**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM 10-QSB**

(Mark One)

X__Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the
period ended June 30, 2001.

___Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from ______ to ______.

**T.Z.F.  INTERNATIONAL INVESTMENTS, INC.******

(Exact name of registrant as specified in its charter)

|Nevada                                         | 0-31353                  | 88-0404186                          
|---------------------------------------------- | ------------------------ | ------------------------------------
|(State or other jurisdiction of
incorporation) | (Commission File
Number) | (IRS Employer Identification
Number)

|Unit 1, 3071 No. 5 Road

Richmond, B.C., Canada | V6X 2T4   
|----------------------------------------------- | ----------
|(Address of principal executive offices)        | (Zip Code)

Registrant's telephone number, including area code:  (604) 718-2188

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

Applicable only to issuers involved in bankruptcy proceedings during the past five years.

Check whether the issuer has filed all documents and reports required to be filed by Section 12,
13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a
court.  Yes .....  No .....

Applicable only to corporate issuers

State the number of shares outstanding of each of the issuer's classes of common equity, as of the
latest practicable date:  At June 30, 2001, there were 35,897,309 shares outstanding.

Transitional Small Business Disclosure Format (Check one):  Yes .....     No ..X..

PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS

(a)  The unaudited financial statements of registrant for the six months ended June 30, 2001,
follow.  The financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim period presented.

T.Z.F.  INTERNATIONAL INVESTMENTS, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

Quarter Ended June 30, 2001

|INDEX TO FINANCIAL STATEMENTS:                            | 
|--------------------------------------------------------- | 
|                                                          | 
|Independent Accountants' Review Report                    | 
|ConsolidatedBalance Sheets                                | 
|Consolidated Statements of Operations                     | 
|Consolidated Statements of Retained Earnings (Deficit)    | 
|Consolidated Statements of Cash Flows                     | 
|Schedule of Fixed Assets/Intangible Assets                | 
|Consolidated Statement of Changes in Stockholders' Equity | 
|Notes to Consolidated Financial Statements                | 



**MOEN AND COMPANY**

CHARTERED ACCOUNTANTS

|PO Box 10129            |            |               
|----------------------- | ---------- | --------------
|1400 IBM Tower          | Telephone: | (604) 662-8899
|701 West Georgia Street | Fax:       | (604) 662-8809
|Vancouver, BC   V7Y 1C6 |            |               

**INDEPENDENT ACCOUNTANTS' REVIEW REPORT**

To the Directors and Shareholders of T.Z.F. International Investments, Inc.

(formerly Sabai Sabai Enterprises, Corp.)

(A Nevada Corporation)

We have reviewed the accompanying Consolidated Balance Sheets of T.Z.F. International
Investments, Inc. (formerly Sabai Sabai Enterprises, Corp.) (A Nevada Corporation) as of June
30, 2001 and June 30, 2000, and the Consolidated Statements of Operations, Cash Flows and
Changes in Stockholders' Equity for the six month periods then ended in accordance with
Statements on Standards for Accounting and Review Services issued by the America Institute of
Public Accountants.  All information included in these financial statements is the representation
of the management of T.Z.F. International Investments, Inc.

A review consists principally of applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters.  It is substantiallyless in
scope than an audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial statements taken as a
whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the
accompanying financial statements in order for them to be in conformity with United States
generally accepted accounting principles (GAAP).

****

***"Moen and Company"***

Chartered Accountants

Vancouver, British Columbia, Canada

July 27, 2001

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES, CORP)**

**(A Nevada Corporation)**

**Consolidated Balance Sheets**

**June 30, 2001 and June 30, 2000**

**(In U.S. Dollars)**

**(Unaudited)******

|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  | 2001       |  | 2000     
|----------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------- | -------------------------------------------------------------- | ---------------------- | --------- | ---------- | ---------- | --------- | --------- | ------- | -------------------------- | -- |  |  |  | ---------- |  | ---------
|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         | ******************Assets** |    |  |  |  |            | 
|Current Assets                                              |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  | 
|                                                            | Cash and cash equivalents (note 3)                                             |            |                                                                |                        |           | $          | 1,633,610  | $         | 1,418,183
|                                                            | Accounts receivable (note 4)                                                   |            |                                                                |                        |           |            | 5,615,010  |           | 17,591   
|                                                            | Prepaid expenses and deposits (note 5)                                         |            |                                                                |                        |           |            | 221,152    |           | 5,382    
|                                                            | Subscriptions receivable (note 6)                                              |            |                                                                |                        |           |            | 406,434    |           | --       
|                                                            | Short-term investment - secured (note 29)                                      |            |                                                                |                        |           |            | 1,550,674  |           | --       
|                                                            | Inventories, at lower cost or market (note 7)                                  |            |                                                                |                        |           | 2,185,094  |            | 206,532  
|TOTAL CURRENT ASSETS                                        |                                                                                |            |                                                                |                        |           | 11,611,974 |            | 1,647,688
|Fixed Assets - Schedule A                                   |                                                                                |            |                                                                |                        |           |            |            |           | 6,433,193 |         | 76,751                    
|Intangible Assets - Schedule A                              |                                                                                |            |                                                                |                        |           | 4,140,831  |            | 4,038,229
|Goodwill, at cost less accumulated amortization - (note 12) |                                                                                |            |                                                                | 1,176,390              |           | --        
|TOTAL ASSETS (Subject to charges - Note 18)                 |                                                                                |            | $                                                              | 23,362,388             | $         | 5,762,668 
|******Liabilities and Stockholders' Equity**                |                                                                                |           
|Current Liabilities                                         |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    | 
|                                                            | Bank loans - secured (note 18)                                                 |            |                                                                |                        |           | $          | 1,917,775  | $         | --       
|                                                            | Accounts payable and accrued (note 15)                                         |            |                                                                |                        |           |            | 2,783,372  |           | 176,397  
|                                                            | Payable on acquisition of Shenzhen Tianzhifu Network Technology

Ltd. (note 1) | 518,590    |                                                                | --                    
|                                                            | Management fees payable (note 16)                                              |            |                                                                |                        |           |            | 224,538    |           | 150,726  
|                                                            | Due to related parties, unsecured, non interest                                |            |                                                                |                        |           |            |           
|                                                            | bearing, with no specific terms of repayment (note 17(b))                      |            |                                                                | 515,053                |           | 76,585    
|TOTAL CURRENT LIABILITIES                                   |                                                                                |            |                                                                |                        |           | 5,959,328  |            | 403,708  
|Long-term Liabilities                                       |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |   
|                                                            | Long-term debt (note 19)                                                       |            |                                                                |                        |           |            |            |           |           | 295,399 |                            | --
|                                                            | Deferred liabilities - pensions (note 24)                                      |            |                                                                |                        |           |            | 212,562    |           | --       
|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  | 507,961    |  | --       
|Minority interest (note 8)                                  |                                                                                |            |                                                                |                        |           |            |            |           | 108,680   |         | --                        
|Stockholders' Equity                                        |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    | 
|                                                            | Capital stock (note 20)                                                        |            |                                                                |                        |           |            |            |           |           |         |                            |   
|                                                            |                                                                                | Authorized |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  |           
|                                                            |                                                                                |            | 100,000,000 common shares at $0.0001 par value                 |                        |           |            |            |           |          
|                                                            |                                                                                | Issued     |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  |           
|                                                            |                                                                                |            | 35,897,309 common shares (2000 - 1,600,000 shares) - par value |                        | 3,590     |            | 2,470     
|                                                            |                                                                                |            | Paid in capital in excess of par value of stock                |                        |           |            | 15,403,889 |           | 5,665,362
|                                                            |                                                                                |            | 280,000 shares subscribed but unissued                         |                        |           |            |            |           | --        |         | 282,676                   
|                                                            | Retained earnings (deficit)                                                    |            |                                                                |                        |           |            |            |           | 1,374,761 |         | (591,752)                 
|                                                            | Cumulative translation (note 2)                                                |            |                                                                |                        |           |            | 4,179      |           | 204      
|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  | 16,786,419 |  | 5,358,960
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  |                                                                                | $          | 23,362,388                                                     | $                      | 5,762,668
|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  |            |  |          
|Approved on behalf of the board:                            |                                                                                |            |                                                                |                        |           |            |            |          
|                                                            |                                                                                |            |                                                                | *********"Xin Chen"*   | **        | , Director |            |           |           |         |                            |    |  |  | 
|                                                            |                                                                                |            |                                                                |                        |           |            |            |           |           |         |                            |    |  |  |  |            |  |          
|                                                            |                                                                                |            |                                                                | ************"Chung Yu" | **        | , Director |            |           |           |         |                            |    |  |  | 

