is permitted. EITF 08-4
had no impact on the Company.

48

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On October 10, 2008, the FASB issued FSP 157-3, Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active, which clarifies the application of SFAS 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. FSP 157-3 became effective on October 10, 2008, and its adoption did
not have a material impact on our financial position or results for the years
ended December 31, 2008.

In January 2009, the FASB issued FSP EITF 99-20-1, Amendments
to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20, Recognition
of Interest Income and Impairment on Purchased and Retained Beneficial Interests
in Securitized Financial Assets. FSP EITF 99-20-1 changes the impairment model
included within EITF 99-20 to be more consistent with the impairment model of
SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in
EITF 99-20 to remove 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 FSP
EITF 99-20-1 did not have a material impact on our consolidated financial
statements because all of our investments in debt securities are classified as
trading securities

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

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.

49

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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, 2008. Based on our assessment, Mr. Zhao and Mr. Kuo determined that, as of
December 31, 2008, 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, 2008 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, 2008. 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 is not effective, as of December
31, 2008 for the reasons disclosed below.

During its audit of our consolidated financial statements for
the fiscal year ended December 31, 2008, our independent registered public
accounting firm reported material weaknesses in our internal control over
financial reporting. Our independent registered public accounting firm reported
material weakness in our financial statement reporting process, including:

| | (i)  | Lack of sufficient accounting personnel qualified in US
      GAAP;                                                  
| | ---- | ---------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                      
| | (ii) | Deficiencies in the supervision, monitoring and reviewing
      of annual financial statements preparation
processes.

50

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We believe that the material weaknesses identified above were
the direct result of our recent expansion toward the year end of 2008. We have taken the measures below and
plan to continue taking measures to remediate these material weaknesses as soon
as practicable.

| | (i)  | Hire an additional financial reporting and accounting
      personnel with relevant account experience, skills and knowledge in the
      preparation of financial statements under the requirements of US GAAP and
      financial reporting disclosure under the requirement of SEC
  rules.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                               
| | (ii) | Develop a 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.

Changes in Internal Controls over Financial Reporting.

During the fiscal year ended December 31, 2008, 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      | 45  | Chairwoman of the Board              
|Chao Ming Zhao     | 35  | Chief Executive Officer and President
|Yu-Yun Tristan Kuo | 54  | Chief Financial Officer              
|Lin Ling Li        | 45  | Director                             
|Sean Shao          | 52  | Director                             
|Jie Gan            | 40  | Director                             
|Tong Jun Lin       | 45  | 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.

51

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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
Shandong Taibang since September 2007. Mr. Kuo has more than 27 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 2 years. Prior to joining our
company, Mr. Kuo worked for the Noble Group in Hong Kong as the IT Director 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 2007 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.

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 of Agria Corporation, a China-based agricultural company
listed in the U.S.He has served as the Chief Financial Officer of
Trina Solar Limited since August 2006, where he assisted them in listing on the
NYSE in December 2006. Prior to that, Mr. Shao served, from September 2005 to
August 2006, as the Chief Financial Officer of ChinaEdu Corporation, a Chinese
educational service provider, and from August 2004 to September 2005, as the
Chief Financial Officer of Watchdata Technologies Ltd., a Chinese security
software company. Prior to that Mr. Shao served, from October 1998 to July 2004,
as a senior manager at Deloitte Touche Tohmatsu CPA Ltd., Beijing, and from
December 1994 to November 1997, as an assistant manager at Deloitte &
Touche, Toronto. 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
an associate member of the American Institute of Certified Public Accountants.
Mr. Shao also serves as an Independent Director of China Information Security
Technology, Inc., a provider of public security services in China.

Dr. Jie Gan. Dr. Gan has been a member of our board of
directors since July 24, 2008.He has served as an associate professor of
finance in the School of Business and Management at Hong Kong University of
Science and Technology (HKUST) since 2002. Prior to joining HKUST, Dr. Gan
served, from 2000 to 2002, as an assistant professor at the Columbia University,
Graduate School of Business. Dr. Gan has also worked as a consultant for CRA
International (formerly Charles River Associates), one of the largest finance
and economics consulting firms in the U.S., and her consulting experience spans
company valuation, securities fraud and anti-trust, in a range of industries
including financial services, consumer goods and energy. Dr. Gan holds a Master
Degree of Urban Economics from Beijing University and a PhD in Financial
Economics from Massachusetts Institute of Technology and has been published in
top academic journals such as the Journal of Financial Economics and the Review
of Financial Studies.

Dr. Tong Jun Lin. Dr. Lin has been a member of our board
of directors since July 24, 2008. He has served as an Associate Professor in the
Departments of Microbiology and Immunology and Pediatrics, Dalhousie University since 2000 and has focused his research in immune response to
microbial pathogens. Dr. Lin received his MD (1984) and PhD (1990) degrees from
the Institute of Materia Medica at 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 43
peer-reviewed research articles in leading journals and is a member of the
American Association of Immunologists and the Canadian Society for
Immunologists. Dr. Lin is a recipient of the New Investigator Award from
Canadian Institutes of Health Research (2003-2008) and an Award of Excellence in
Medical Research from Dalhousie University (2004).

52

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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.

Significant Employees

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

|NAME          | AGE | POSITION                                         
|------------- | --- | -------------------------------------------------
|Tung Lam      | 46  | Chief Executive Officer of
      Shandong Taibang
|Yun Hua Gao   | 55  | Chief Technical Adviser of Shandong Taibang      
|Dian Cong Liu | 54  | Chief Technical Adviser of
      Shandong Taibang

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.

Yun Hua Gao. Mr. Gao is the Chief Technical Advisor of
our operating subsidiary, Shandong Taibang. In 1975, Mr. Gao was assigned to the
Shandong Institute and has been involved in the research and development work of
plasma products. From January 2000 to October 2000, he was head of the
production department at Shandong Biological Products Institute, and from
November 2002 to April 2004, he served as manager of the production department.
He graduated from Shandong Medical University majoring in medicine in 1975.

Dian Cong Liu. Mr. Liu is the Chief Technical Adviser of
our operating subsidiary, Shandong Taibang. Mr. Liu has spent many years in the
area of biopharmaceutical research. Mr. Liu joined the Shandong Institute in
1978, and served as manager of the institutes placenta product department from
1986 to 1992 and as department head for the institutes quality assurance
department from December 2000 to September 2002. Mr. Liu was one of our founding
employees in 2002. He obtained his Bachelors degree in Medicine from Shandong
Weifang Medical School in 1978. Mr. Liu has also been certified as pharmacist by
the Shandong Food and Drug Administration since 2003.

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
Certain Relationships and Related Transactions, and Director Independence,
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.

53

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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 2008, 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, with the following exceptions:

- a late Form 4 report was filed on May 16, 2008 by Siu Ling Chan, our
  director, to report the stock award of ten year non-qualified stock options to
  purchase 50,000 shares of our common stock, under our equity incentive plan,
  pursuant to a stock option agreement, dated May 9, 2008, entered into between
  her and the Company;
- a late Form 4 report was filed on May 16, 2008 by Lin Ling Li, our
  director, to report the stock award of ten year non-qualified stock options to
  purchase 50,000 shares of our common stock, under our equity incentive plan,
  pursuant to a stock option agreement, dated May 9, 2008, entered into between
  her and the Company;
- a late Form 4 report was filed on May 16, 2008 by Stanley Wong, our former
  Chief Executive Officer, to report the stock award of ten year non-qualified
  stock options to purchase 50,000 shares of our common stock, under our equity
  incentive plan, pursuant to a stock option agreement, dated May 9, 2008,
  entered into between him and the Company;
- a late Form 4 report was filed on May 16, 2008 by Chao Ming Zhao, our
  Chief Executive Officer, to report the stock award of ten year non-qualified
  stock options to purchase 115,000 shares of our common stock, under our equity
  incentive plan, pursuant to a stock option agreement, dated May 9, 2008,
  entered into between him and the Company;
- a late Form 3 was filed on August 18, 2008 by Sean Shao, our director, to
  report the award of ten-year non-qualified stock option to purchase 20,000
  shares of our common stock, under our employee benefit plan, pursuant to a
  stock option agreement, dated July 24, 2008, between him and the Company;
- a late Form 3 was filed on August 20, 2008 by Tong Jun Lin, our director,
  to report the award of ten-year non-qualified stock option to purchase 20,000
  shares of our common stock, under our employee benefit plan, pursuant to a
  stock option agreement, dated July 24, 2008, between him and the Company;
- a late Form 3 was filed on September 10, 2008 by Jie Gan, our director, to
  report the award of ten-year non-qualified stock option to purchase 20,000
  shares of our common stock, under our employee benefit plan, pursuant to a
  stock option agreement, dated July 24, 2008, between her and the Company;

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.

54

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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. Jie Gan, 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;
- 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.

55

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ITEM 11.

EXECUTIVE
COMPENSATION.

Summary Compensation Table  2008 and 2007

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 CompensationEarnings
      ($)
    Non- qualified
      Deferred **Compensation** Earnings
      ($)
    All Other
      Compensation ($)
    Total ($)Stanley Wong, 
    former CEO (1)
    2008
    $ 65,493
    $38,684
    -
    $67,370
    -
    -
    $2,346
    $173,8932007
    $100,611
    $10,637
    -
    -
    -
    -
    $4,082
    $115,330Chao Ming Zhao, CEO and former CFO
      (2)
    2008
    $148,208
    $34,377
    -
    $154,954
    -
    -
    -
    $337,5392007
    $84,674
    $16,126
    -
    -
    -
    -
    $8,288
    $109,088Yu-Yun Tristan Kuo, CFO(3)
    2008
    $179,805
    $20,582
    -
    $101,055
    -
    -
    -
    $301,4422007
    $43,950
    -
    -
    -
    -
    -
    -
    $43,950


|(1) | Stanley Wong served as our CEO from March 2007 until June
      1, 2008.                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                  
|(2) | 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.
|    |                                                                                                                                                                                                                                                  
|(3) | 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                                                                

Summary of Employment Agreements and Material Terms

Pursuant to an employment agreement which became effective
March 8, 2007, as consideration for his services as our Chief Executive Officer,
Mr. Wong received a monthly salary of $12,800, plus a bonus equals to one month
of salary payable at the end of each year and monthly round trip tickets from
Jinan to Hong Kong. Mr. Wongs employment agreement terminated upon his
resignation as or Chief Executive Officer on June 1, 2008. On May 9, 2008, we
entered into a consulting agreement with Mr. Wong, pursuant to which we agreed
to pay Mr. Wong a monthly fee of RMB40,000 or its HK$ equivalent (approximately
$5,725), as consideration for performance of his duties as consultant. We also
agreed to grant Mr. Wong a ten-year non-qualified option under the 2008 Plan,
for the purchase of 50,000 shares our common stock, at an exercise price of
$4.00 per share. The term of the consulting agreement commenced on June 1, 2008,
and expired on December 31, 2008, in accordance with its terms.