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES, CORP)**

**(A Nevada Corporation)**

**Consolidated Statements of Operations**

**(In U.S. Dollars)**

**(Unaudited)**

|                                  |                          |           |         |           |           |           |           |         |           | ************Cumulative
From   |               |            |           |                  |       |            |  |          
|--------------------------------- | ------------------------ | --------- | ------- | --------- | --------- | --------- | --------- | ------- | --------- | ----------------------------- | ------------- | ---------- | --------- | ---------------- | ----- | ---------- |  | ---------
|                                  |                          |           |         |           |           |           |           |         |           | ************Inception Date    |               |            |           |                  |       |            | 
|                                  |                          |           |         |           |           |           |           |         |           | ************of  Sep. 15, 1998 | Quarter
Ended |            |           | Six Months
Ended
|                                  |                          |           |         |           |           |           |           |         |           | ************to June 30,       |               |            | June 30,  |                  |       | June 30,  
|                                  |                          |           |         |           |           |           |           |         |           | 2001                          |               | 2001       |           | 2000             |       | 2001       |  | 2000     
|Revenue                           |                          |           |         |           |           |           |           |         |           |                               |               |            |           |                 
|                                  | Sales                    |           |         |           |           | $         | 7,966,199 | $       | 4,811,377 | $                             | 1,630         | $          | 6,097,923 | $                | 1,630
|                                  | Cost of sales            |           |         |           |           |           | 5,088,636 |         | 3,460,877 |                               | --            |            | 4,214,578 |                  | --   
|                                  |                          |           |         |           |           |           |           |         |           | 2,877,563                     |               | 1,350,500  |           | 1,630            |       | 1,883,345  |  | 1,630    
|                                  | Other income             |           |         |           |           |           | 488,666   |         | 96,616    |                               | 431           |            | 260,246   |                  | 1,046
|                                  |                          |           |         |           |           |           |           |         |           | 3,366,229                     |               | 1,447,116  |           | 2,061            |       | 2,143,591  |  | 2,676    
|                                  |                          |           |         |           |           |           |           |         |           |                               |               |            |           |                  |       |            |  |          
|Selling expenses                  |                          |           |         |           |           | 168,988   |           | 92,669  |           | 19,040                        |               | 168,988    |           | 19,040          
|Administration Costs              |                          |           |         | 1,194,019 |           | 344,719   |           | 306,065 |           | 641,341                       |               | 307,111   
|Depreciation                      |                          |           |         |           |           | 98,215    |           | 42,641  |           | 2,201                         |               | 84,624     |           | 2,201           
|Deferred lease expenses write off |                          |           |         | 5,046     |           |           |           | 5,046  
|Amortization of Goodwill          |                          |           | 30,164  |           | 15,082    |           | --        |         | 30,164    |                               | --           
|Stock-based compensation          |                          |           | 252,400 |           | --        |           | 252,400   |         | --        |                               | 252,400      
|                                  |                          |           |         |           |           |           |           |         |           |                               |               |            |           |                  |       |            |  |          
|                                  |                          |           |         |           |           |           |           |         |           | 1,743,786                     |               | 495,111    |           | 584,752          |       | 925,117    |  | 585,798  
|Profit (loss) before income taxes | 1,622,443                |           | 952,005 |           | (582,691) |           | 1,218,474 |         | (583,122)
|Income taxes                      |                          |           |         |           |           | 211,553   |           | 174,956 |           |                               |               | 211,553    |           |                 
|                                  |                          |           |         |           |           |           |           |         |           | 1,410,890                     |               | 777,049    |           | (582,691)        |       | 1,006,921  |  | (583,122)
|Minority interest                 |                          |           |         |           |           | 36,129    |           | 36,129  |           |                               |               | 36,129     |           |                 
|Net profit (loss) for the period  | $                        | 1,374,761 | $       | 740,920   | $         | (582,691) | $         | 970,792 | $         | (583,122)                    
|                                  |                          |           |         |           |           |           |           |         |           |                               |               |            |           |                  |       |            |  |          
|Basic profit per share            |                          |           |         |           | $         | 0.02      | $         | (0.03)  | $         | 0.03                          | $             | (0.06)    
|Diluted profit per share          |                          |           |         | $         | 0.02      | $         | (0.03)    | $       | 0.03      | $                             | (0.06)       
|Weighted average number of        |                          |           |         |           |           |           |           |         |          
|                                  | common shares used to    |           |         |           |           |           |           |         |           |                               |               |           
|                                  | compute profit per share |           |         |           |           |           |           |         |           |                               |               |           
|                                  |                          |           |         | Basic     |           |           |           |         |           |                               |               | 35,897,309 |           | 16,667,862       |       | 35,897,309 |  | 9,133,947
|                                  |                          |           |         | Diluted   |           |           |           |         |           |                               |               | 35,897,309 |           | 16,667,862       |       | 35,897,309 |  | 9,133,947

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES CORP.)**

**(A Nevada Corporation)**

**Consolidated Statements of Retained Earnings (Deficit)**

**(In US Dollars)**

**June 30, 2001**

**(Unaudited)**

|                                 |           |  |         |  |           |           |         |           |           | ************Cumulative From  |               |           |   |           |  |           
|-------------------------------- | --------- |  | ------- |  | --------- | --------- | ------- | --------- | --------- | ---------------------------- | ------------- | --------- | - | --------- |  | ----------
|                                 |           |  |         |  |           |           |         |           |           | ************Inception Date   |               |           |   |           |  | Six Months
|                                 |           |  |         |  |           |           |         |           |           | ************of Sep. 15, 1998 | Quarter Ended | Ended    
|                                 |           |  |         |  |           |           |         |           |           | ************to June 30,      | June 30,      | June 30, 
|                                 |           |  |         |  |           |           |         |           |           | 2001                         |               | 2001      |   | 2000      |  | 2001      
|Retained earnings (deficit),     |           |  |         |  |           |           |         |           |           |                             
|beginning of period              |           |  |         |  |           | 633,841   |         | (9,061)   |           | 403,969                      |               | (8,630)  
|Net profit (loss) for the period | 1,374,761 |  | 740,920 |  | (582,691) |           | 970,792 |           | (583,122)
|Retained earnings (deficit),     |           |  |         |  |           |           |         |           |           |                             
|end of period                    |           |  |         |  | $         | 1,374,761 | $       | 1,374,761 | $         | (591,752)                    | $             | 1,374,761 | $ | (591,752)

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES CORP.)**

**(A Nevada Corporation)**

**Consolidated Statements of Cash Flows**

**(In US Dollars)**

**(Unaudited)**

|                                 |                      |                                  |                                  |           |             |             |           |             |             | ************Cumulative From  |               |           |           |                  |           |          
|-------------------------------- | -------------------- | -------------------------------- | -------------------------------- | --------- | ----------- | ----------- | --------- | ----------- | ----------- | ---------------------------- | ------------- | --------- | --------- | ---------------- | --------- | ---------
|                                 |                      |                                  |                                  |           |             |             |           |             |             | ************Inception Date   |               |           |           |                  |           |          
|                                 |                      |                                  |                                  |           |             |             |           |             |             | ************of Sep. 15, 1998 | Quarter Ended |           |           | Six Months
Ended
|                                 |                      |                                  |                                  |           |             |             |           |             |             | ************to June 30,      | June 30,      |           |           | June 30,        
|                                 |                      |                                  |                                  |           |             |             |           |             |             | 2001                         |               | 2001      |           | 2000             |           | 2001     
|                                 |                      |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                  |           |          
|Cash derived from (used for)     |                      |                                  |                                  |           |             |             |           |             |            
|                                 | Operating activities |                                  |                                  |           |             |             |           |             |             |                              |               |           |          
|                                 |                      | Net profit (loss) for the period | $                                | 1,374,761 | $           | 740,920     | $         | (582,691)   | $           | 970,792                      | $             | (583,122)
|                                 |                      | Items not requiring use of cash  |                                  |           |             |             |           |             |             |                             
|                                 |                      |                                  | Depreciation                     |           |             |             |           |             | 98,215      |                              | 42,641        |           | 2,201     |                  | 84,624    |          
|                                 |                      |                                  | Amortization of goodwill         |           | 30,164      |             | 15,082    |             | --          |                              | 30,164        |           | --       
|                                 |                      |                                  | Deferred lease expense write off |           |             |             | 5,046     |             |             |                              | 5,046        
|                                 |                      |                                  | Stock-based compensation         | 252,400   |             | --          |           | 252,400     |             | --                           |               | 252,400  
|                                 |                      | Minority interest                |                                  |           |             |             | 108,680   |             | 108,680     |                              |               |           | 108,680   |                  |          
|                                 |                      | Cumulative translation           |                                  |           | 4,179       |             | (196)     |             | 204         |                              | (204)         |           | 204      
|                                 |                      | Changes in non-cash              |                                  |           |             |             |           |             |             |                              |               |           |          
|                                 |                      |                                  | working capital items            |           |             |             |           |             |             |                              |               |           |           |                 
|                                 |                      |                                  | Accounts receivable              |           |             | (5,615,010) |           | 2,559       |             | (4,374)                      |               | (410,033) |           | (4,374)         
|                                 |                      |                                  | Prepaid expenses and
deposits    | (221,152) |             | (153,551)   |           | --          |             | (186,468)                    |               | --       
|                                 |                      |                                  | Inventories                      |           |             |             |           |             | (2,185,094) |                              | (618,429)     |           | --        |                  | (940,452) |          
|                                 |                      |                                  | Subscriptions receivable         |           | (406,434)   |             |           |             | 374,546     |                              |               |           | 374,546  
|                                 |                      |                                  | Accounts payable and
accrued     | 2,783,372 |             | 168,176     |           | 15,038      |             | 32,942                       |               | 14,538   
|                                 |                      |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                  |           |          
|                                 |                      |                                  |                                  |           |             |             |           |             |             | (3,775,919)                  |               | 305,882   |           | 62,370           |           | (309,955)
|                                 | Financing activities |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                 
|                                 |                      | Issuance of shares for cash      | 7,605,801                        |           | --          |             | --        |             | --          |                              | --           
|                                 |                      | Net gain on acquisition          |                                  |           | 3,333,103   |             | --        |             | --          |                              | --            |           | --       
|                                 |                      | Capital contributed              |                                  |           |             | 177,946     |           |             |             | --                           |               | 177,946   |           | --              
|                                 |                      | Management fees payable          |                                  | 224,538   |             | 47,867      |           | (17,479)    |             | 74,534                       |               | (17,479) 
|                                 |                      | Advance on share subscriptions   |                                  |           |             | 282,676     |           |             |             | 282,676                     
|                                 |                      | Payable on acquisitions          |                                  |           | 518,590     |             | --        |             | --          |                              | --            |           | --       
|                                 |                      | Bank loans                       |                                  |           |             |             |           | 1,917,775   |             | 338,573                      |               | --        |           | 338,573          |           | --       
|                                 |                      | Long-term debt                   |                                  |           |             |             | 295,399   |             |             |                              | --            |           | (10,739)  |                  | --       
|                                 |                      | Deferred liabilities, pension    |                                  | 212,562   |             |             |           | --          |             |                              |               | --       
|                                 |                      | Due to related parties           |                                  |           | 515,053     |             | --        |             | 15,830      |                              | --            |           | 15,830   
|                                 |                      |                                  |                                  |           |             |             |           |             |             | 14,800,767                   |               | 386,440   |           | 281,027          |           | 580,314  
|                                 | Investing activities |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                 
|                                 |                      | Fixed assets acquired            |                                  |           | (6,531,408) |             | (260,283) |             | (19,025)    |                              | (641,202)     |           | (19,025) 
|                                 |                      | Intangible assets                |                                  |           |             |             | (102,602) |             | (1,014)     |                              | --            |           | 79        |                  | --       
|                                 |                      | Goodwill                         |                                  |           |             |             |           | (1,206,554) |             | --                           |               | --        |           | --               |           | --       
|                                 |                      | Investment in Hongkong           |                                  |           |             |             | 532,044   |             | --          |                              | 532,044       |           | --       
|                                 |                      | Short-term investment            |                                  |           | (1,550,674) |             | (196,381) |             | --          |                              | (196,381)     |           | --       
|                                 |                      |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                  |           |          
|                                 |                      |                                  |                                  |           |             |             |           |             |             | (9,391,238)                  |               | 74,366    |           | (19,025)         |           | (305,460)
|                                 |                      |                                  |                                  |           |             |             |           |             |             |                              |               |           |           |                  |           |          
|Cash, increase during the period | 1,633,610            |                                  | 766,688                          |           | 324,372     |             | (35,101)  |             | 323,441    
|Cash, beginning of period        |                      |                                  |                                  |           | 866,922     |             | 1,093,811 |             | 1,668,711   |                              | 1,094,742    
|Cash, end of period              |                      |                                  |                                  | $         | 1,633,610   | $           | 1,633,610 | $           | 1,418,183   | $                            | 1,633,610     | $         | 1,418,183

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES CORP.)**

**(A Nevada Corporation)**

**Schedule of Fixed Assets/Intangible Assets**

**As at June 30, 2001**

**(In US Dollars)**

**(Unaudited)**

Schedule A

|                  |              |                                         |                             |             |  |    |   |           |   |       |           |           |   | ************Accumulated |     |           | 
|----------------- | ------------ | --------------------------------------- | --------------------------- | ----------- |  | -- | - | --------- | - | ----- | --------- | --------- | - | ----------------------- | --- | --------- | 
|                  |              |                                         |                             |             |  |    |   |           |   |       |           | Cost      |   | Depreciation            | Net |          
|                  | Fixed Assets |                                         |                             |             |  |    |   |           |   |       |           |           |   |                        
|                  |              | Deferred lease
expense                  |                             |             |  |    | $ | 3,556     | $ | 1,112 | $         | 2,444     |  
|                  |              | Deferred expenses - other - TZF Jiangsu |                             | 222,664     |  | -- |   | 222,664   |  
|                  |              | Fixed assets of operating companies     |                             |             |  |    |   |           |  
|                  |              |                                         |                             | - note 9    |  |    |   |           |   |       |           | 2,354,704 |   | 662,653                 |     | 1,692,051 | 
|                  |              |                                         |                             | - note 10   |  |    |   |           |   |       |           | 793,813   |   | --                      |     | 793,813   | 
|                  |              | Construction in progress - Note 11      |                             | 2,115,743   |  | -- |   | 2,115,743 |  
|                  |              | Rights of use of
land                   |                             |             |  |    |   |           |   |       |           |           |   |                        
|                  |              |                                         |                             | Tianan      |  |    |   |           |   |       |           | 370,508   |   | 3,972                   |     | 366,536   | 
|                  |              |                                         |                             | TZF Jiangsu |  |    |   |           |   |       |           | 1,239,942 |   | --                      |     | 1,239,942 | 
|                  |              |                                         |                             |             |  |    |   |           |   |       | $         | 7,100,930 | $ | 667,737                 | $   | 6,433,193 | 
|                  |              |                                         |                             |             |  |    |   |           |   |       |           |           |   |                         |     |           | 
|Intangible Assets |              |                                         |                             |             |  |    |   |           |   |       |           |           |  
|                  |              |                                         | Technology rights - Note 14 |             |  |    |   |           |   | $     | 4,038,229 |          
|                  |              |                                         | Deferred costs - Note 13    |             |  |    |   |           |   |       |           | 102,602   |  
|                  |              |                                         |                             |             |  |    |   |           |   |       |           |           |   |                         | $   | 4,140,831 | 

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES CORP.)**

**(A Nevada Corporation)**

**Consolidated Statements of Changes in Stockholders' Equity**

**From Date of Inception on September 15, 1998 to June 30, 2001**

**(In US Dollars)**

**(Unaudited)**

|                               |                                                 |                                  |             |             |            |           |             |             |              
|------------------------------ | ----------------------------------------------- | -------------------------------- | ----------- | ----------- | ---------- | --------- | ----------- | ----------- | -------------
|                               |                                                 |                                  | Number of   |             | Additional | Total     | Retained    |             | Total        
|                               |                                                 |                                  | Common      | par         | Paid-in    | Capital   | Earnings    | Cumulative  | Stockholders'
|                               |                                                 |                                  | Shares      | Value       | Capital    | Stock     | (Deficit)   | Translation | Equity       
|                               |                                                 |                                  |             |             |            |           |             |             |              
|                               | 9/25/98 issuance of common                      |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 1,000,000   | $1,000      | $1,500     | $2,500    |             |             | $2,500       
|                               | Net loss for the year ended December 31, 1998   |                                  |             |             | (1,115)    |           | (1,115)    
|Balance, December 31, 1998     | 1,000,000                                       | 1,000                            | 1,500       | 2,500       | (1,115)    |           | 1,385      
|                               | 2/17/99 issuance of common                      |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 600,000     | 600         | 59,400     | 60,000    |             |             | 60,000       
|                               | Net loss for the year ended December 31, 1999   |                                  |             |             | (7,515)    |           | (7,515)    
|Balance, December 31, 1999     | 1,600,000                                       | 1,600                            | 60,900      | 62,500      | (8,630)    |           | 53,870     
|                               | 4/30/00 cancellation of                         |                                  |             |             |            |           |             |            
|                               |                                                 | common stock and                 |             |             |            |           |             |             |              
|                               |                                                 | transfer of par value to         |             |             |            |           |             |             |              
|                               |                                                 | paid-in capital (note 1)         | (1,000,000) | (1,000)     | 1,000      |           |             |             |              
|Balance, April 30, 2000        |                                                 |                                  |             |             |            |           |            
|                               | before forward split                            | 600,000                          | 600         | 61,900      | 62,500     | (8,630)   |             | 53,870     
|                               |                                                 |                                  |             |             |            |           |             |             |              
|05/15/00 10 to 1 forward split | 6,000,000                                       | 600                              | 61,900      | 62,500      | (8,630)    |           | 53,870     
|                               | 05/15/00 issuance of common                     |                                  |             |             |            |           |             |            
|                               |                                                 | stock for services               | 250,000     | 25          | 252,375    | 252,400   |             |             | 252,400      
|                               | 05/15/00 issuance of common                     |                                  |             |             |            |           |             |            
|                               |                                                 | stocks for the BC Company        | 18,451,843  | 1,845       | 5,351,087  | 5,352,932 |             |             | 5,352,932    
|                               | 7/4/00 issuance of common                       |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 340,000     | 34          | 343,216    | 343,250   |             |             | 343,250      
|                               | 9/30/00 issuance of common                      |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 615,466     | 62          | 621,286    | 621,348   |             |             | 621,348      
|                               | 10/19/00 issuance of common                     |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 10,000      | 1           | 10,999     | 11,000    |             |             | 11,000       
|                               | 11/19/00 issuance of common                     |                                  |             |             |            |           |             |            
|                               |                                                 | stock for cash                   | 230,000     | 23          | 252,977    | 253,000   |             |             | 253,000      
|                               | 12/28/00 issuance of common                     |                                  |             |             |            |           |             |            
|                               |                                                 | stock for debt                   | 10,000,000  | 1,000       | 4,999,000  | 5,000,000 |             |             | 5,000,000    
|                               | Net profit for the year ended December 31, 2000 |                                  |             |             | 412,599    |           | 412,599    
|                               | Negative goodwill - gain on                     |                                  |             |             |            |           |             |            
|                               |                                                 | acquisition TZF Jiangsu - note 1 |             |             | 3,333,103  | 3,333,103 |             |             | 3,333,103    
|                               | Cumulative translation                          |                                  |             |             |            |           | 4,383       | 4,383      
|Balance, December 31, 2000     | 35,897,309                                      | 3,590                            | 15,225,943  | 15,229,533  | 403,969    | 4,383     | 15,637,885 
|                               | 1/1/01 capital contributed                      |                                  |             | 177,946     | 177,946    |           |             | 177,946    
|                               | Net profit for six months ended June 30, 2001   |                                  |             |             | 970,792    |           | 970,792    
|                               | Cumulative translation                          |                                  |             |             |            |           | (204)       | (204)      
|Balance, June 30, 2001         | 35,897,309                                      | $3,590                           | $15,403,889 | $15,407,479 | $1,374,761 | $4,179    | $16,786,419
|                               |                                                 |                                  |             |             |            |           |             |             |              

See Accompanying Notes and Independent Accountants' Review Report

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

**(FORMERLY SABAI SABAI ENTERPRISES CORP.)**

**(A Nevada Corporation)**

**Notes to Consolidated Financial Statements**

**June 30, 2001**

**(In US Dollars)**

**(Unaudited)**

Note 1.	ORGANIZATION AND NATURE OF BUSINESS

The Company was incorporated under the laws of the State of Nevada on September 15,
1998, as Sabai Sabai Enterprises, Corp., and on May 25, 2000, changed its name to T.Z.F.
International Investments, Inc.

Pursuant to a stock purchase agreement dated March 30, 2000, T.Z.F. International Herbs
Investment Inc., ("BC Company") purchased 1,000,000 shares of the issued and outstanding
common stock of the Company.  These shares were purchased in anticipation of the
subsequent completion of a share exchange transaction between the Company and the BC
Company.  In conjunction with completion of the share exchange transaction these shares
were cancelled, effective April 30, 2000, and as a result, the amount of the par value of
$1,000 attributable to such shares was transferred to paid-in capital.