56

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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. Furthermore, we are 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. The exercise price of such option
will be the fair market value at the date of the grant and the option will be
immediately vested and exercisable on the date of the grant.

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, 2008.

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 ($)
    Option
      expiration date
    Number ofshares or
      units of stock thathave not
      vested
    **Market value**
      of shares of units of stock**that have
      not**vested ($)
    Equity incentive plan
      awards: Number of **unearned shares,**
      **units or other**rights that have not
      vested
    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
    6/1/2048
    -
    -
    -
    -


We use the Black-Scholes option pricing model to measure the
fair value of stock options, granted in 2008. 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, 2008:

57

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Name
    Fees earned or paid
      in cash
    Stock Awards
      ($)
    Option Awards
      ($)
    Non-Equity Incentive
      Plan Compensation ($)
    Nonqualified Deferred
      Compensation Earnings ($)
    All Other
      Compensation ($)
    Total ($)Siu Ling Chan
    103,648
    
    67,370
    
    
    
    171,018Lin Ling Li
    103,648
    
    67,370
    
    
    
    171,018Sean Shao
    10,516
    
    36,940
    
    
    
    47,456Jie Gan
    7,887
    
    36,940
    
    
    
    44,827Tong Jun Lin
    7,887
    
    36,940
    
    
    
    44,827


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.

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.

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, as of March 18, 2009, certain
information with respect to the beneficial ownership of our common stock by (i)
each director and executive officer, (ii) each person known by us to be the
beneficial owner of five percent or more of the outstanding shares of common
stock, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, the person or entity listed in the table is the beneficial
owner of, and has sole voting and investment power with respect to, the shares
indicated. Unless otherwise specified, the address of each of the persons set
forth below is in care of the Company at No. 14 East Hushan Road, Taian City,
Shandong, Peoples Republic of China 271000.

58

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|Name & Address of Beneficial Owner                                         | Office, If Any          | Title of Class                | Amount and Nature of Beneficial
      Ownership(1) | Percent of Class(2)
|-------------------------------------------------------------------------- | ----------------------- | ----------------------------- | -------------------------------------------------- | -------------------
|Officers and Directors                                                    
|Siu Ling Chan c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 | Chairwoman of the Board | Common stock $.0001 par value | 6,912,624(3)                                       | 29.1%              

New YorkChao Ming Zhao c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    Chief Executive Officer
    Common stock $.0001 par value
    1,186,787 (4)
    5.0%Yu-Yun Tristan Kuo
    Chief Financial Officer
    Common stock $.0001 par value
    75,000 (5)
    0.3%Lin Ling Li c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    Director
    Common stock $.0001 par value
    6,862,624(3)
    29.1%Sean Shao
    Director
    Common stock $.0001 par value
    10,000 (6)
    0.0%Jie Gan
    Director
    Common stock $.0001 par value
    10,000 (6)
    0.0%Tong Jun Lin
    Director
    Common stock $.0001 par value
    10,000 (6)
    0.0%All officers and directors as a group (7 persons named
      above)
    
    Common stock $.0001 par value
    15,117,035
    63.7%5% Securities HoldersSiu Ling Chan c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    Chairwoman of the Board
    Common stock $.0001 par value
    6,912,624(3)
    29.1%Lin Ling Li c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    Director
    Common stock $.0001 par value
    6,912,624(3)
    29.1%Chao Ming Zhao c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    Chief Executive Officer and Director
    Common stock $.0001 par value
    1,186,787 (4)
    5.0%Katherine Loh c/o Lane Capital Markets, LLC 120
      Broadway, Suite 1019 New York
    
    Common stock $.0001 par value
    1,071,787
    4.5%Pinnacle China Fund, LP 4965 Preston Park Blvd., Suite
      240 Plano, TX 75093
    
    Common stock $.0001 par value
    2,638,523(7)
    11.1%The Pinnacle Fund LP 4965 Preston Park Blvd., Suite 240
      Plano, TX 75093
    
    Common stock $.0001 par value
    500,000
    2.1%Barry M. Kitt 4965 Preston Park Blvd., Suite 240
      Plano, TX 75093
    
    Common stock $.0001 par value
    3,138,523(8)
    13.2%Jayhawk Private Equity Fund 8201 Mission Road, Suite
      110 Prairie Village, Kansas 66208
    
    Common stock $.0001 par value
    1,346,133(9)
    5.7%Jayhawk Private Equity Co-Invest 8201 Mission Road,
      Suite 110 Prairie Village, Kansas 66208
    
    Common stock $.0001 par value
    59,646(10)
    0.3%Kent C. McCarthy Jayhawk China Fund (Cayman) Ltd. 
    8201 Mission Road, Suite 110 
    Prairie Village,
      Kansas 66208
    
    Common stock $.0001 par value
    1,405,779(11)
    5.9%


*Less than 1%

59

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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 March 18, 2009, a total of 21,434,942 shares of our
      common stock are considered to be outstanding pursuant to SEC Rule
      13d-3(d)(1). For each Beneficial Owner above, any options exercisable
      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)  | Includes 10,000 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 will be vested on July 25, 2009.                                                                    
|     |                                                                                                                                                                                                                                                                                                                                               
|(7)  | Includes 527,705 shares underlying a five-year warrant
      granted on July 19, 2006, exercisable at $2.8425 per share.                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                               
|(8)  | Represents 2,110,818 shares held by Pinnacle China Fund,
      LP and 500,000 shares held by The Pinnacle Fund LP, both of which are
      beneficially owned and controlled by Barry M. Kitt.                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                               
|(9)  | Includes 471,562 shares underlying a five-year warrant
      granted on July 19, 2006, exercisable at $2.8425 per share.                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                               
|(10) | Includes 4,771 shares underlying a five-year warrant
      granted on July 19, 2006, exercisable at $2.8425 per share.                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                               
|(11) | Represents 1,346,133 shares held by Jayhawk Private
      Equity Fund and 59,646 held by Jayhawk Private Equity Co-Invest Fund,
      which are managed by Jayhawk Capital Management, LLC, an entity controlled
      by Kent C. McCarthy, who is deemed the beneficial owner of the
    shares.                                             

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
2008 for each category of our equity compensation plan:

60

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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)
    997,500
    $4.00
    4,002,500Total
    997,500
    
    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 2008 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.

- On May 9, 2008, we entered into a consulting agreement with Mr. Stanley
  Wong, our former Chief Executive Officer until June 1, 2008, pursuant to which
  we agreed to pay Mr. Wong a monthly fee of RMB40,000 or its HK$ equivalent
  (approximately $5,725), as consideration for performance of his duties as
  consultant. We also agreed to grant Mr. Wong a ten-year non-qualified option
  under the 2008 Plan, for the purchase of 50,000 shares our common stock, at an
  exercise price of $4.00 per share. The term of the consulting agreement
  commenced on June 1, 2008, and expired on December 31, 2008, in accordance
  with its terms.
- During 2007, the Company advanced in total $413,697 (RMB
3,007,481) in cash to
a 20% minority shareholder of one of the Companys plasma companies for the
purchases of plasma collection license and certain equipments for its Fang Cheng
Plasma Company. However, the title transfer of those equipments, with the
estimated value of approximately $16,871 (RMB 122,481), has not been realized.
The Company determined that the likelihood of the minority shareholders ability
to deliver the title of those equipments is minimal and made a provision for the
amount of $16,871 as of December 31, 2008. The Company also determined that the
future cash flows expected to be generated from the Fang Cheng plasma collection
license had impaired as the plasma collected in 2008 did not warrant any
carrying amount for the license. As a result, the Company recorded an impairment
write-down of intangible assets for approximately $415,873 (RMB 2,885,000).

61

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- 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 fund.

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

On July 24, 2008, our board of directors appointed Mr. Sean
Shao, Dr. Jie Gan, and Dr. Tong Jun Lin to serve 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
Moore Stephens for professional services rendered for the fiscal years ended
December 31, 2008 and 2007:

|                   |   | Year Ended December 31, | 
|------------------ | - | ----------------------- | 
|                   |   | 2008                    | 
|Audit Fees         | $ | 360,000                 | 
|Audit-Related Fees | $ | -                       | 
|Tax Fees           | $ | 17,000                  | 
|All Other Fees     | $ | 7,000                   | 
|TOTAL              | $ | 384,000                 | 

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.

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 Moore Stephens for our financial statements as of and for the
year ended December 31, 2008.

62

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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 No. |  | Description                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                 
|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)                         

63

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|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|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)                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|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 Qihei 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)                                                                  

64

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                
|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)                                                           

65

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                               
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|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)                                                                                                                                                                                  

66

---

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                     
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                 
|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)                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                 
|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                                                                                                                                                                                                                                        

67

---

|Exhibit No. |  | Description                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------
|            |  |                                                                                                         
|32.2*       |  | Certification of Chief Financial Officer
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith.

68

---

CHINA BIOLOGIC PRODUCTS, INC. CONSOLIDATED FINANCIAL
STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

Index to Financial Statements

|                                                                                                                      | Page
|--------------------------------------------------------------------------------------------------------------------- | ----
|CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
      ENDED  **DECEMBER 31, 2008 AND 2007**                           |     
|                                                                                                                      |     
|Report of Independent Registered Public
    Accounting Firm                                                           | F-2 
|Consolidated Balance Sheets as of December 31, 2008 and
    2007                                                      | F-3 
|Consolidated Statements of Income and Other
      Comprehensive Income for the Years Ended December 31, 2008 and 2007 | F-4 
|Consolidated Statements of Shareholders Equity for the
      Years Ended December 31, 2008 and 2007                  | F-5 
|Consolidated Statements of Cash Flows for
      the Years Ended December 31, 2008 and 2007                            | F-6 
|Notes to Consolidated Financial Statements                                                                            | F-7 

F-1

---

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, 2008 and 2007,
and the related consolidated statements of income and other comprehensive
income, shareholders equity, and cash flows for each of the years in the
two-year period ended December 31, 2008. China Biologic Products, Incs
management is responsible for these consolidated financial statements. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit 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, 2008 and 2007,
and the results of its operations and cash flows for each of the years in the
two-year period ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.

/s/ Moore Stephens Wurth Frazer and Torbet, LLP

Walnut, California March 30, 2009

F-2

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS 
AS OF DECEMBER 31, 2008 AND 2007

|A S S E T S                                                                      |  
|-------------------------------------------------------------------------------- | -
|                                                                                 |  
|CURRENT ASSETS:                                                                  |  
|Cash                                                                             | $
|Note receivable                                                                  |  
|Accounts receivable, net of
      allowance for doubtful accounts of $1,268,052  |  
|and
      $1,238,772 as of December 31, 2008 and 2007, respectively              |  
|Dividend receivable                                                              |  
|Other receivables                                                                |  
|Other receivables- related party                                                 |  
|Inventories                                                                      |  
|Prepayments and deferred expense                                                 |  
|Total current assets                                                             |  
|                                                                                 |  
|PLANT AND EQUIPMENT, net                                                         |  
|                                                                                 |  
|OTHER ASSETS:                                                                    |  
|Investment in unconsolidated affiliate                                           |  
|Refundable deposit for potential
      acquisition                               |  
|Prepayments-non-current                                                          |  
|Long term prepayment  related party                                             |  
|Intangible assets, net                                                           |  
|Total other assets                                                               |  
|                                                                                 |  
|Total assets                                                                     | $
|                                                                                 |  
|L I A B I L I T I E S   A N D   S H A R E H O L
      D E R S' E Q U I T Y       |  
|                                                                                 |  
|CURRENT LIABILITIES:                                                             |  
|Accounts payable                                                                 | $
|Notes payable                                                                    |  
|Short term loans - bank                                                          |  
|Short term loan  minority shareholder                                           |  
|Other payables and accrued liabilities                                           |  
|Other payable - land use right                                                   |  
|Distribution payable to minority
      shareholder                               |  
|Customer deposits                                                                |  
|Taxes payable                                                                    |  
|Investment payable                                                               |  
|Total current liabilities                                                        |  
|                                                                                 |  
|OTHER LIABILITIES:                                                               |  
|Non-current other payable  land use
      right                                 |  
|Long term loan-bank                                                              |  
|Total other liabilities                                                          |  
|Total liabilities                                                                |  
|                                                                                 |  
|COMMITMENTS AND CONTINGENCIES                                                    |  
|                                                                                 |  
|MINORITY INTEREST                                                                |  
|                                                                                 |  
|SHAREHOLDERS' EQUITY:                                                            |  
|Common stock, $0.0001 par value,
      100,000,000 shares authorized, 21,434,942 |  
|shares issued and
      outstanding at December 31, 2008 and 2007                |  
|Paid-in-capital                                                                  |  
|Statutory reserves                                                               |  
|Retained earnings                                                                |  
|Accumulated other comprehensive income                                           |  
|Total shareholders' equity                                                       |  
|                                                                                 |  
|Total liabilities and shareholders' equity                                       | $

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

F-3

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|                                                                     |   | 2008       |   |   | 2007       | 
|-------------------------------------------------------------------- | - | ---------- | - | - | ---------- | 
|                                                                     |   |            |   |   |            | 
|REVENUES                                                             | $ | 46,751,160 |   | $ | 32,398,669 | 
|                                                                     |   |            |   |   |            | 
|COST OF SALES                                                        |   | 14,040,602 |   |   | 9,945,921  | 
|                                                                     |   |            |   |   |            | 
|GROSS PROFIT                                                         |   | 32,710,558 |   |   | 22,452,748 | 
|                                                                     |   |            |   |   |            | 
|OPERATING EXPENSES:                                                  |   |            |   |   |            | 
|Selling expenses                                                     |   | 2,212,073  |   |   | 4,434,721  | 
|General and administrative
      expenses                            |   | 7,684,493  |   |   | 4,651,434  | 
|Research and development
      expenses                              |   | 1,166,494  |   |   | 609,178    | 
|Stock-based compensation
      expenses (general and administrative) |   | 1,311,727  |   |   | -          | 
|TOTAL OPERATING EXPENSES                                             |   | 12,374,787 |   |   | 9,695,333  | 
|                                                                     |   |            |   |   |            | 
|INCOME FROM OPERATIONS                                               |   | 20,335,771 |   |   | 12,757,415 | 
|                                                                     |   |            |   |   |            | 
|OTHER EXPENSES (INCOME):                                             |   |            |   |   |            | 
|Equity in income of
      unconsolidated affiliate                   |   | (175,231   | ) |   | -          | 
|Interest expense (income), net                                       |   | 373,497    |   |   | 88,686     | 
|Other expense (income), net                                          |   | 251,390    |   |   | 422,891    | 
|TOTAL OTHER EXPENSES (INCOME), NET                                   |   | 449,656    |   |   | 511,577    | 
|                                                                     |   |            |   |   |            | 
|INCOME BEFORE PROVISION FOR INCOME TAXES                             |   |            |   |   |            | 
|AND MINORITY INTEREST                                                |   | 19,886,115 |   |   | 12,245,838 | 
|                                                                     |   |            |   |   |            | 
|PROVISION FOR INCOME TAXES                                           |   | 4,596,603  |   |   | 2,074,560  | 
|                                                                     |   |            |   |   |            | 
|NET INCOME BEFORE MINORITY INTEREST                                  |   | 15,289,512 |   |   | 10,171,278 | 
|                                                                     |   |            |   |   |            | 
|LESS MINORITY INTEREST                                               |   | 3,303,841  |   |   | 1,991,902  | 
|                                                                     |   |            |   |   |            | 
|NET INCOME                                                           |   | 11,985,671 |   |   | 8,179,376  | 
|                                                                     |   |            |   |   |            | 
|OTHER COMPREHENSIVE INCOME:                                          |   |            |   |   |            | 
|Foreign currency translation gain                                    |   | 2,144,091  |   |   | 1,490,409  | 
|                                                                     |   |            |   |   |            | 
|COMPREHENSIVE INCOME                                                 | $ | 14,129,762 |   | $ | 9,669,785  | 
|                                                                     |   |            |   |   |            | 
|BASIC EARNINGS PER SHARE:                                            |   |            |   |   |            | 
|Weighted average number of
      shares                              |   | 21,434,942 |   |   | 21,434,942 | 
|Earnings per share                                                   | $ | 0.56       |   | $ | 0.38       | 
|                                                                     |   |            |   |   |            | 
|DILUTED EARNINGS PER SHARE:                                          |   |            |   |   |            | 
|Weighted average number of
      shares                              |   | 21,556,342 |   |   | 21,861,014 | 
|Earnings per share                                                   | $ | 0.56       |   | $ | 0.37       | 

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

F-4

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007

|                                         |  | Common stock |  |   |       |  |   | Retained earnings |  |   | Accumulated |  |   |              |  
|---------------------------------------- |  | ------------ |  | - | ----- |  | - | ----------------- |  | - | ----------- |  | - | ------------ | -
|                                         |  |              |  |   |       |  |   | Additional        |  |   |             |  |   |              |  
|                                         |  |              |  |   | Par   |  |   | Paid-in           |  |   | Statutory   |  |   |              |  
|                                         |  | Shares       |  |   | value |  |   | capital           |  |   | reserves    |  |   | Unrestricted |  
|                                         |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|BALANCE, December 31, 2006               |  | 21,434,942   |  | $ | 2,143 |  | $ | 9,388,305         |  | $ | 2,199,580   |  | $ | 17,427       |  
|                                         |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|Net income                               |  |              |  |   |       |  |   |                   |  |   |             |  |   | 8,179,376    |  
|Adjustment to statutory reserve          |  |              |  |   |       |  |   |                   |  |   | 1,735,123   |  |   | (1,735,123   | )
|Foreign currency translation adjustments |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|                                         |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|BALANCE, December 31, 2007               |  | 21,434,942   |  | $ | 2,143 |  | $ | 9,388,305         |  | $ | 3,934,703   |  | $ | 6,461,680    |  
|                                         |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|Stock based compensation                 |  |              |  |   |       |  |   | 1,311,727         |  |   |             |  |   |              |  
|Net income                               |  |              |  |   |       |  |   |                   |  |   |             |  |   | 11,985,671   |  
|Adjustment to statutory reserve          |  |              |  |   |       |  |   |                   |  |   | 3,055,098   |  |   | (3,055,098   | )
|Foreign currency translation adjustments |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|                                         |  |              |  |   |       |  |   |                   |  |   |             |  |   |              |  
|BALANCE, December 31, 2008               |  | 21,434,942   |  | $ | 2,143 |  | $ | 10,700,032        |  | $ | 6,989,801   |  | $ | 15,392,253   |  

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



F-5

---

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

|                                                                 |   | 2008        |   |   | 2007       |  
|---------------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                                 |   |             |   |   |            |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                            |   |             |   |   |            |  
|Net income                                                       | $ | 11,985,671  |   | $ | 8,179,376  |  
|Adjustments to reconcile net income to
      cash                |   |             |   |   |            |  
|provided by operating activities:                                |   |             |   |   |            |  
|Minority Interest                                                |   | 3,303,841   |   |   | 1,991,902  |  
|Depreciation                                                     |   | 1,088,155   |   |   | 777,007    |  
|Amortization                                                     |   | 61,095      |   |   | 91,965     |  
|Loss on disposal of equipment                                    |   | 214,663     |   |   | 245,042    |  
|Allowance for bad debt  accounts receivable                     |   | (56,462     | ) |   | 221,813    |  
|Allowance for bad debt  other
      receivables and prepayments |   | 560,668     |   |   | -          |  
|Impairment of assets                                             |   | 415,873     |   |   | -          |  
|Stock based compensation                                         |   | 1,311,727   |   |   | -          |  
|Equity in income of unconsolidated affiliate                     |   | (175,231    | ) |   | -          |  
|Change in operating assets and liabilities:                      |   |             |   |   |            |  
|Notes receivable                                                 |   | 43,245      |   |   | 44,109     |  
|Accounts receivable                                              |   | 81,980      |   |   | 3,351,444  |  
|Other receivables                                                |   | (33,462     | ) |   | 310,943    |  
|Other receivables  related party                                |   | 1,442       |   |   | (2,302     | )
|Inventories                                                      |   | (4,695,495  | ) |   | (2,845,676 | )
|Prepayments and deferred expenses                                |   | (459,019    | ) |   | 599,238    |  
|Accounts payable                                                 |   | (376,527    | ) |   | 93,800     |  
|Other payables and accrued
      liabilities                     |   | 2,695,860   |   |   | (773,185   | )
|Other payables land use right                                   |   | (37,308     | ) |   | (1,346     | )
|Customer deposits                                                |   | 653,514     |   |   | 2,679      |  
|Taxes payable                                                    |   | 3,585,237   |   |   | 227,604    |  
|Contingent liability                                             |   | (149,428    | ) |   | 136,491    |  
|Net cash provided
      by operating activities                  |   | 20,020,039  |   |   | 12,650,904 |  
|                                                                 |   |             |   |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                            |   |             |   |   |            |  
|Payments to related
      party                                  |   | -           |   |   | (395,010   | )
|Additions to plant and equipment                                 |   | (4,033,667  | ) |   | (7,715,142 | )
|Additions to intangible
      assets                             |   | (83,259     | ) |   | (234,120   | )
|Payments for unconsolidated affiliate                            |   | (3,171,300  | ) |   | -          |  
|Prepayments for
      potential acquisition                      |   | (14,181,800 | ) |   | -          |  
|Advances on non-current assets                                   |   | (270,119    | ) |   | (381,996   | )
|Advances on building
      purchase to related party             |   | -           |   |   | (496,001   | )
|Proceeds from sales of equipment                                 |   | 73,641      |   |   | 11,455     |  
|Net
      cash used in investing activities                      |   | (21,666,504 | ) |   | (9,210,814 | )
|                                                                 |   |             |   |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                            |   |             |   |   |            |  
|Proceeds from notes payable                                      |   | 28,830      |   |   | -          |  
|Proceeds from short
      term loan                              |   | -           |   |   | 1,316,700  |  
|Payments on short term loan                                      |   | (720,750    | ) |   | (3,291,750 | )
|Proceeds from long term
      loan                               |   | 5,766,000   |   |   | -          |  
|Payments on long term debt                                       |   | -           |   |   | (658,350   | )
|Dividends paid to
      minority shareholders                    |   | (288,300    | ) |   | (488,878   | )
|Net cash provided
      by (used in) financing activities        |   | 4,785,780   |   |   | (3,122,278 | )
|                                                                 |   |             |   |   |            |  
|EFFECTS OF EXCHANGE RATE CHANGE IN CASH                          |   | 665,268     |   |   | 424,001    |  
|                                                                 |   |             |   |   |            |  
|INCREASE IN CASH                                                 |   | 3,804,583   |   |   | 741,813    |  
|                                                                 |   |             |   |   |            |  
|CASH, beginning of year                                          |   | 5,010,033   |   |   | 4,268,220  |  
|                                                                 |   |             |   |   |            |  
|CASH, end of year                                                | $ | 8,814,616   |   | $ | 5,010,033  |  
|                                                                 |   |             |   |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                 |   |             |   |   |            |  
|Income taxes paid                                                | $ | 1,523,867   |   | $ | 1,803,510  |  
|Interest paid (net of capitalized
      interest)                | $ | 108,170     |   | $ | 107,077    |  
|Non-cash transactions                                            |   |             |   |   |            |  
|Accounts receivable in exchange for accrued liabilities          | $ | -           |   | $ | 1,126,404  |  
|Unpaid investment in unconsolidated affiliate                    | $ | 3,218,565   |   | $ | -          |  