Pursuant to the terms of the share exchange which was effective as of April 30, 2000, the
Company acquired all of the issued and outstanding stock of the BC Company in exchange
for the issuance of 18,451,843 shares of its authorized but previously unissued sharesof
common stock, which shares were valued at $5,352,932 for purposes of the acquisition.
Assets and liabilities of the BC Company at the date of acquisition on April 30, 2000, were
as follows:

|Assets                                                                                                                       |           
|---------------------------------------------------------------------------------------------------------------------------- | ----------
|Cash and short term deposits                                                                                                 | $1,040,372
|Accounts receivable                                                                                                          | 13,217    
|Capital stock subscriptions receivable                                                                                       | 374,546   
|Prepaid expense and deposit                                                                                                  | 5,382     
|Inventories                                                                                                                  | 206,532   
|Deferred lease expense, net of amortization                                                                                  | 5,047     
|Fixed assets, net of accumulated depreciation                                                                                | 59,927    
|Intangible assets, technology rights                                                                                         | 4,038,229 
|                                                                                                                             | 5,743,252 
|Liabilities                                                                                                                  |           
|Accounts payable and accrued                                                                                                 | 114,917   
|Accrued payroll deductions payable                                                                                           | 45,767    
|Management fees payable                                                                                                      | 168,205   
|Due to related parties                                                                                                       | 60,755    
|                                                                                                                             | 389,644   
|Net assets including cumulative translation                                                                                  | 5,353,608 
|Cumulative translation, included in above,

Booked in stockholders' equity of Sabai Sabai                                    | (676)     
|Net value in exchange for 18,451,843 common

Shares off Sabai Sabai and net equity on date of

acquisition of the BC Company | $5,352,932



In May 2000, the Company completed a 10:1 forward split of its outstanding stock. This
forward split increased the number of issued and outstanding shares from 600,000
(1,600,000 previously outstanding less the 1,000,000 shares which were cancelled) to
6,000,000.

Subsequent to completion of the share exchange on April 30, 2000, the BC Company (the
Company's wholly-owned subsidiary) received subscriptions for 340,000 additional shares.
The Company elected to convert such shares to shares of its own common stock on the same
terms as it completed the share exchange.  Therefore, effective as of July 4, 2000 the
Company issued 340,000 additional shares in exchange for shares of the BC Company

In May 2000, following completion of the forward split, the Company authorized the
issuance of 250,000 restricted shares as compensation for consulting services at a price of
CAD$1.50 per share, to the following:

|Name           | Number of Shares | Consideration Cad$ | Equivalent US$
|-------------- | ---------------- | ------------------ | --------------
|Robert Gelfand | 50,000           | $   75,000         | $   50,480    
|Fred Fisher    | 200,000          | 300,000            | 201,920       
|               | 250,000          | $375,000           | $252,400      



Accordingly, the amount of $252,400 was recorded as stock-based compensation in the
financial statements for the year ended December 31, 2000.

T.Z.F. International Herbs Investment Inc., which is now a wholly-owned subsidiary of the
Company, owns the formula and all distribution and intellectual property rights, including
trademark, patent and industry design rights, for Snow Lotus Tea products.

The Company and its wholly-owned subsidiary, the BC Company, are both based in
Richmond, British Columbia, Canada.

On December 21, 2000 the BC Company acquired 100% of issued and outstanding shares of
Tianan Investment Limited ("Tianan"), a British Virgin Islands company with an office in
Hong Kong for the total price of HK$21,500,000 (US$2,758,847),which was paid in cash in
three installments. The BC Company paid the first installment totaling HK $6,638,318.09
(approximately US $851,100) in two parts, on July 7 and July 10, 2000. The second
installment of HK $6,261,681.91 (approximately US $802,800), and the final installment of
HK$8,600,000.00 (approximately US $1,104,947), which were paid on October 20, 2000
and December 20, 2000, respectively, were both paid by Xin Chen, one of the principal
shareholders.

The sole asset of Tianan is its 100% ownership of Tianan Pharmacy (Xiamen) Co., Ltd.
("Tianan Pharmacy"), a manufacturer of Chinese biological and herbal medicine products.
Tianan Pharmacy has a plant which is located in the Torch High Tech Development Zone of
Xiamen, China, where it currently conducts research and development and produces herbal
and biological medicines which it distributes and sells in China.

As a result of the closing of this purchase transaction, Tianan became our wholly-owned
subsidiary.

Assets and liabilities ofTiananat the date of acquisition on December 21, 2000, were as
follows:

|Assets                                        |           
|--------------------------------------------- | ----------
|Cash and cash equivalents                     | $ 103,910 
|Accounts receivable, trade                    | 198,910   
|Short-term loans                              | 831,875   
|Prepaid expense and deposit                   | 5,069     
|Inventories                                   | 449,147   
|Deferred expense, net of amortization         | 27,957    
|Fixed assets, net of accumulated depreciation | 1,405,851 
|Rights of use of land - 50 years              | 370,508   
|                                              | 3,393,227 
|Liabilities                                   |           
|Accounts payable, trade                       | 9,921     
|Accounts payable, others                      | 42,176    
|Taxes payable                                 | 33,222    
|Deferred liabilities, pension                 | 212,562   
|Bank loan                                     | 483,676   
|                                              | 781,557   
|Net assets                                    | 2,611,670 
|Goodwill on acquisition                       | 147,177   
|Total cash payments on acquisition            | $2,758,847





On December 31, 2000, the BC Company completed the purchase of all of the shares of
T.Z.F. International Herbs (Jiangsu) Co. Ltd. ("TZF Jiangsu") (formerly Second Pharmacy
Factory of Yancheng City), ("Second Pharmacy"), a Chinese corporation. The assets were
purchased from The People's Government of JianWu County, JiangSu Province, the People's
Republic of China. The purchase was completed pursuant to the terms of an Acquisition and
Investment Agreement dated September 12, 2000.



In accordance with the Acquisition and Investment Agreement, the purchase price was a
total of RMB14,000,000.00 (US $1,786,591), which was paid in cash in two installments,
plus assumption of liabilities totaling approximately RMB400,000 (approximately
US$48,000). The first cash installment totaling RMB3,000,000.00 (approximately US
$362,000) , was paid on September 18, 2000. The second cash installment of

RMB11,000,000.00 (approximately US $1,376,591) was paid in two parts, on November 22
and November 28, 2000.

The purchase price for the assets of TZF JiangSu was determined through arms length
negotiation with the seller.

The cash purchase price for the assets of TZF JiangSu was paid on our behalf by Xin Chen,
one of the principal shareholders. These payments were part of a total of US$5,000,000
which Mr. Chen paid or advanced on behalf of the Company during the fiscal year ended
December 31, 2000.



The assets of TZF JiangSu consist primarily of an automated assembly line used for the
production of various pharmaceutical products. The Company will continue to use this
equipment and factory for the production of pharmaceutical products and will seek to
expand and improve the operations.

In addition to payment of the initial purchase price of RMB14,000,000 for purchase of the
existing assets of TZF JiangSu, the Acquisition and Investment Agreement contemplates
that during the next three years we will invest an additional sum of RMB14,000,000 in fixed
assets, technological improvements, research and development and marketing in order to
improve and expand the operations of TZF JiangSu. In return for the Company's
commitment to make this additional capital investment, the seller, The People's Government
of JianWu County, JiangSu Province, the People's Republic of China has agreed to grant the
Company various incentives, including rent free occupancy of certain new plant space for 50
years, an agreement to refund certain Value Added Tax for 3 years, a 100% exemption from
income taxes for three years commencing in 2001, a 50% exemption from income taxes for
an additional 3 years thereafter, an exemption from the Industrial and Commercial
Administration Charge and other industry fees for one year, and an exemption from a variety
of other fees and surcharges during the period that the new plant space is under construction.



Assets and liabilities of TZF JiangSu at the date of acquisition on December 31, 2000, were
as follows:

|Assets                                                                                          |           
|----------------------------------------------------------------------------------------------- | ----------
|Cash and cash equivalents                                                                       | $1,005,456
|Accounts receivable, trade                                                                      | 1,675,847 
|Accounts receivable, others                                                                     | 701,927   
|Short-term loans                                                                                | 79,095    
|Inventories                                                                                     | 861,460   
|Construction in progress                                                                        | 1,918,374 
|Fixed assets, net of accumulated depreciation                                                   | 548,421   
|Fixed assets, other                                                                             | 239,261   
|Rights of use of land - 50 years                                                                | 1,239,942 
|                                                                                                | 8,269,783 
|Liabilities                                                                                     |           
|Accounts payable, trade                                                                         | 913,669   
|Accounts payable, others                                                                        | 350,001   
|Taxes payable                                                                                   | 389,934   
|Payroll and payroll deductions payable                                                          | 94,821    
|Long-term liabilities                                                                           | 306,138   
|Bank loans                                                                                      | 1,095,526 
|                                                                                                | 3,150,089 
|Net assets                                                                                      | 5,119,694 
|Gain - Negative goodwill on acquisition added to

paid-in capital in these financial statements | 3,333,103 
|Total cash payments on acquisition                                                              | $1,786,591

By an Acquisition and Investment Agreement dated December 31, 2000, the Company
completed the purchase of all of the shares of Shenzhen Tianzifu Network Technology Ltd.,
("Shenzhen TZF Net") (formerly Shenzhen Xinhaihu Industry Trading & Development Co.,
Ltd.), a Chinese corporation, and including its subsidiary, Meixian County Hengkang
Pharmaceutical Company.  The purchase price is $3,000,000, of which, $2,481,410 was
paid, and the balance of $518,590 is recorded as payable on acquisition as a current liability
in these financial statements.

The major businesses of Shenzhen TZF Net are in China and include pharmaceutical businesses,
material supply, computer network software and hardware development and related business
information consulting.



Shenzhen TZF Net.****owns and operates a major health food and medicine online sales network,
as outlined below through which Chinese products are marketed and brand products from North
America and the rest of the world will be distributed under licenses. It also serves as T.Z.F's
China headquarters, as it owns one subsidiary, directly, which is Meixian County Hengkang
Pharmaceutical Company, and will administer the operations of all current and future T.Z.F.
subsidiaries in China.

Shenzhen TZF Netoperates a Chinese-Language health food Web site. Its objective is to
centralize the management of the entire T.Z.F. network in China and to improve its efficiency
and economic scale, including that of the manufacturing, sales and marketing functions. It
proposes to expand the existing distribution network and channels of distribution of all current
subsidiaries of T.Z.F. in China with its competitive edge and unique resources.  It will carry out
the T.Z.F. plan of building 200 chain counters and stores in the top 200 major department stores
nationwide, and to open 50 licensed drug stores, 60 chain stores and 20 distribution centers in
selected locations in China. After Shenzhen TZF Net has completed building the sales network
platform domestically in China, it will then focus on attracting international suppliers of health
food or related health care products that wish to export their products to China,  and use this
expanding international network to market Chinese health food products and herbal medicines.
Shenzhen TZF Net proposes to be the flagship operation of an effective, competitive China-North America manufacturing, sales and marketing network.