|Plant and equipment acquired with prepayments made in prior
      periods | $ | 78,905 |  | $ | 498,147 | 
|------------------------------------------------------------------------- | - | ------ |  | - | ------- | 

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

F-6

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2008

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 as Shepherd Food Equipment, Inc. On July 18, 2006, the Company entered into a Share Exchange
Agreement with Logic Express Ltd (Logic Express) and its stockholders. Upon the closing of the Share Exchange Agreement on July 19, 2006, Logic Express became a wholly-owned subsidiary of the Company.

Logic Express was incorporated on January 6, 2006, in the British Virgin Islands. Logic Express was established for the purpose of acquiring an 82.76% majority equity interest in Shandong Missile Biological Products Co., Ltd., which it acquired on
April 17, 2006 and on February 27, 2007 changed its name to Shandong Taibang Biological Products Co., Ltd. (Shandong Taibang). As a result of the acquisition, Shandong Taibang became the Companys indirect subsidiary.

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 India.

Acquisition of assets from plasma stations

In the third quarter of 2006, Shandong Taibang, through its wholly owned plasma companies, entered into an asset transfer agreement with the Shandong Provincial government to acquire certain assets of five plasma stations in Shandong Province, for
total consideration of approximately $2,607,356 (RMB 19.3 million).  The operating licenses of the plasma companies were effective as of January 1, 2007.

In January 2007, Shandong Taibang, through its 100% and 80% owned plasma companies, entered into letters of intent to acquire certain assets of two plasma stations in Guangxi Province for total consideration of approximately $761,781
(approximately RMB 5.6 million).

Establishment of distribution company

In September 2006, Shandong Taibang applied to establish a wholly owned subsidiary Shandong Missile Medical Co., Ltd. (Shandong Medical). The registration of Shandong Medical was approved by the Shandong Provincial Department
of Foreign Trade and Economic Cooperation on July 19, 2007. Shandong Medicals scope of business is the wholesale of biological products with a business license period of 25 years from the date of registration, with a registered capital of
$384,600.

Establishment of new collection station in Guangxi

In June 2008, the Company received the 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 (Fang Cheng). The Company's management decided to relocate Fang Cheng to a more strategic location to increase
collection volumes. During the construction period, the existing Fang Cheng Plasma Station will still continue with its normal operations. With the approval of the Centralized Industry Zone of Pu Bei County, once Fang Cheng becomes operational, the
Company hopes to expand its coverage area to secure higher collection volumes in the future.

See report of independent registered public accounting firm.

F-7

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2008

Note 2  Summary of significant accounting policies

Principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). 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. GAAP 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 principal operating subsidiaries established in the PRC use their local currency, Renminbi (RMB), as their functional currency.  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 stockholders 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 FAS 95, "Statement of Cash Flows," 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, 2008 and 2007 were translated at RMB6.82 to $1.00 and RMB7.29 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, 2008 and 2007 were RMB6.94 and RMB7.59, respectively.

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 our 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. Products distributed by Shandong Medical are subjected to a 17% VAT.

Shipping and handling

Shipping and handling costs related to costs of goods sold are included in selling, general and administrative costs and totaled $60,164 and $93,107 for the years ended December 31, 2008 and 2007, respectively.

Financial instruments

Statement of Financial Accounting Standards (SFAS) 107, Disclosures about Fair Value of Financial Instruments requires disclosure of the fair value of financial instruments held by the Company. SFAS 107 defines the fair value
of financial instruments. 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.

See report of independent registered public accounting firm.

F-8

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

On January 1, 2008, the Company adopted SFAS 157, Fair Value
Measurements, which defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosures
requirements for fair value measures. The three levels are defined 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.

The Companys investment in unconsolidated affiliate amounted
to $6,533,977 as of December 31, 2008. Since there is no quoted or observable
market price for the fair value of similar investment, the Company then used the
level 3 inputs for its valuation methodology. The determination of the fair
value was based on the capital investment that the Company contributed income or
losses from investment and additional contributions made and distributions
received. The carrying value of the investment in unconsolidated affiliate
approximated the fair value as of December 31, 2008.

The carrying value of the long term bank loan amounted to
$5,868,000. The Company used Level 2 inputs for its valuation methodology for
the long term bank loan by comparing the stated loan interest rate to the rate
charged by the Bank of China to similar loans.

|                    |   | Carrying Value as of |  |   | Fair Value
      Measurements at December 31, 2008 | 
|------------------- | - | -------------------- |  | - | -------------------------------------------------- | 
|                    |   | December 31, 2008    |  |   | using Fair Value Hierarchy                         | 
|                    |   |                      |  |   | Level 1                                            | 
|Investment          | $ | 6,533,977            |  | $ | -                                                  | 
|Long term bank loan | $ | 5,868,000            |  | $ | -                                                  | 

The Company did not identify any assets or liabilities that are
required to be presented on the balance sheet at fair value in accordance with
SFAS 157.

Concentration of risk

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.

Cash includes cash on hand and demand deposits in accounts
maintained with state-owned banks within the PRC, Hong Kong and the United
States. Certain financial instruments, which subject the Company to
concentration of credit risk, consist of cash. 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 state-owned banks at
December 31, 2008 and 2007 amounted to $8,689,414 and $4,814,991, respectively,
$47,865 and $240,797 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.

The Companys major product, human albumin: - 20%/10ml,
20%/25ml and 20%/50ml, accounted for 57.8% and 63.5% of total revenues, for the
years ended December 31, 2008 and 2007, 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.

See report of independent registered public accounting firm.

F-9

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

All of the Companys customers are located in the PRC. As of
December 31, 2008 and 2007, 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
fiscal year ended December 31, 2008 and 2007, respectively. No individual
customer represented more than 10% of trade receivables at December 31, 2008 and
2007. The Company performs ongoing credit evaluations of its customers
financial condition and, generally, requires no collateral from its
customers.

The Companys top three vendors comprised 36.3% and 24.0%,
respectively, of the Companys purchases for the years ended December 31, 2008
and 2007. Accounts payable to these vendors amounted $448,016 and $318,843 as of
December 31, 2008 and 2007, respectively.

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. Trade accounts receivable
consist of the following:

|                                      |   | December 31, 2008 |   |   | December 31, 2007 |  
|------------------------------------- | - | ----------------- | - | - | ----------------- | -
|Trade accounts receivable             | $ | 1,581,139         |   | $ | 1,555,641         |  
|Less: Allowance for doubtful accounts |   | (1,268,052        | ) |   | (1,238,772        | )
|Total                                 | $ | 313,087           |   | $ | 316,869           |  

The activity in the allowance for doubtful accounts for trade
accounts receivable for the years ended December 31, 2008 and 2007 is as
follows:

|                                             |   | December 31, 2008 |   |   | December 31, 2007 |  
|-------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|Beginning allowance for doubtful accounts    | $ | 1,238,772         |   | $ | 1,131,209         |  
|Bad debt expense                             |   | -                 |   |   | 221,813           |  
|Recovery of amount
      previously reserved |   | (56,462           | ) |   | -                 |  
|Write-off charged against the allowance      |   | -                 |   |   | (188,891          | )
|Foreign currency translation adjustment      |   | 85,742            |   |   | 74,641            |  
|Ending allowance for doubtful accounts       | $ | 1,268,052         |   | $ | 1,238,772         |  

Inventories

Inventories are stated at the lower of cost or market using the
weighted average basis and consist of the following:

|                |   | December 31, 2008 |  |   | December 31, 2007 | 
|--------------- | - | ----------------- |  | - | ----------------- | 
|Raw materials   | $ | 7,043,349         |  | $ | 3,841,595         | 
|Work-in-process |   | 4,801,768         |  |   | 4,068,389         | 
|Finished goods  |   | 3,104,079         |  |   | 1,595,090         | 
|Total           | $ | 14,949,196        |  | $ | 9,505,074         | 

The Company reviews its inventory periodically for possible
obsolete goods or to determine if any reserves are necessary for potential
obsolescence. As of December 31, 2008 and 2007, the Company has determined that
no reserve is necessary.

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. Depreciation
expense for the year ended December 31, 2008 and 2007 amounted to $1,088,155 and
$777,007, respectively.

See report of independent registered public accounting
firm.

F-10

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Estimated useful lives of the assets are as follows:

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

Construction in progress represents the costs incurred in
connection with the construction of buildings, new additions, or capitalized
interest incurred in connection with the Companys plant facilities. In
accordance with the provisions of SFAS No. 34, Capitalize of Interest Cost,
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 SFAS 144. 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, 2008, there were no impairments of its long-lived
assets.

|Plant and equipment consist of the following: |   |                   |   |   |                   |  
|--------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                              |   |                   |   |   |                   |  
|                                              |   | December 31, 2008 |   |   | December 31, 2007 |  
|Buildings and improvements                    | $ | 5,809,724         |   | $ | 4,525,589         |  
|Machinery and equipment                       |   | 12,308,174        |   |   | 8,201,720         |  
|Furniture, fixtures, and office equipment     |   | 1,501,946         |   |   | 768,197           |  
|Total depreciable assets                      |   | 19,619,844        |   |   | 13,495,506        |  
|Accumulated depreciation                      |   | (3,099,259        | ) |   | (1,840,197        | )
|                                              |   | 16,520,585        |   |   | 11,655,309        |  
|Construction in progress                      |   | 2,778,779         |   |   | 3,778,815         |  
|Total                                         | $ | 19,299,364        |   | $ | 15,434,124        |  

Interest expense of $0 and $52,701 was capitalized into
construction in progress for the years ended December 31, 2008 and 2007,
respectively.

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.

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 livesLand use rights
    
    50 yearsPermits and licenses
    
    5-10 yearsBlood donor network
    
    10 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 and Good
Manufacturing Practice Certificates contributed in return for equity upon the
establishment of Shandong Taibang in 2002. Contributed rights include those
necessary to manufacture and distribute human blood products in the PRC
market as authorized by the relevant PRC authorities. The estimated useful life
of the contributed rights is 5-10 years.

See report of independent registered public accounting
firm.

F-11

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Intangible assets consisted of the following:

|                         |   | December 31, 2008 |   |   | December 31, 2007 |  
|------------------------ | - | ----------------- | - | - | ----------------- | -
|Land use rights          | $ | 848,982           |   | $ | 819,937           |  
|Permits and licenses     |   | 389,709           |   |   | 326,983           |  
|Blood donor network      |   | 2,347             |   |   | 5,621             |  
|Software                 |   | 61,296            |   |   | 28,892            |  
|Totals                   |   | 1,302,334         |   |   | 1,181,433         |  
|Accumulated amortization |   | (299,773          | ) |   | (265,559          | )
|Intangible assets, net   | $ | 1,002,561         |   | $ | 915,874           |  

Total amortization expense for the  years ended December
31, 2008 and 2007 amounted to $61,095 and $91,965, respectively.

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

|                     |   | 2009   |  |   | 2010   |  |   | 2011   |  |   | 2012   |  |   | 2013   |  |   | Thereafter | 
|-------------------- | - | ------ |  | - | ------ |  | - | ------ |  | - | ------ |  | - | ------ |  | - | ---------- | 
|Amortization expense | $ | 64,328 |  | $ | 62,635 |  | $ | 62,635 |  | $ | 56,560 |  | $ | 31,777 |  | $ | 749,029    | 

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.
For the years ended December 31, 2008 and 2007, the Company recorded an
impairment loss of $415,873 and $0, respectively. As of December 31, 2008, the Company expects these assets to be fully
recoverable.

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, 2008 and
2007 are as follows:

|                                                      |   | 2008       |  |   | 2007       | 
|----------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Human Albumin  20%/10ml, 20%/25ml and
      20%/50ml | $ | 27,021,733 |  | $ | 20,544,330 | 
|Human Hepatitis B Immunoglobulin                      |   | 3,203,901  |  |   | 1,532,661  | 
|Human Immunoglobulin for Intravenous
      Injection  |   | 10,307,294 |  |   | 3,335,607  | 
|Human Rabies Immunoglobulin                           |   | 3,619,622  |  |   | 5,753,124  | 
|Human Tetanus Immunoglobulin                          |   | 1,492,421  |  |   | 1,105,630  | 
|Others                                                |   | 1,106,189  |  |   | 127,317    | 
|Totals                                                | $ | 46,751,160 |  | $ | 32,398,669 | 

The Company is engaged in sale of human blood products to
customers in India. The amount was immaterial and less than 10% of total sales
for the year ended December 31, 2008.

Research and development costs

Research and
development costs are expensed as incurred.

See report of independent registered public accounting
firm.

F-12

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CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

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 product liability insurance of approximately $2,934,000 (RMB 20,000,000). For the years ended December 31, 2008 and 2007, no claim on the insurance policy was filed.

Government grants

The Companys subsidiary, Shandong Taibang, is entitled to receive grants from the PRC municipal government due to its operation in the high- and new technology business sector. For the years ended December 31, 2008 and 2007, Shandong Taibang
received non-refundable grants of $139,365 and $257,415, respectively, from the PRC municipal government.  Grants received from the PRC municipal government can be used for enterprise development and technology innovation purposes.  The
government grants received during the 2008 and 2007 periods were recognized in the accompanying statement of operations as an offset to Research and Development expenses as they were earmarked or as a reduction of cost of the assets acquired.

Income taxes

The Company accounts for income taxes under SFAS 109, Accounting for Income Taxes, which requires the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between
income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consist of taxes currently due plus deferred taxes. Since the Company had no operations within the United States there is no provision for US taxes
and there are no deferred tax amounts at December 31, 2008 and 2007. In July, 2006, the Financial Accounting Standard Board (FASB) issued FASB Interpretations No. 48, Accounting for Uncertainty in Income Taxes  an interpretation
of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. FIN 48 provides guidance on the measurement, recognition, classification and disclosure of
tax positions, along with accounting for the related interest and penalties.  FIN 48 became effective at the beginning of 2007 and had no impact on the Companys consolidated financial statements.

The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

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.

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.
Products distributed by Shandong Medical are subjected to a 17% VAT. No credit is available for VAT paid on purchases.

Stock-based compensation

See report of independent registered public accounting firm.

F-13

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

The Company accounts and reports stock-based compensation pursuant to SFAS 123R 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 SFAS 123R and the EITF 96-18, "Accounting for Equity
Instruments that are issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services", as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably
measured.

Recently issued accounting pronouncements

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115 which permits companies to choose to measure many financial
instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply hedge accounting provisions. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. The Company adopted SFAS 159 on January 1, 2008, and chose not to elect the option to measure the fair value of eligible financial assets and liabilities.

In June 2007, the FASB issued FASB Staff Position No. EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for use in Future Research and Development Activities (FSP EITF 07-3), which
addresses whether nonrefundable advance payments for goods or services that used or rendered for research and development activities should be expensed when the advance payment is made or when the research and development activity has been
performed.  The adoption of FSP EITF 07-3 did not impact the Companys consolidated financial statements

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51, which establishes accounting and reporting standards for ownership interests
in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest and the valuation of retained non-controlling
equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the
non-controlling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company believes adopting SFAS 160 will significantly impact its financial statements for purchases of minority ownership completed after December
31, 2008.

In December 2007, the FASB issued SFAS 141(R), Business Combinations to replace SFAS 141, Business Combinations.SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting
(which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R 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. This replaces SFAS 141s cost-allocation process, which required the cost of an acquisition to be allocated
to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141R 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 SFAS 141R). SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company believes adopting SFAS 141R will
significantly impact its financial statements for all business combinations completed after December 31, 2008.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities An Amendment of SFAS No. 133. Effective on January 1, 2009, SFAS 161 seeks to improve financial reporting for derivative
instruments and hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS 161 requires (1) the disclosure of the fair value of
derivative instruments and gains and losses in a tabular format; (2) the disclosure of
derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. The Company is in the process of evaluating the new disclosure requirements under SFAS 161.

See report of independent registered public accounting firm.

F-14

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

In May 2008, the FASB issued SFAS 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section
411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." SFAS 162 has no impact on the Companys financial condition, operations or cash flows.

In June 2008, the FASB issued EITF 07-5 Determining whether an Instrument (or Embedded Feature) is indexed to an Entitys Own Stock. This Issue is effective for financial statements issued for fiscal years beginning after December
15, 2008, and interim periods within those fiscal years. Early application is not permitted. Paragraph 11(a) of SFAS 133 Accounting for Derivatives and Hedging Activities specifies that a contract that would otherwise meet the definition
of a derivative but is both (a) indexed to the Companys own stock and (b) classified in stockholders equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new
two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuers own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This standard triggers liability
accounting on all options and warrants exercisable at strike prices denominated in any currency other than the functional currency of the operating entity in China (Renminbi). EITF 07-5 is effective for fiscal years beginning after December 15,
2008, and is expected to materially affect the Companys financial statements to carry all warrants and options as liabilities at fair value and to reflect the change in fair value as a gain (loss).

In June 2008, FASB issued EITF 08-4, Transition Guidance for Conforming Changes to Issue No. 98-5. The objective of EITF 08-4 is to provide transition guidance for conforming changes made to EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, that result from EITF 00-27 Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. This Issue is effective for financial statements issued for fiscal years ending after December 15, 2008. Early application is permitted. EITF 08-4 had no impact on the
Company.

On October 10, 2008, the FASB issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, which clarifies the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective on October 10, 2008, and its adoption did not have a material impact on
our financial position or results for the years ended December 31, 2008.

In January 2009, the FASB issued FSP EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets. FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to remove 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 FSP
EITF 99-20-1 did not have a material impact on our consolidated financial statements because all of our investments in debt securities are classified as trading securities

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.

See report of independent registered public accounting firm.

F-15

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Note 3  Related party transactions

The material related party transactions undertaken by the
Company with related parties during the  years ended December 31, 2008 and
2007 are presented as follows:

|Amount Due from                              |  | Purpose               |  |   | December 31, 2008 |  |   | December 31, 2007 | 
|-------------------------------------------- |  | --------------------- |  | - | ----------------- |  | - | ----------------- | 
|Minority shareholder of subsidiary
      (1) |  | Advances              |  | $ | -                 |  | $ | 413,697           | 
|Minority shareholder of subsidiary (2)       |  | Prepayment for assets |  |   | -                 |  |   | 516,456           | 
|                                             |  |                       |  |   |                   |  |   |                   | 
|Amount Due to                                |  | Purpose               |  |   | December 31, 2008 |  |   | December 31, 2007 | 
|Minority shareholder of subsidiary
      (3) |  | Loan                  |  | $ | 773,277           |  | $ | 722,674           | 

(1) During 2007, the Company advanced in total $413,697 (RMB
3,007,481) in cash
to a 20% minority shareholder of one of the Company's plasma companies for the purchases of plasma collection license
and certain equipments for its Fang Cheng Plasma Company. However, the title
transfer of those equipments, with the estimated value of approximately $16,871
(RMB 122,481), has not been realized. The Company determined that the likelihood
of the minority shareholders ability to deliver the title of those equipments
is minimal and made a provision for the amount of $16,871 as of December 31,
2008. The Company also determined that the future cash flows expected to be
generated from the Fang Cheng plasma collection license had impaired as the
plasma collected in 2008 did not warrant any carrying amount for the license. As
a result, the Company recorded an impairment write-down of intangible assets for
approximately $415,873 (RMB 2,885,000).

(2) The Company prepaid approximately $516,456 (RMB 3,767,000)
to a minority shareholder of one of the plasma companies as of December 31,
2008. The prepayment is for the purpose of acquiring certain assets. Assets are
expected to be received by January 2009. The Company determined that the
likelihood of recovering this 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 the amount as allowance for bad debt as of December 31, 2008. The Company is
currently negotiating with the shareholder in attempt to recover the fund.

(3) As of December 31, 2008 and 2007, the Company borrowed an
aggregate of $773,277 and $722,674, respectively, from its minority shareholder,
Shandong Institute, for working capital purposes. The Company is required to
repay the loan in cash due by August 2009, with an annual interest rate of
6%.

Note 4  Prepayments and deferred expense

Prepayments and deferred expense represent partial payments for
deposits on raw material purchases and prepayment for insurance expenses and
amounted to $614,704 and $138,756 as of December 31, 2008 and 2007,
respectively.