Shenzhen TZF Net will apply the computer network and database technology that it has
developed and is currently using in-house to consolidate, standardize and specialize its
management and distribution systems in order to maximize operating efficiencies. It will
implement a Retailer Management System, an Electronic Ordering System and an Electronic
Data Interchange. Network Technology's head office will control the organization of the chain
stores.  Its online network will be able to present a virtual sales platform for the eventual B2B
and B2C transaction.  Shenzhen TZF Net proposes to have seven departments: marketing,
merchandise, sales, information center, distribution center, general management/administration
and accounting.

Meixian County Hengkang Pharmaceutical Company, is a wholly owned subsidiary of Shenzhen
TZF Net. It was formed in 1995 and is located in Meixian County in Guangdong Province. It has
a staff of 60 and is one of only few pharmaceutical wholesalers/retailers (out of 990 wholesale
enterprises and 3,760 retailers) in Guangdong Province to meet the GSP requirements.
Hengkang Pharmaceutical wholesales and retails chemical pharmaceutical preparation,
antibiotic pharmaceutical preparations, Chinese traditional medicine preparations, Chinese
traditional medicine tablets and health products throughout Southern China including Guanxi,
Fujian and Hunan provinces. Hengkang Pharmaceutical plans to expand its facilities and market
share in order to meet the growing demand for medicines and to become a major pharmaceutical
distributor and wholesaler in Southern China.

Assets and liabilities of Shenzhen TZF Net at the date of acquisition on December 31, 2000,
were as follows:

AssetsCash and cash equivalents
$
416,994Accounts receivable, trade

274,132Short-term loans

517,487Short-term investment

1,354,293Inventories

12,033Prepaid expenses

23,260Fixed assets, net of accumulated depreciation

78,193Investment in subsidiary,Meixian Hengkang Pharmaceutical Company

532,044Deferred Website development costs

74,7243,283,160LiabilitiesAccounts payable, trade

6,829Accounts payable, others

1,183,904Taxes payable

151,8041,342,537Net Assets

1,940,623Goodwill on acquisition (note)

1,059,377Total payments required on acquisition
$
3,000,000Amounts paid by December 31, 2000

2,481,410Amount unpaid at December 31, 2000, recordedas a current liability in these financial statements
$
518,590

The amount of $518,590 unpaid, bears no interest, is unsecured and has no specific due date.

Note 2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

**Principles of consolidation**

The accompanying consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary,T.Z.F. International Herbs Investment Inc.,Tianan Investment
Limited (and its wholly-owned subsidiary Tianan Pharmacy (Xiamen) Co. Ltd.),TZF
International Herbs (JiangSu) Co. Ltd. and Shenzhen Tianzhifu Network Technology Ltd.  All
intercompany transactions and balances have been eliminated.

**Basis of presentation**

These consolidated financial statements have been prepared in accordance with Accounting
Principles Generally Accepted in the United States ("USGAAP).

**Development stage company**

The accompanying consolidated financial statements have been prepared in accordance with the
provisions of Statement of Financial Accounting Standard No. 7, "Accounting and Reporting by
Development Stage Enterprises", which include cumulative figures for the statement of
operations and cash flows from the date of inception on September 15, 1998 to June 30, 2001.

**Business Combinations**

The Company uses the Purchase Method in accounting for its acquisitions and amortizes
goodwill over a twenty year period.

Goodwill will be subject to review for impairment.  This review would be at the lowest
reporting level or levels that include the acquired business (i.e., the reporting unit).  Goodwill
would be considered impaired and subject to write-down if the fair value of the reporting unit's
goodwill is less than its carrying amount.  The fair value of goodwill would be determined by
subtracting the fair value of the recognized net assets of the reporting unit (excluding goodwill)
from the fair value of the reporting unit.  The amount of the impairment would be the difference
between the carrying amount and the fair value of the goodwill.

**Use of estimates**

The preparation of financial statements in conformity with USGAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.  Actual results could
differ from those estimates.

**Cash and cash equivalents**

Cash and cash equivalents consists of cash on deposit and highly liquid short-term interest
bearing securities with a maturity at the date of purchase of three months or less.

******Income Taxes**

Provisions for income taxes are based on taxes payable or refundable for the current year and
deferred taxes on temporary differences between the amount of taxable income and pretax
financial income and between the tax bases of assets and liabilities and their reported amounts in
the financial statements.  Deferred tax assets and liabilities are included in the financial
statement at currently enacted income tax rates applicable to the period in which the deferred tax
assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No.
109, Accounting for Income Taxes.  As changes in tax laws or rate are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.

**Compensated absences**

Employees of the corporation are entitled to paid vacations, sick days and other time off
depending on job classification, length of service and other factors.  It is impractical to estimate
the amount of compensation for future absences, and accordingly, no liability has been recorded
in the accompanying financial statements.  The corporation's policy is to recognize the costs of
compensated absences when paid to employees.

**Net earnings per share**

The Company adopted Statement of Financial Accounting Standards No. 128 that requires the
reporting of both basic and diluted earnings per share.  Basic earnings per share is computed by
dividing net income available to common shareowners by the weighted average number of
common shares outstanding for the period.  Diluted earnings per share reflects the potential
dilution that could occur if securities or other contacts to issue common stock were exercised or
converted into common stock.  In accordance with FASB 128, any anti-dilution effects on net
loss per share are excluded.

**Disclosure about fair value of financial instruments**

The Company has financial instruments, none of which are held for trading purposes. The
Company estimates that the fair value of all financial instruments at June 30, 2001 as defined in
FASB 107, does not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet.  The estimated fair value amounts
have been determined by the Company using available market information and appropriate
valuation methodologies.  Considerable judgment is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative
of the amounts that the Company could realize in a current market exchange.

**Fixed assets**

Fixed assets are stated at cost less accumulated depreciation.  Depreciation is recorded on the
following rates, based upon the useful life of the assets.

|Office equipment      | - 20% per annum on the declining balance basis             
|--------------------- | -----------------------------------------------------------
|Leasehold improvement | - allocated on a straight-line basis over the term of lease
|Vehicles              | - 30% per annum on the declining balance basis             
|Computer equipment    | - 30% per annum on the declining balance basis             
|Buildings             | - 4.75% per annum on the straight-line basis               
|Mechanical devices    | - 19% per annum on the straight-line basis                 
|Electric devices      | - 19% per annum on the straight-line basis                 
|Shipping devices      | - 19% per annum on the straight-line basis                 
|Other devices         | - 19% per annum on the straight-line basis                 

**Long-lived assets**

Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset in question may not be recoverable.  This standard did not have a material
effect on the Company's results of operations, cash flows or financial position.

**Foreign currency translation**

The functional currency of the parent Company T.Z.F. International Investments, Inc. is the
United States Dollar and of T.Z.F. International Herbs Investment Inc. is the Canadian Dollar
and the reporting currency on a consolidated basis is the United States Dollar.

The assets, liabilities, and operations of the Company are expressed in the functional currency of
the Company in United States Dollars.  Operations of the subsidiary, T.Z.F. International Herbs
Investment Inc. are in Canadian Dollars and in conformity with US GAAP they are translated
into the reporting currency, the United States Dollar.

Monetary assets and liabilities are translated at the current rate of exchange.

The weighted average exchange rate for the period is used to translate revenue, expenses, and
gains or losses from the functional currency to the reporting currency.

The gain or loss on translation is reported as a separate component of stockholders' equity and
not recognized in net income.  Gains or losses on remeasurement are recognized in current net
income.

Gains or losses from foreign currency transactions are recognized in current net income.

Fixed assets are measured at historical exchange rates that existed at the time of the transaction.

Depreciation is remeasured at historical exchange rates that existed at the time the underlying
related asset was acquired.

An analysis of the changes in the cumulative translation adjustment as disclosed as part of
stockholders' equity, is as follows:

|                                    | Six Months Ended June 30, 2001 | Six Months Ended June30,  2000
|----------------------------------- | ------------------------------ | ------------------------------
|Balance, December 31,
2000 and 1999 | $ 4,383                        | $         -                   
|Change during the period            | (204)                          | --                            
|Balance, June 30, 2001
and 2000     | $ 4,179                        | $      --                     

The effect of exchange rate changes on cash balances is reported in the statement of cash flows
as a separate part of the reconciliation of change in cash and cash equivalents during the period.

**Concentration of credit risk**

Financial instruments that potentially subject the Company to a significant concentration of
credit risk consist primarily of cash and cash equivalents which are not collateralized.  The
Company limits its exposure to credit loss by placing its cash and cash equivalents with high
credit quality financial institutions.

**Inventories**

The inventories are recorded at the lower of cost or market. As at June 30, 2001 the inventories
total $2,185,094 (see note 7)

**Revenue Recognition**

The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101,
Revenue Recognition in Financial Statements, in December 1999.  The SAB summarizes certain
of the SEC staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements.  During the current year, the Company performed a review
of its revenue recognition policies and determined that it is in compliance with SAB 101.

**Web Site Development Expenses**

Web site development expenses relate to the development of new online services and consist
principally of employee compensation, as well as costs for content, facilities and equipment.
The consensus in the Financial Accounting Standards Board Emerging Issues Task Force (EITF)
Issue No. 00-2, Accounting for Web Site Development Costs, requires that certain costs to
develop Web sites be capitalized or expensed, depending on the nature of the costs.
Development expenses of $101,588 have been capitalized and will be either expensed in 2001 or
amortized over a period of 30 months after completion the Web Site (note 13).

**Shipping and Handing Fees and Costs**

In September 2000, the Financial Accounting Standards Board Emerging Issues Task Force
(EITF) reached a final consensus on EITF Issue No. 00-10, Accounting for Shipping and
Handling Fees and Costs.  This consensus requires that all amounts billed to a customer in a sale
transaction related to shipping and handling, be classified as revenue.  The Company historically
has netted shipping charges to customers with shipping and handling costs which are included in
operating expenses in the Statements of Operations.  With respect to the classification of costs
related to shipping and handling incurred by the seller, the EITF determined that the
classification of such costs is an accounting policy decision that should be disclosed.  The
Company will adopt the consensus in the Issue in fiscal 2001.