Long term prepayments represent partial payments or deposits on
plant and equipment and intangible assets purchases and amounted to $955,874 and
$711,459 as of December 31, 2008 and 2007, respectively.

Note 5  Investment in unconsolidated affiliate

On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement (the "Equity Transfer Agreement") with Mr. Fan Qingchun (the
"Transferor"), a PRC citizen holding 35% of the equity interest in Xi'an Huitian
Blood Products Co., Ltd. ("Huitian"), a PRC limited liability company. Pursuant
to the Equity Transfer 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 $6,502,902 (or RMB
44,327,890) including interest of $48,102 (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. As December 31, 2008, the Company has paid
a total of $3,171,300 with the unpaid balance of $3,275,501 to be due by March
31, 2009, including interest. While the
Company is able and willing to make the final payment, the local tax authority
where Huitian is located prohibited the Company from making the final payment
due to the dispute over the Mr. Fans personal income tax rate and the
withholding tax receiving jurisdiction. The Company is awaiting the final
decision from the local tax authority and expects the payment can be made during
April, 2009.

Logic Express has also entered into an investment entrustment
agreement (the "Investment Agreement") with the minority shareholder in Shandong
Taibang, Shandong Biological Products Research Institute ("Biological
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 $18,000
(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.

See report of independent registered public accounting firm.

F-16

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Summarized unaudited financial information of Huitian is as
follows:

|                                           |   | December 31, 2008 | 
|------------------------------------------ | - | ----------------- | 
|Current assets                             | $ | 8,039,180         | 
|Non-current assets                         |   | 10,145,248        | 
|Total assets                               |   | 18,184,428        | 
|Current liabilities                        |   | 2,747,573         | 
|Non-current liabilities                    |   | -                 | 
|Shareholders' equity                       |   | 15,436,855        | 
|Total liabilities and shareholders' equity | $ | 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 in accordance with APB Opinion No. 18, the Equity Method of
Accounting for investment in Common Stock, shall not be amortized. However,
equity method goodwill shall not be reviewed for impairment in accordance with
SFAS No.142, but instead should continue to be reviewed for impairment in
accordance with paragraph 19(h) of APB18.

Summarized unaudited financial information of Huitian from October 10,
2008, date of acquisition, to December 31, 2008 is as follows:

|                              |   | From October 10, 2008 | 
|----------------------------- | - | --------------------- | 
|                              |   | to                    | 
|                              |   | December 31, 2008     | 
|Net sales                     | $ | 1,777,321             | 
|Gross profit                  | $ | 1,022,416             | 
|Income before taxes           | $ | 560,443               | 
|Net income                    | $ | 500,661               | 
|Companys share of net income | $ | 175,231               | 



|The roll forward of investment in Huitian in the
      balance sheet is shown below: |  
|------------------------------------------------------------------------------------ | -
|                                                                                     |  
|                                                                                     |  
|                                                                                     |  
|December 31, 2007                                                                    | $
|Investment made                                                                      |  
|Net Income                                                                           |  
|Dividend declared                                                                    |  
|Foreign currency translation gain                                                    |  
|December 31, 2008                                                                    | $
|                                                                                     |  
|                                                                                     |  
|See report of independent registered public
      accounting firm.                   |  
|F-17                                                                                
|                                                                                    

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Note 6  Debt

Short term and long term loans

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:

|                                                                                                                                    |   | December 31, 2008 |  |   | December 31, 2007 | 
|----------------------------------------------------------------------------------------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
|Short term bank loan, secured by buildings
      and land use rights, due on February 25, 2008, annual interest rate at
      6.12% | $ | -                 |  | $ | 685,500           | 
|Long term bank loan, secured by buildings and land use
      rights, due on August 3, 2010, annual interest rate at 7.02%           |   | 5,868,000         |  |   | -                 | 
|Totals                                                                                                                              | $ | 5,868,000         |  | $ | 685,500           | 

The above loans are secured by Shandong Taibangs land use
rights and a building located in Taian, Shandong Province, PRC, with carrying
value as follows:

|                |   | December 31, 2008 |  |   | December 31, 2007 | 
|--------------- | - | ----------------- |  | - | ----------------- | 
|Buildings       | $ | 1,417,138         |  | $ | 1,369,831         | 
|Land use rights |   | 195,691           |  |   | 387,989           | 
|Totals          | $ | 1,612,829         |  | $ | 1,757,820         | 



|Other payables and accruals                           |   |                   |  |   |                   | 
|----------------------------------------------------- | - | ----------------- |  | - | ----------------- | 
|                                                      |   |                   |  |   |                   | 
|Other payables and accruals consist of the following: |   |                   |  |   |                   | 
|                                                      |   |                   |  |   |                   | 
|                                                      |   | December 31, 2008 |  |   | December 31, 2007 | 
|Other payables                                        | $ | 1,344,830         |  | $ | 664,195           | 
|Accruals for salaries and welfare                     |   | 830,388           |  |   | 184,942           | 
|Accruals for RTO expenses                             |   | 245,657           |  |   | 245,658           | 
|Accruals for selling commission                       |   | 1,508,102         |  |   | 104,753           | 
|Accruals for interest                                 |   | 33,954            |  |   | -                 | 
|Others                                                |   | -                 |  |   | 520               | 
|Total                                                 | $ | 3,962,931         |  | $ | 1,200,068         | 

Other payable - land use rights

In July 2003, Shandong Taibang obtained certain land use rights
from the PRC 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 $325,390 and $305,571 as of
December 31, 2008 and December 31, 2007, respectively, determined using present
value of annual payments over 50 years.

Note 7 - Earnings per share

Basic earnings per share is 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.

See report of independent registered public accounting
firm.

F-18

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Earning per share is as follows for the years ended December
31,

|                                                    |   | 2008       |  |   | 2007       | 
|--------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Net income for earnings per share                   | $ | 11,985,671 |  | $ | 8,179,376  | 
|Weighted average shares used in basic computation   |   | 21,434,942 |  |   | 21,434,942 | 
|Diluted effect of warrants and
      options        |   | 121,400    |  |   | 426,072    | 
|Weighted average shares used in diluted computation |   | 21,556,342 |  |   | 21,861,014 | 
|Earnings per share:                                 |   |            |  |   |            | 
|Basic                                               | $ | 0.56       |  | $ | 0.38       | 
|Diluted                                             | $ | 0.56       |  | $ | 0.37       | 

At December 31, 2008, 1,284,000 warrants were included in the
calculation of diluted earnings per share and 937,500 options were excluded from
the calculation because of their antidilutive nature.

At December 31, 2007, all outstanding warrants were included in
the calculation of diluted earnings per share.

Note 8  Taxes

Income taxes

The Company is governed by the Income Tax Law of the Peoples
Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign
Enterprises and various local income tax laws (the Income Tax Laws). Under the
Income Tax Laws, foreign investment enterprises (FIE) generally are subject to
an income tax at an effective rate of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments unless the enterprise is located in specially
designated regions of cities for which more favorable effective tax rates apply.
Upon approval by the PRC tax authorities, FIEs scheduled to operate for a period
of 10 years or more and engaged in manufacturing and production may be exempt
from income taxes for two years, commencing with their first profitable year of
operations, after taking into account any losses brought forward from prior
years, and thereafter with a 50% exemption for the next three years.

In 2002, the Company became a Sino-foreign joint venture. In
2003, the Company was granted by the state government for benefit of income tax
exemption in first 2 years from January 2003 to December 2004 and 50% exemption
for the third to fifth years from January 2005 to December 2007.

Beginning January 1, 2008, the new Enterprise Income Tax
(EIT) law will replace the existing laws for Domestic Enterprises (DES) and
Foreign Invested Enterprises (FIEs).

The key changes are:

|a. | The new standard EIT rate of 25% will replace the 33%
      rate currently applicable to both DES and FIEs, except for High Tech
      companies who pays at a reduced rate of 15%; and                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                
|b. | Companies established before March 16, 2007 will continue
      to enjoy tax holiday treatment approved by local government for a grace
      period of the next 5 years or until the tax holiday term is completed,
      whichever is sooner.

The Companys subsidiary, Shandong Taibang, was established
before March 16, 2007 and therefore is qualified to continue enjoying the
reduced tax rate as described above.

Starting from January 1, 2008, Shandong Taibang 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%. 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.

See report of independent registered public accounting firm.

F-19

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

The local government granted the Company tax exemption for
purchases of locally manufactured equipment for the fiscal year ended December
31, 2003 through 2007. Starting January 1, 2008 the government no longer
provides this tax exemption for purchases of locally manufactured equipment.
During the third quarter of 2008, the Company received a tax rebate for the
amount of $319,095 (RMB 2,181,102) for the Companys reinvestment of its
dividends back into Shandong Taibang at the end of our fiscal year 2007.
Starting January 1, 2008, all dividends paid to foreign parents are subject to a
10% income tax. As a result, the company recorded a $1,228,775 income tax
expense for dividends Shandong Taibang paid to its foreign parent, Logic
Express.

The following table reconciles the U.S. statutory rates to the
Companys effective tax rate for the years ended December 31, 2008 and 2007:

|                           |  | 2008  |   |  | 2007  |   | 
|-------------------------- |  | ----- | - |  | ----- | - | 
|U.S. Statutory rates       |  | 35.0  | % |  | 35.0  | % | 
|Foreign Income             |  | (35.0 | ) |  | (35.0 | ) | 
|China Tax rates            |  | 25.0  |   |  | 33.0  |   | 
|China income tax exemption |  | (10.0 | ) |  | (18.0 | ) | 
|Other items (1)            |  | 8.1   |   |  | 1.9   |   | 
|Effective income tax rates |  | 23.1  | % |  | 16.9  | % | 

(1) The 8.1% represents the $1,228,775 income tax expense for
dividends Shandong Taibang paid to its foreign parent in 2008 and expenses
incurred by CBP and Logic Express that are not deductible in PRC for the year
ended December 31, 2008 offset by tax rebate of $319,095 received during the
third quarter of 2008. The 1.9% represents expenses incurred by CBP and Logic
Express that are not deductible in PRC for the year ended December 31, 2007.

The estimated tax savings due to the tax exemption for the
fiscal year ending December 31, 2008 and 2007 amounted to $2,443,657 and
$2,498,472, 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, 2008 and 2007 by $0.11 and $0.12, respectively, would decrease the
diluted earnings per share for the years ended December 31, 2008 and 2007 by
$0.11 and $0.11, respectively.

CBP was incorporated in the United States and has incurred net
operating losses of $1,777,854 (estimated) and $614,982 for income tax
purposes for the years ended December 31, 2008 and 2007, respectively. The
estimated net operating loss carry forwards for United States income taxes
amounted to $3,661,143 which may be available to reduce future years taxable
income. These carry forwards will expire, if not utilize, from 2026 through
2028. 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 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, | 
|-------------------------- | - | ------------------------------- | 
|                           |   | 2008                            | 
|Balance of January 1,      | $ | 640,318                         | 
|Increase                   |   | 604,471                         | 
|Balance as of December 31, | $ | 1,244,789                       | 
|                           |   |                                 | 
|Value added tax            |   |                                 | 

VAT on sales amounted to $3,098,977 and $2,203,070 for the
years ended December 31, 2008 and 2007, 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.