Note 3.  CASH AND CASH EQUIVALENTS - $1,633,610

The total for cash and equivalents as at June 30, 2001, is made up as follows:

|                    | TZF US
Company | The BC
Company | Tian'an   | TZF JiangSu | Shenzhen TZF
Net | Total     
|------------------- | -------------- | -------------- | --------- | ----------- | ---------------- | ----------
|Petty cash          | $              | $       0      | $   386   | $ 9,025     | $     2,585      | $   11,996
|Cash in trust       |                | 435            |           |             |                  | 435       
|Cash in bank        | 5,068          | 56,444         | 189,148   | 132,133     | 1,218,347        | 1,601,140 
|Short-term deposits |                | 20,039         |           |             |                  | 20,039    
|Total               | $ 5,068        | $ 79,918       | $ 189,534 | $141,158    | $ 1,220,932      | $1,633,610



Note 4.ACCOUNTS RECEIVABLE - $6,630,729 (see note 30 re past operations of
subsidiaries)

This balance represents the following:

|                                  | TZF US
Company | The BC
Company | Tian'an   | TZF JiangSu | Shenzhen TZF
Net | Total     
|--------------------------------- | -------------- | -------------- | --------- | ----------- | ---------------- | ----------
|Accounts receivable, trade        | $97,254        | $ 1,528,497    | $ 430,188 | $1,522,099  | $ 668,624        | $4,246,662
|Accounts receivable,
Canadian GST |                | $21,493        |           |             |                  | $ 21,493  
|Short-term loans                  |                |                | 6,046     | 6,046       | 407,947          | 420,039   
|Accounts receivable, others       |                | 15,249         |           | 911,567     |                  | 926,816   
|Total                             | $ 97,254       | $1,565,239     | $436,234  | $2,439,712  | $ 1,076,571      | $5,615,010

Note 5.PREPAID EXPENSES AND DEPOSITS - $221,152

The balance of prepaid expense and deposit as at June 30, 2001, is as follows:

|                     | The BC Company | Tian'an | Shenzhen TZF Net | Total    
|-------------------- | -------------- | ------- | ---------------- | ---------
|Rental deposits      | $ 5,384        | $       | $                | $  5,384 
|Deposit for supplies | 970            | (2,167) | 216,965          | 215,768  
|Total                | $6,354         | (2,167) | 216,965          | $ 221,152



Note 6.SUBSCRIPTIONS RECEIVABLE - $406,434

On September 11, 2000, Mr. Chung Yiu Chung signed a subscription agreement with the
Company, whereby he subscribed for 561,798 common share of the Company at a price of
CAD$1.50 per share, of which 162,994 common shares were issued and paid.  The balance of
$406,434 is unpaid and is disclosed as a current asset in these financial statements.

Note 7.  INVENTORIES -$2,185,094

The inventories as at June 30, 2001, are made up as follows:

|                    | The BC
Company | Tian'an     | TZF JiangSu | Shenzhen TZF
Net | Total     
|------------------- | -------------- | ----------- | ----------- | ---------------- | ----------
|Raw materials       | $              | $    97,232 | $ 75,296    | $                | $172,528  
|Packaging materials | 22,947         | 20,655      | 518,238     |                  | 561,840   
|Finished products   |                | 658,558     | 153,181     |                  | 811,739   
|Other               |                |             | 224,227     | 414,760          | 638,987   
|Total               | $    22,947    | $776,445    | $970,942    | $   414,760      | $2,185,094

Note 8.MINORITY INTEREST

As at June 30, 2001, the consolidated financial statements of Shenzhen TZF Net consists of
Shenzhen TZF Net and its 88% owned subsidiary, Guangdong Hongkong Medical Company.
Detailed calculation are as follows:

|                                                         | Hongkong
Medical | Percentage share of
Shenzhen TZF Net | Shenzhen TZF
Net Share | Minority Interest
|-------------------------------------------------------- | ---------------- | ------------------------------------ | ---------------------- | -----------------
|Capital Stock                                            | $604,595         | 88%                                  | $532,044               | $72,551          
|Retained earnings (commencing
business on April 1, 2001) | 0                | 88%                                  | 0                      | 0                
|Net profit this period                                   | 301,075          | 88%                                  | 264,946                | 36,129           
|Total                                                    | $905,670         | 0                                    | 796,990                | 108,680          

Note 9.  FIXED ASSETS

The totals for fixed assets and accumulated depreciation as at June 30, 2001, are made up as
follows:

|**Cost**                     | The BC
Company | Tian'an    | TZF JiangSu | Shenzhen TZF
Net | Total     
|---------------------------- | -------------- | ---------- | ----------- | ---------------- | ----------
|Computer equipment           | $   14,364     | $          | $           | $                | $ 14,364  
|Office equipment             | 14,286         |            |             |                  | 14,286    
|Vehicles                     | 19,025         |            |             |                  | 19,025    
|Buildings and improvement    | 38,426         | 1,312,794  |             |                  | 1,351,220 
|Mechanic devices             |                | 321,187    |             |                  | 321,187   
|Shipping devices             |                | 21,685     |             |                  | 21,685    
|Electronic devices           |                |            |             | 82,996           | 82,996    
|Other                        |                | 314,560    | 215,381     |                  | 529,841   
|Total                        | 86,101         | 1,970,226  | 215,381     | 82,996           | 2,354,704 
|**Accumulated Depreciation** |                |            |             |                  |           
|Computer equipment           | 3,535          |            |             |                  | 3,535     
|Office equipment             | 3,751          |            |             |                  | 3,751     
|Vehicles                     | 4,440          |            |             |                  | 4,440     
|Buildings and improvement    | 9,359          | 275,701    |             |                  | 285,060   
|Mechanic Devices             |                | 128,402    |             |                  | 128,402   
|Shipping Devices             |                | 19,517     |             |                  | 19,517    
|Electronic Devices           |                |            |             | 7,599            | 7,599     
|Other                        |                | 210,349    |             |                  | 210,349   
|Total                        | 21,085         | 633,969    | 0           | 7,599            | 662,653   
|**Net Book Value**           |                |            |             |                  |           
|Computer equipment           | 10,829         |            |             |                  | 10,829    
|Office equipment             | 10,535         |            |             |                  | 10,535    
|Vehicles                     | 14,585         |            |             |                  | 14,585    
|Buildings                    | 29,067         | 1,037,093  |             | 0                | 1,066,160 
|Mechanic Devices             |                | 192,785    |             | 0                | 192,785   
|Shipping Devices             |                | 2,168      |             | 0                | 2,168     
|Electronic Devices           |                | 0          |             | 75,397           | 75,397    
|Other                        |                | 104,211    | 215,381     | 0                | 319,592   
|Total (to Schedule A)        | $ 65,016       | $1,336,257 | $   215,381 | $ 75,397         | $1,692,051

Note 10. FIXED ASSETS - OTHERS

As at June 30, 2001, other fixed assets of $793,813 represent the residual value of fixed assets
located at TZF JiangSu.

Note 11. FIXED ASSETS - CONSTRUCTION IN PROGRESS

The construction in progress of $2,146,980 as at June 30, 2001, applies to new buildings and
related equipment located at TZF JiangSu and will not be depreciated until the building has been
completed and the equipment put into use during 2001.  The additional cost to complete is
approximately $2,424,598 , see note 27, contractual commitments.

Note 12. GOODWILL

As at June 30, 2001, goodwill of $1,206,554 is made up as follows:

|                         | Tian'an  | Shenzhen TZF Net | Total     
|------------------------ | -------- | ---------------- | ----------
|Goodwill on acquisitions | $147,177 | $1,059,377       | $1,206,554
|Accumulated amortization | 3,680    | 26,484           | 30,164    
|Net book value           | $143,497 | $1,032,893       | $1,176,390

The goodwill will be amortized over a twenty year period and will be evaluated on an annual
basis as to any possible impairment, and, accordingly amortization of $30,164 is recorded in the
quarter ended June 30, 2001.

Note 13. INTANGIBLE ASSETS - DEFERRED COSTS

As at June 30, 2001, deferred costs of $101,588 are made up as follows:

|                                                                                 | Tian'an  | Shenzhen TZF Net | Total   
|-------------------------------------------------------------------------------- | -------- | ---------------- | --------
|Website development - to be amortized over 30 months
after completion of website | $        | $71,780          | $71,780 
|New product development costs - to be expensed in 2001                           | 30,822   |                  | 30,822  
|Total                                                                            | $ 30,822 | $71,780          | $102,602

Note 14.  INTANGIBLE ASSETS - TECHNOLOGY RIGHTS

By agreement dated December 15, 1999, Shenzhen Hengyunda Enterprises Co. Ltd. of P.R.
China agreed to sell and assign certain information and rights relating to a series of products
known as the Snow Lotus Tea series products to the BC Company.

The BC Company agreed to pay consideration of $4,038,229 for acquisition of these assets,
through the issuance of 6,000,000 shares of its Class B common stock, which were valued for
purposes of the acquisition at a price of CAD$1.00 per share, for total consideration of
CAD$6,000,000 (US$4,038,229).

Shenzhen Hengyunda Enterprises Co. Ltd. has warranted that there are no charges or
encumbrances against the rights being acquired.

This agreement includes the sale, assignment and transfer of all the right, title and interest in and
to the Product Information and all the rights to use, exploit, develop or otherwise deal with the
Product Information or the Project, including the right to register any Intellectual Property in
connection with the Product, the same to be held and enjoyed by the BC Company and its
successors and assigns as fully and effectively as the same would have been held and enjoyed by
Shenzhen Hengyunda Enterprises Co. Ltd. had this transfer and assignment not been made.

Shenzhen Hengyunda Enterprises Co. Ltd. further agrees to execute and deliver all such
documents and further assurances as may be necessary or desirable to give effect to the sale and
assignment.

Amortization of the cost of the technology will commence when the products relating to the
technologies are available to be marketed; which is expected to be effective in 2001.  The
amortization period is for ten years on a straight-line basis.  No amortization of these technology
rights is included in these financial statements for the quarter ended June 30, 2001.