See report of independent registered public accounting
firm.

F-20

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Taxes payable consisted of the following:

|                                 |   | December 31, 2008 |  |   | December 31, 2007 | 
|-------------------------------- | - | ----------------- |  | - | ----------------- | 
|VAT tax payable                  | $ | 331,505           |  | $ | 168,369           | 
|Income tax payable               |   | 3,630,878         |  |   | 187,924           | 
|Others miscellaneous tax payable |   | 97,627            |  |   | 28,495            | 
|                                 | $ | 4,060,010         |  | $ | 384,788           | 

Note 9  Commitments and contingent liabilities

Capital and lease commitments

The Companys 82.76% owned subsidiary, He Ze, 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 $1,760 (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, 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 $4,569 (RMB 31,144) with no early
termination penalty.

The Companys 82.76% owned subsidiary, Zhang Qiu, 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 $43,245 (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 of building and equipment for a period of 10 years. The annual lease
payment is approximately $1,467 (RMB 10,000) with no early termination penalty.

The Company recognizes lease expense on a straight line basis
over the term of the lease in accordance to SFAS 13, Accounting for leases.
Total capital and lease commitments outstanding as of December 31, 2008 were as
follows:

|Fiscal year                  |   | 2009       |  |   | 2010      |  |   | 2011  |  |   | 2012  |  |   | 2013  |  |   | Thereafter | 
|---------------------------- | - | ---------- |  | - | --------- |  | - | ----- |  | - | ----- |  | - | ----- |  | - | ---------- | 
|Property and equipment       | $ | 82,068     |  | $ | -         |  | $ | -     |  | $ | -     |  | $ | -     |  | $ | -          | 
|Lease                        |   | 7,796      |  |   | 7,796     |  |   | 7,796 |  |   | 7,796 |  |   | 7,796 |  |   | 205,977    | 
|Purchase of 54% Dalin Equity |   | 11,407,392 |  |   | 2,851,848 |  |   | -     |  |   | -     |  |   | -     |  |   | -          | 
|Total                        | $ | 11,497,256 |  | $ | 2,859,644 |  | $ | 7,796 |  | $ | 7,796 |  | $ | 7,796 |  | $ | 205,977    | 

For the years ended December 31, 2008 and 2007, total rent
expense amounted to $21,717 and $0, respectively.

Contingencies

In the normal course of business, the Company is exposed to
claims related to the manufacture and use of the Companys products, but
currently the Company is not aware of any such claim.

Legal proceedings

Misuse of Company Seal

In July 2006, one of the Companys sales employees
misappropriated goods and resold them to other parties using a counterfeit
Company seal. The amount involved was approximately $0.15 million (RMB1.16
million). The incident was revealed during a routine reconciliation of accounts
receivable. The Company reported the misappropriation to the police and the
employee was arrested and criminal charges were brought against him. To date,
the Company recovered approximately $0.05 million (cash of RMB350,000 and goods
valued at approximately RMB30,000). Pursuant to a financial guarantee and
repayment agreement between the Company and the employee, witnessed by officials
at the Taian City Police Station, the Company will continue to pursue recovery.

See report of independent registered public accounting firm.

F-21

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Transfer of Equity Interests

Mr. Zu Ying Du was one of the original equity holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement, among the original equity holders, Mr. Du was obligated to make a capital contribution of RMB20 million (or
approximately $2.6 million) for a 25% interest in Shandong Taibang.  Mr. Du made this contribution using funds borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed to repay Beijing Chen Da for his
loan of the capital contribution amount.Mr. Du disputes that the money was due and owing. A Beijing court found that Beijing Chen Da had given money to Mr. Du but found that the loan agreement failed to comply with Chinese law. A notice
was issued on July 5, 2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a stay of the Beijing action pending their investigation into money laundering relating to the 20 million RMB loan to Zu Ying Du.

On September 26, 2004, Beijing Chen Da entered into an equity transfer agreement with Mr. Du, pursuant to which Mr. Dus 25% equity interest in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB20 million debts. This
agreement was signed by Mr. Dus brother who held a power of attorney from Mr. Du. This transfer was approved by the Shandong Provincial Department of Foreign of Trade and Economic Cooperation, or the Shandong COFTEC on March 17, 2005. Mr. Du
disputes the legitimacy of this transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued his brother in the court of Jianli County, Hubei province, relating to the propriety of the
brothers actions under the power of attorney. Initially the county court found in its judgment that the power of attorney was valid, but that the transfer agreements signed by Mr. Dus brother, Du Hai Shan were invalid because their
execution and delivery were beyond the scope of Du Hai Shans authority under the power of attorney.  Subsequently the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds
that the original court lacked jurisdiction to hear the case. The case is stated to be reviewed again by the Hubei Jingzhou Intermediate Court.

Missile Engineering, another original equity holder wholly controlled by Mr. Du, was obligated to contribute RMB32.8 million (or $4.2 million) for a 41% interest in Shandong Taibang by means of cash, equipment and patent technology. It was
obligated to obtain a new drug certificate and production license of its patent technology from the government within a stipulated period in order to be recognized as a valid capital contribution, or in the alternative, make a cash payment. The
patent technology was valued as RMB26.4 million (or approximately $3.4 million). However, Missile Engineering failed to obtain the new drug certificate and production license within the stipulated period.  Mr. Du also disputes whether the period
for obtaining the certificate and license had expired. Pursuant to a stockholders resolution on September 26, 2004, Missile Engineering agreed to sell its 41% interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB26.4 million in cash.  This transfer was approved by Shandong COFTEC on March 17, 2005.  Missile Engineering disputes this transaction and sued Mr. Dus brother in the court of Jianli County, Hubei province,
relating to the propriety of the brothers actions under the power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou City,
Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is stated to be reviewed again by the Hubei Jingzhou Intermediate Court.

In June 10, 2005, Beijing Chen Da also sold its equity interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a share transfer agreement, which became effective on September 2, 2005, upon approval by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our subsidiary.

In 2006, Missile Engineering applied for arbitration before the China International Economic and Trade Arbitration Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing Investments Limited, of the equity interests in
Shandong Taibang, formerly owned by Missile Engineering.  The equity transfer had been approved by the Shandong Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC.  Missile Engineering later voluntarily withdrew
this application and instead applied for administrative reconsideration of the equity transfer, but this application was rejected by the Ministry of Commerce in 2007. Missile Engineering applied with the District Court of Lixia District, Jinan City,
Shandong province requesting revocation of Shandong COFTECs approval of the equity transfer to Up-wing by Missile Engineering. Missile Engineering later voluntarily withdraw the action. In April 2007, Logic Express initiated an arbitration
proceeding
before the Shandong Taian Arbitration Committee, to establish that Logic Express is the lawful shareholder of Shandong Taibang.  The parties to that proceeding were Logic Express Ltd. and Shandong Taibang Biological Products Co., Ltd. The
Arbitration Committees decision on September 6, 2007 confirmed that Logic Express had legitimate ownership as a result of the transfers of Shandong Taibang. Up-Wing started an action in the Intermediate Court of Taian City, Shandong province
requesting the court to establish that Up-wing is the lawful shareholder of Shandong Taibang. The intermediate court rejected the application by Up-Wing on the basis that the same matter had been tried by the arbitration panel.

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, 2008

On February 16, 2009, Mr. Du and Missile Engineering have filed actions in the Intermediate Court of Wuhan City, Hubei province, against the following defendants, Du Hai Shan the brother of Mr. Du, Beijing Chen Da and Logic Express. Mr. Du and
Missile Engineering have requested that the Wuhan Intermediate Court to restore the equity interests originally held by the plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by Missile Engineering. On February 17, the Wuhan
Intermediate Court has issued preliminary orders attaching 66% of the equity of Shandong Taibang pending the outcome of the case.

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 Taian 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 Henan Province High Court. In November 2007, the High 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 High Court to freeze the Companys bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Taian City District Court to seek recovery of any losses in
connection with Hua Lans claim and to request that the Taian 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 Taian 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 withdraw. 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 light of the foregoing, it is unlikely that the Companys planned acquisition of the assets of Bobai will go forward.

See report of independent registered public accounting firm.

F-23

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

Note 10  Warrants and options

Warrants

The Companys warrants are accounted for as equity under SFAS
133 and EITF 00-19. The warrant activity is as follows:

|                  |  |             |  |  |             |  |   | Weighted |  |  | Average     | 
|----------------- |  | ----------- |  |  | ----------- |  | - | -------- |  |  | ----------- | 
|                  |  |             |  |  |             |  |   | Average  |  |  | Remaining   | 
|                  |  | Warrants    |  |  | Warrants    |  |   | Exercise |  |  | Contractual | 
|                  |  | Outstanding |  |  | Exercisable |  |   | Price    |  |  | Life        | 
|December 31, 2006 |  | 1,284,000   |  |  | 1,284,000   |  | $ | 2.84     |  |  | 4.55        | 
|Granted           |  |             |  |  |             |  |   |          |  |  |             | 
|Forfeited         |  |             |  |  |             |  |   |          |  |  |             | 
|Exercised         |  |             |  |  |             |  |   |          |  |  |             | 
|December 31, 2007 |  | 1,284,000   |  |  | 1,284,000   |  | $ | 2.84     |  |  | 3.55        | 
|Granted           |  |             |  |  |             |  |   |          |  |  |             | 
|Forfeited         |  |             |  |  |             |  |   |          |  |  |             | 
|Exercised         |  |             |  |  |             |  |   |          |  |  |             | 
|December 31, 2008 |  | 1,284,000   |  |  | 1,284,000   |  | $ | 2.84     |  |  | 2.55        | 
|                  |  |             |  |  |             |  |   |          |  |  |             | 
|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 vest
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 will be vested on January 24, 2009
and the remaining 30,000 shares will be vested on July 24, 2009, with the
expiration date of July 24, 2018. As of December 31, 2008, there were 4,002,500
shares available under the plan.

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 our 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 year ended December 31, 2008, the Company expensed
$1,311,727 in compensation expense. As of December 31, 2008, approximately
$62,281 of estimated expense with respect to non-vested stock-based awards has
yet to be recognized and will be recognized as an expense over the employees
remaining weighted average service period of approximately 0.67 years. The
options are accounted for as equity under SFAS 133 and EITF 00-19.The options
activity is as follows:

See report of independent registered public accounting
firm.