Note 15.  ACCOUNTS PAYABLE AND ACCRUED

Details of the total of accounts payable and accrued as at June 30, 2001, are as follows:

|                      | TZF US
Company | The BC
Company | Tian'an  | Second
Pharmacy | Shenzhen TZF
Net | Total     
|--------------------- | -------------- | -------------- | -------- | --------------- | ---------------- | ----------
|A/P, Trade            | $              | $ 617,956      | $189,649 | $791,472        | $107,531         | $1,706,428
|Accrued payroll taxes |                | 59,228         |          | 30,784          |                  | 90,012    
|Taxes payable         |                |                | 29,930   | 248,718         | 326,756          | 605,404   
|Other payables        | 2,118          | 57,206         | 33,241   | 288,963         |                  | 381,528   
|Total                 | $ 2,118        | $734,390       | $252,640 | $1,359,937      | $434,287         | $2,783,372



Note 16.  MANAGEMENT FEES PAYABLE - $176,671

Detail of the total of management fees payable as at June 30, 2001, are as follows:

Mr. Xin Chen	$103,195

Mr. Chung Yu75,365

Mr. Eric Liu45,978

Total	$$224,538

Note 17.  RELATED PARTY TRANSACTIONS

a)	By Director Resolution, each of Mr. Eric Liu, Director and Vice-president of the
Company, Mr. Chung Yu, Director and CEO of the Company and Mr. Xin Chen,
Director and Chairman of the Company, respectively, will be paid CAD$8,000
per month as remuneration effective December 1, 1998.  Payment of such
director's fees may be deferred until such time as the Company has had an Initial
Public Offering (IPO), or as the Board of Directors may otherwise decide in view
of the financial situation of the Company at that time.

As at June 30, 2001, management fees payable for which payment was deferred
total $224,538 (see note 16).

- The amount of $515,053 is due to related parties as at June 30, 2001, is
unsecured, non interest bearing, with no specific terms of repayment, and due to
the following:

Mr. Xin Chen	$499,776

Mr. Chung Yu	15,277

Total	$	515,053

c)		The principal shareholders offered to all warrant holders to exchange their
warrants for shares held by the principal shareholders pursuant to such ratio so
that, with the completion of the warrant/share exchange, the per share cost of the
share/warrant held by the minority shareholder effectively stands at CAD$0.75
per share.  The share/warrant change became effective as of December 17, 2000.

d)		During the fiscal year ended December 31, 2000, Mr. Xin Chen, Director and
Chairman of Board of Directors of the Company, advanced a total of
approximately $5,500,000 on behalf of the Company. These funds were used in
part for purchase of the assets of TZF JiangSu, and in part for purchase of all of
the issued and outstanding stock of Tian'an Investments Limited, a British Virgin
Islands Corporation (which was completed on December 21, 2000) and part of
the payment on the acquisition of 100% of the issued and outstanding shares of
Shenzhen T.Z.F. Network Technologies Co., Ltd.

On December 28, 2000, the Company signed a Debt Settlement Agreement with
Mr. Xin Chen.  Mr. Chen agreed to take 10,000,000 common shares of the
Company at a price of CAD$0.75 (US$0.50) per share to repay $5,000,000 of his
loan.  These shares have warrants attached entitling the holder to purchase
additional 10,000,000 common shares of the Company at a price of CAD$1.50
per share until December 28, 2001, and thereafter, at a price of CAD$2.50 per
share until December 28, 2002.

Note 18.  BANK LOANS

Details of bank loans as at June 30, 2001, are as follows:

a)	Tian'an

As at June 30, 2001, Tianan has bank loans, as follows, secured by its assets:

|                        |                   | Principal   |                  
|----------------------- | ----------------- | ----------- | -----------------
|                        | Period of Loan    | Chinese RMB | Equivalent to US$
|Bank of China           | 10/20/00-10/20/01 | 4,000,000   | 483,676          
|China Construction Bank | 5/18/01-5/18/02   | 3,000,000   | 362,757          
|Total                   |                   | 7,000,000   | 846,433          

b)	TZF JiangSu

As at June 30, 2001, TZF JiangSu has bank loans, as follows, secured by its
assets:

|                                              | Period of Loan  | Principal

Chinese
RMB | Principal

Equivalent to US$ | Interest
Rate/Monthly
|--------------------------------------------- | --------------- | ---------------------- | ---------------------------- | ---------------------
|Industries and Commerce Bank of Jianhu,
China | 6/30/01-6/30/02 | 8,859,998              | 1,071,342                    | 0.63375%             

c)	Summary of Bank loans

|                                       | Tian'an  | TZF JiangSu | Total     
|-------------------------------------- | -------- | ----------- | ----------
|Bank of China Xiamen Branch            | $483,676 | $           | $483,676  
|Industries and Commerce Bank of Jianhu |          | 1,071,342   | 1,071,342 
|China Construction Bank                | 362,757  |             | 362,757   
|Total                                  | $846,433 | $1,071,342  | $1,917,775

Note 19.  LONG-TERM LIABILITIES

a)		The long-term debt of $295,399 represents long-term accounts payable owed by
Second Pharmacy

b)		The deferred liabilities for pensions applies to Tianan.  This is a provision for
pension liabilities.

Note 20.  CAPITAL STOCK

a)		Authorized:  100,000,000 common shares with a par value of $0.0001 each per
share.

b)		Issued and outstanding common shares as at June 30, 2001 are as follows:

|                                  | Issued Date | Number of
Shares | Par Value | Additional Paid-in Capital | Total      
|--------------------------------- | ----------- | ---------------- | --------- | -------------------------- | -----------
|private placement                 | 9/25/98     | 1,000,000        | $   1,000 | $ 1,500                    | $ 2,500    
|**Balance**                       | 12/31/98    | 1,000,000        | 1,000     | 1,500                      | 2,500      
|private placement                 | 2/17/99     | 600,000          | 600       | 59,400                     | 60,000     
|**Balance**                       | 12/31/99    | 1,600,000        | 1,600     | 60,900                     | 62,500     
|cancellation of common stock      | 4/30/00     | (1,000,000)      | (1,000)   | 1,000                      |            
|**Balance, before forward split** | 4/30/00     | 600,000          | $ 600     | $ 61,900                   | $ 62,500   
|10:1 forward split                | 5/15/00     | 6,000,000        | 600       | 61,900                     | 62,500     
|issuance of stock for services    | 5/15/00     | 250,000          | 25        | 252,375                    | 252,400    
|acquisition of the BC Company     | 5/15/00     | 18,451,843       | 1,845     | 5,351,087                  | 5,352,932  
|issuance for cash                 | 7/4/00      | 340,000          | 34        | 343,216                    | 343,250    
|issuance for cash                 | 9/30/00     | 615,466          | 62        | 621,286                    | 621,348    
|issuance for cash                 | 10/19/00    | 10,000           | 1         | 10,999                     | 11,000     
|                                  |             |                  |           |                            |            
|issuance for cash                 | 11/19/00    | 230,000          | 23        | 252,977                    | 253,000    
|issuance for debt                 | 12/28/00    | 10,000,000       | 1,000     | 4,999,000                  | 5,000,000  
|negative goodwill                 | 12/31/00    |                  |           | 3,333,103                  | 3,333,103  
|Capital contributed               | 1/1/01      |                  |           | 177,946                    | 177,946    
|**Balance**                       | 6/30/01     | 35,897,309       | $ 3,590   | $15,403,889                | $15,407,479

c)	Outstanding Warrants at June 30, 2001

537,000 warrants to purchase 537,000 common shares exercisable at CAD$1.50
per share until December 17, 2001

2,231,311 warrants to purchase 2,231,311 common shares exercisable at
CAD$2.50 per share until December 17, 2001

10,000,000 warrants to purchase 10,000,000 common shares exercisable at
CAD$1.50 per shares until December 28, 2001, and thereafter exercisable at
CAD$2.50 per share until December 28,2002 (see note 17(d))

12,768,311

Note 21.  INCOME TAXES

a)	The most recent Federal Income Tax filing for the Company for the US was for
the year ended December 31, 2000, disclosing no income taxes payable to the US
Internal Revenue Service.

b)	The BC Company has filed Federal Income Tax Returns for the years ended
December 31, 1999 and 2000.  To December 31, 2000, the BC Company had a
total loss of CAD$482,634 (equivalent to US$321,756).  No provision for
Canadian Income Taxes is provided for in these consolidated financial statements
as the profit is reduced by other costs of the Company.

Note 22.  FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents, accounts receivable,
prepaid expenses and deposits, subscriptions receivable, short-term investment, inventories,
bank loans, accounts payable and accrued, management fees payable, balances due to related
parties, the amount payable on an acquisition and long-term liabilities.  It is management's
opinion that the Company is not exposed to significant interest, currency or credit risks arising
from these financial instruments.  The fair value of these financial statements approximates their
carrying values.

Note 23.  LEASE OBLIGATIONS

a)		Canon Copier (NP-3825) Lease

On October 1, 1999, the Company entered into a 48 month lease with Dominion
Technologies for a Canon Copier to be used by the Company.  Lease payments
are expensed as they are incurred.  Lease obligations are as follows:

2001	CAD$	1,327

2002	CAD$	1,327

2003	CAD$	995

b)		Computer Lease

On October 1, 1999, the Company entered into a 36 month lease with Dominion
Technologies for computer equipment to be used by the Company.  Lease
payments are expensed as they are incurred.  Lease obligations are as follows:

2001	CAD$	2,947

2002	CAD$	2,210

c)		Vehicle Leases

On July 29, 1999, the Company entered into a 36 month lease with Mercedes-Benz Credit of Canada Inc. for two vehicles to be used by the Company.  Lease
payments are expensed as they are incurred.  Lease obligations are as follows:

2001	CAD$	20,927

2002	CAD$	12,207

d)		Lease of Premises

The Company entered into a lease for offices on April 26, 1999 with Omnia
Overseas Trading Ltd. for three years for monthly rent and costs of
CAD$3,133.51, that commenced on July 1, 1999.

The first and the last months rent of CAD$6,631.15 is due at the time of signing.
This amount has been paid and is recorded as prepaid expense and deposit as at
December 31, 2000.

Summary of lease obligations

|Year | CAD$    | Equivalent US$
|---- | ------- | --------------
|2001 | $62,803 | $42,269       
|2002 | 34,545  | 23,250        
|2003 | 995     | 670           
|     | $98,343 | $66,189       

These lease payments are not capitalized, but are expensed as they are incurred.

Note 24.  PENSION AND EMPLOYMENT LIABILITIES

The Company has liabilities which are deferred as at June 30, 2001, for pension, post-employment benefits or post-retirement benefits in Tianan in the amount of $212,562.  The
parent company and other subsidiary companies, (except for Tianan) do not have any liabilities
for pensions and related costs.

Note 25.  DISTRIBUTORSHIP AGREEMENTS

The Company enters into various distributorship agreements with independent third parties to
market products of the Company and its subsidiaries.