F-24

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

|                  |  |             |  |  |             |  |   | Weighted |  |  | Average     |  |   |           | 
|----------------- |  | ----------- |  |  | ----------- |  | - | -------- |  |  | ----------- |  | - | --------- | 
|                  |  |             |  |  |             |  |   | Average  |  |  | Remaining   |  |   | Aggregate | 
|                  |  | Options     |  |  | Options     |  |   | Exercise |  |  | Contractual |  |   | Intrinsic | 
|                  |  | Outstanding |  |  | Exercisable |  |   | Price    |  |  | Life        |  |   | Value     | 
|December 31, 2006 |  | -           |  |  | -           |  | $ | -        |  |  | -           |  | $ | -         | 
|Granted           |  |             |  |  |             |  |   |          |  |  |             |  |   |           | 
|Forfeited         |  |             |  |  |             |  |   |          |  |  |             |  |   |           | 
|Exercised         |  |             |  |  |             |  |   |          |  |  |             |  |   |           | 
|December 31, 2007 |  | -           |  |  | -           |  | $ | -        |  |  | -           |  | $ | -         | 
|Granted           |  | 997,500     |  |  | 937,500     |  |   | 4.00     |  |  | 10.00       |  |   | -         | 
|Forfeited         |  |             |  |  |             |  |   |          |  |  |             |  |   |           | 
|Exercised         |  |             |  |  |             |  |   |          |  |  |             |  |   |           | 
|December 31, 2008 |  | 997,500     |  |  | 937,500     |  | $ | 4.00     |  |  | 9.43        |  | $ | -         | 

Note 11  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

For the years ended December 31, 2008 and 2007, the Company
transferred $2,036,732 and $1,156,748, respectively, to the surplus reserve
fund. Amounts represent 10% of the net income determined in accordance with PRC
accounting rules and regulations, and are transferred to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Companys registered
capital. As of December 31, 2008, amount of $3,806,825 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.

Enterprise expansion fund

The enterprise fund may be used to acquire fixed assets or to
increase the working capital to expend on production and operation of the
business. For the years ended December 31, 2008 and 2007, the Company
transferred $1,018,366 and $578,375, respectively, to the fund. Amounts
represent 5% of the net income determined in accordance with PRC accounting
rules and regulations.

Note 12  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, 2008 and 2007, the
Company made pension contributions in the amount of $220,493 and $171,802,
respectively.

Note 13- Minority interest and distribution

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

See report of independent registered public accounting
firm.

F-25

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

|                                         |   | Fang Cheng Minority Owners (20%) |   |   | Shandong Taibang Minority Owners (17.24%) |   |   | Total Minority Interest |  
|---------------------------------------- | - | -------------------------------- | - | - | ----------------------------------------- | - | - | ----------------------- | -
|December 31, 2006                        | $ | -                                |   | $ | 2,308,487                                 |   | $ | 2,308,487               |  
|Net income(loss)                         |   | (2,332                           | ) |   | 1,994,234                                 |   |   | 1,991,902               |  
|Foreign currency translation gain/(loss) |   | (96                              | ) |   | -                                         |   |   | (96                     | )
|Investment made                          |   | 82,260                           |   |   | -                                         |   |   | 82,260                  |  
|Dividend declared                        |   | -                                |   |   | (2,207,541                                | ) |   | (2,207,541              | )
|Dividend reinvested                      |   | -                                |   |   | 1,710,880                                 |   |   | 1,710,880               |  
|December 31, 2007                        | $ | 79,832                           |   | $ | 3,806,060                                 |   | $ | 3,885,892               |  
|Net income(loss)                         |   | (83,938                          | ) |   | 3,387,779                                 |   |   | 3,303,841               |  
|Foreign currency translation gain/(loss) |   | 4,106                            |   |   | -                                         |   |   | 4,106                   |  
|Dividend declared                        |   | -                                |   |   | (2,982,045                                | ) |   | (2,982,045              | )
|December 31, 2008                        | $ | -                                |   | $ | 4,211,794                                 |   | $ | 4,211,794               |  

Dividends declared are split pro rata between the shareholders
according to their ownership interest. The payment of the dividends may occur at
different times to the shareholders resulting in distributions which do not
appear to be reflective of the minority ownership percentages. In 2008 and 2007,
minority shareholders owned 17.24% of the Companys subsidiaries. The table
below shows the minority shareholder and dividends outstanding.

|                                             |   | Minority shareholder |  
|-------------------------------------------- | - | -------------------- | -
|Distribution payable, December 31, 2006      | $ | 476,597              |  
|Dividend declared                            |   | 2,207,541            |  
|Dividend paid                                |   | (488,878             | )
|Dividend used to increase registered capital |   | (1,710,880           | )
|Foreign currency translation adjustments     |   | 22,246               |  
|Distribution payable, December 31, 2007      | $ | 506,626              |  
|Dividend declared                            |   | 2,982,045            |  
|Dividend paid                                |   | (288,300             | )
|Foreign currency translation adjustments     |   | 51,983               |  
|Distribution payable, December 31, 2008      | $ | 3,252,354            |  

Note 14  Subsequent event

On September 26, 2008, Logic Express Limited (Logic Express),
a wholly-owned BVI subsidiary of the Company, entered into an Equity Transfer
Agreement with Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang for the
purchase of a total of a 90% equity interest in Chongqing Dalin Biologic
Technologies Co., Ltd., (Chongqing Dalin), a PRC limited liabilities company,
for a price of $28,518,480 (RMB 194,400,000). The Company made prepayments of
approximately $2,023,165 (RMB 13,810,000) and approximately $12,208,296
(RMB83,390,000) on this potential acquisition in October and December 2008,
respectively. An English translation of the Equity Transfer Agreement is
incorporated by reference to exhibit 10.1 of the Companys Form 8-K filed with
SEC on October 2, 2008. As of December 31, 2008, the Company has completed the
financial and legal due
diligence investigations on Dalin and Qianfeng and expects to close the transaction within a few months, subject to the formal transfer of title to the Company. In January 2009, Logic Express appointed three out of the four Board of Directors
members to the Chongqing Dalin to take control of Dalin.  On January 16, 2009, the shareholders of Qianfeng Biological Products (Qianfeng), which Chongqing Dalin owns 54% equity interest, elected four Board of Directors appointed by
Chongqing Dalin as part of its seven board members. On January 17, 2009, the Board of Directors of Qianfeng elected a new management team consists of all Logic Express and Chongqing Dalins appointees, including CEO, Executive Senior Vice
President, CFO and Directors of sales. As a result, the Company took over the control of Qianfeng starting January 16, 2009.

As part of its due diligence investigation into Dalin and Qianfeng, the
Company discovered that the indirect interest in Qianfeng that would be acquired
under Equity Transfer Agreement will be diluted. The local AIC records show
Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued equity to
certain investors pursuant to a capital increase agreement, dated May 2007.
Qianfeng received the consideration for the equity, but the increase in
registered capital and issuance of the equity interest has not yet been
registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that
such shareholders right of first refusal with respect to the new equity
issuance was violated. When the capital increase is registered with AIC, Dalin
will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng
shareholder was decided against such shareholder, who subsequently appealed.
Therefore, Dalins interests in Qianfeng could be diluted to as low as 41.3% as
the result of the issuance of additional equity to the shareholder, if his
appeal prevails. Even if the indirect equity interest that the Company acquires
through the proposed acquisition is diluted down to 41.3%, the Company would be
able to retain control over Qianfeng as a result of the four board membership to
the Qianfengs board. The Company does not expect this dispute to impact its
ability to complete the acquisition.

See report of independent registered public accounting firm.

F-26

---

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008

On October 10, 2008, Shandong Taibang entered into an Equity Transfer Agreement with Mr. Fan Qingchun, a PRC citizen holding 35% of the equity interest in Xian Huitian Blood Products Co., Ltd., a PRC limited liabilities company
(Huitian), for a price of approximately $6,454,800 (RMB 44,000,000).The Company has made a prepayment of $1,467,000 (RMB 10,000,000) and $1,760,400(RMB 12,000,000) on this potential acquisition in September and in November
2008, respectively. An English translation of the Equity Transfer Agreement is incorporated by reference to exhibit 10.1 of the Companys Form 8-K filed with SEC on October 16, 2008. Since November 14, 2008, the date of second
installment payment, the Company has been exercise its rights in Huitian as a shareholder, pursuant to cooperation agreements among Taibang and the other Huitian shareholders, including the right to re-elect directors to Huitians board of
directors and board of supervisors and engagement of new executive officers. On March 17, 2009, the Shandong Taibang successfully completed the registration process with Administration of Industry and Commerce in the City of XiAn, Shannxi
Province to transfer the 35% equity title from Mr. Fan Qingchun to Shandong Taibang according to the Equity Transfer Agreement.  In January 2009, Shandong Taibang received approximately $147,256 (RMB 1,003,789) from Huitian for its share of 2008
dividends declared by Huitian according to the Equity Transfer Agreement.

On January 8, 2009, Shandong Taibang entered into a loan agreement with Taishan Sub-Branch of the Bank of China, to borrow $5,868,000 (RMB 40,000,000) for purchase of raw material. The loan bears a fixed interest rate of 5.31% per annum and
payable in full on January 7, 2010 and early prepayment will be subject to a penalty equal to 0.0005 of the principal. During the term of the loan agreement, the Company had agreed that it will not engage in any sub-contracting, leasing, equity
restructuring, pooling, consolidating, merging, splitting, joint investment, capital transferring, filing for restructuring, fling for dissolution, filing for bankruptcy, and other actions which may affect realization of the banks right under
the loan agreement.

On February 16, 2009, Shandong Taibangs board of directors declared a cash dividend in the amount of approximately $2,640,600 (RMB 18,000,000). According to the PRC tax law, Shandong Taibang had withheld at source 10% of the dividend
amount of its BVI parent, Logic Express.

See report of independent registered public accounting firm.

F-27

---

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 31, 2009

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 31, 2009
|Siu Ling Chan                |                                              |               
|                             |                                              |               
|/s/ Chao Ming
      Zhao     | Chief Executive Officer                      | March 31, 2009
|Chao Ming Zhao               | (Principal Executive Officer)                |               
|                             |                                              |               
|/s/ Yu-Yun Tristan
      Kuo | Chief Financial Officer                      | March 31, 2009
|Yu-Yun Tristan Kuo           | (Principal Financial and Accounting Officer) |               
|                             |                                              |               
|/s/ Lin Ling
      Li        | Director                                     | March 31, 2009
|Lin Ling Li                  |                                              |               
|                             |                                              |               
|/s/ Sean
      Shao          | Director                                     | March 31, 2009
|Sean Shao                    |                                              |               
|                             |                                              |               
|/s/ Jie
      Gan            | Director                                     | March 31, 2009
|Jie Gan                      |                                              |               
|                             |                                              |               
|/s/ Tong Jun
      Lin       | Director                                     | March 31, 2009
|Tong Jun Lin                 |                                              |               

---

EXHIBIT INDEX

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                                                                                 
|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)                         
|            |  |                                                                                                                                                                                                                                                                                                                                                                                 

---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|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)                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|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 Qihei 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)                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         

---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                                                                                
|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)                                                           
|            |  |                                                                                                                                                                                                                                                                                                                                                                                

---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|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)                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                           

---

|            |  |                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                 
|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)                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                 
|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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|      |  |                                                                                                         

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