Note 26.  LAWSUITS

Expediter Sales Ltd. ("Expediter") v. the BC Company

There is a claim filed against the BC Company by Expediter alleging a breach of contract and
misrepresentation.  Expediter is seeking damages for alleged loss of profits, loss of business and
goodwill, misrepresentation, set-up expenses and the alleged wrongful use of Expediter's name,
and an injunction to prevent the BC Company from selling and herbal tea in Canada.  The BC
Company terminated the contract of Expediter for non-performance and has, accordingly,
counterclaimed against Expediter for outstanding debts unpaid by Expediter.  No provision has
been made in these financial statements for any potential costs or contingent assets relating to
this matter as the results of the claim and counterclaim are not determinable at this time.

Note 27.  CONTRACTUAL COMMITMENTS

A subsidiary, TZF JiangSu has contractual obligations totaling $2,424,598, at June 30, 2001, to
builders, suppliers and sub-trades relating to construction in progress of buildings and for
purchase of equipment.

Note 28.  SALES IN CANADA

The Company maintains a products analysis and quality control system in Canada, for its
products to be distributed, in order to ensure that its products conform to relevant regulatory and
health requirements.  Where any products are found not to meet the regulatory requirements, the
Company will immediately take such measures as necessary, or cause such measures to be
taken, so that the said regulatory requirements are complied with.

Note 29.	SHORT-TERM INVESTMENT

As at June 30, 2001, Shenzhen TZF Net invested $1,354,293 in Shenzhen Shengqi Investments
Ltd. for a one year term (October 12, 2000 to October 12, 2001).  This investment is secured by
the assets of Shenzhen Shengqi Investments Ltd. and is guaranteed at least 12% return per
annum.

Note 30.	REVENUES OF ACQUISITIONS

The Company has acquired four subsidiary companies and they are recorded as a purchase.
Operating figures of these acquisitions are disclosed from the date of acquisition.  Details of the
operating figures for the Company and the four subsidiary companies for the six month period
ended June 30, 2001, extracted from the applicable financial statements of those companies, are
as follows:

|                         | TZF US
Company | The BC
Company | Tian'an   | TZF JiangSu | Shenzhen TZF
Net | Total     
|------------------------ | -------------- | -------------- | --------- | ----------- | ---------------- | ----------
|Revenue                  |                |                |           |             |                  |           
|Sales                    | $146,234       | $1,206,677     | $ 489,199 | $ 625,996   | $3,629,817       | $6,097,923
|Cost of sales            | 38,056         | 683,344        | 212,533   | 417,160     | 2,863,485        | 4,214,578 
|Gross profit             | 108,178        | 523,333        | 276,666   | 208,836     | 766,332          | 1,883,345 
|Selling expenses         |                | 16,509         | 45,836    | 79,177      | 27,466           | 168,988   
|                         | 108,178        | 506,824        | 230,830   | 129,659     | 738,866          | 1,714,357 
|Other income             | 70             | 2,306          | 65,683    | 121,827     | 70,360           | 260,246   
|                         | 108,248        | 509,130        | 296,513   | 251,486     | 809,226          | 1,974,603 
|Administrative costs     | 43,079         | 317,588        | 81,853    | 98,001      | 100,850          | 641,341   
|Amortization of goodwill |                |                | 3,680     |             | 26,484           | 30,164    
|Depreciation             |                | 8,606          | 74,544    |             | 1,474            | 84,624    
|                         | 43,079         | 326,164        | 160,077   | 98,001      | 128,808          | 756,129   
|Profit (loss) before     | 65,169         | 182,966        | 136,436   | 153,485     | 680,418          | 1,218,474 
|Income taxes             |                |                | 21,017    |             | 190,536          | 211,553   
|                         | 65,169         | 182,966        | 115,419   | 153,485     | 489,882          | 1,006,921 
|Minority Interest        |                |                |           |             | 36,129           |           
|**Net Profit (loss)**    | $ 65,169       | $182,966       | $ 115,419 | $153,485    | $453,753         | $970,792  



Note 31  DISTRIBUTION AGREEMENTS

a)		By agreement dated December 15, 2000, effective January 1, 2001, Trophic
Canada Ltd. ("the Supplier"), granted TZF International Investments, Inc. (TZF)
the exclusive right to promote, distribute, and sell the supplier's products within
the "Territory" of China, which includes Hong Kong, SAR, for a period of five
years.  Continuation of this exclusive right is continent upon meeting or
exceeding the purchase of products for a minimum of CAD$50,000 within the
first distribution year, a minimum of CAD$200,000 within the second
distribution year, and increases of approximately 20% in each of the subsequent
distribution years.

The supplier may terminate the distribution agreement if TZF breaches any terms
of the agreement, including but not restricted to the annual sales requirements, if
any breaches are not remedied within three months after written notice.

TZF cannot assign the agreement or subcontract its obligations under the
agreement without the consent in writing of the supplier. The supplier is an arms
length party unrelated to TZF.

b)		By agreement dated June 22, 2001, effective June 22, 2001, Puresource Inc. ("the
Supplier") granted TZF International Investments, Inc. (TZF) the exclusive right
to promote, distribute, and sell the supplier's products within the "Territory" of
China, which includes Hong Kong, SAR, for a period of five years.  Continuation
of this exclusive right is continent upon meeting or exceeding the purchase of
products for a minimum of US$20,000 within 12 months after the initial product
has been approved for sale in the Territory by the appropriate government
department.

The supplier may terminate the distribution agreement if TZF breaches any terms
of the agreement, including but not restricted to the annual sales requirements, if
any breaches are not remedied within 45 days after written notice.

This agreement shall be renewed for additional successive renewal periods of
five year terms upon written notice by either of the parties, delivered at lease 60
days prior to the expiration of the preceding period and in any case the
Distributor will always have the first choice of renewal.

Note 32   SUBSEQUENT EVENT

By agreement dated and effective July 25, 2001, Flora Manufacturing and Distributing Ltd. ("the
Supplier"), granted TZF International Investments, Inc. (TZF) the exclusive right to promote,
distribute, and sell the supplier's products within the "Territory" of the Peoples' Republic of
China (excluding Hong Kong and Macao) for a period of three years.  Continuation of this
exclusive right is continent upon meeting or exceeding the purchase of products for a minimum
of US$50,000 within 12 months after the initial Product has been approved for sale in the
Territory by the appropriate government department and in the next two years thereafter or
US$200,000 in the second year and US$400,000 in the third year.

The supplier may terminate the distribution agreement if TZF breaches any terms of the
agreement, including but not restricted to the annual sales requirements, if any breaches are not
remedied within three months after written notice.

This agreement shall be renewed for additional successive renewal periods of three year terms
upon written notice by either of the parties, delivered at lease 60 days prior to the expiration of
the preceding period and in any case the Distributor will always have the first choice of renewal.

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements.  Certain statements in this report, including statements in the
following discussion which are not statements of historical fact, are what are known as "forward
looking statements,"which are basically statements about the future, and which for that reason,
involve risk and uncertainty, since no one can accurately predict the future.  Words such as
"plans," "intends," "will," "hopes," "seeks," "anticipates," "expects," "goal" and "objective"
often identify such forward looking statements, but are not the only indication that a statement is
a forward looking statement.  Such forward looking statements include statements of our plans
and objectives with respect to the present and future operations of the Company, and statements
which express or imply that such present and future operations will or may produce revenues,
income or profits.  Numerous factors and future events could cause the Company to change such
plans and objectives, or fail to successfully implement such plans or achieve such objectives, or
cause such present and future operations to fail to produce revenues, income or profits.
Therefore, the reader is advised that the following discussion should be considered in light of the
discussion of risks and other factors contains in this Form 10QSB and in the Company's other
filings with the Securities and Exchange Commission, and that no statements contained in the
following discussion or in this Form 10QSB should be construed as a guarantee or assurance of
future performance or future results.

The Company's business plan is to build a vertically and horizontally integrated network of
health food distribution centers and retail counters in China that will sell products both under the
T.Z.F. brand name and under other Chinese and Western brand names.  The Company also
intends to introduce several of its Chinese health food products to the North American market.

During the fiscal year ended December 31, 2000, the Company completed several acquisitions.
However, the acquisitions which were the most significant were all completed in December
2000, at the end of the fiscal year.  Therefore, the first quarter of the current fiscal year was the
first quarter for which the Company was involved in management of the operations of these
subsidiaries.  As a result, during the second quarter the Company focused its efforts on
integrating and consolidating the operations of its subsidiaries and on preparing them for
development and expansion of their operations.

Specific activities by the Company during the quarter ended June 30, 2001, included entering
into an agreement on June 22 with Puresource, Inc. which granted the Company the exclusive
right to promote, distribute, and sell the supplier's products within China and Hong Kong for a
period of five (5) years.  Through this agreement, the Company intends to become the largest
distributor of Canadian health products into China.  Founded in 1989, Puresource is one of
Canada's largest health products wholesalers and brokers -- delivering thousands of brand name
health products to Canadians.  The products are available through a network of health food
retailers located across the nation.  Puresource offers a broad range of products covering herbal,
nutritional and sport supplements, herbal and medicinal teas, homeopathics, personal care
products, non-dairy beverages and energy bars.  Some of the manufacturers represented by
Puresource include: Herbal Select, Now Foods, Nonu International, Select Teas, Uncle Lee's
Tea, Algonquin Tea Company, Homeocan, Natra-Bio, Naturade, Tea Tree Therapy, Rachel
Perry, Imagine Foods, Pacific Foods, Vitasoy, Peak Bar, Cliff Bar, Balance Foods and
PowerBar.

On June 6, 2001, the Company acquired the exclusive distribution rights for the product named
"Bitter Melon Powder" in North American.  This product is made in China.  The Company has
already registered the product label with the appropriate government office in Canada.  The
Company is currently focusing on the marketing of the product.

A subsidiary of the Company, Shenzen Tianzifu Network Technology Ltd. ("Shenzen TZF") has
signed agreements with twenty large department stores in Sichuan Province, PRC, in which the
Company can sell its products on its own special counters.  Eight counters are in use currently.
The balance of the counters are under construction.  Ultimately, the Company anticipates having
40 such counters in Sichuan Province.  In Wuhan City, the Company has three counters in
operation in department stores.  Two more are in progress.  The goal is to open a total of 200
counters in the top  200 department stores nationwide.

The Company is negotiating distribution rights with Flora Manufacturing and Distributing, Ltd.,
a Canadian company ("Flora"), with respect to the distribution of Flora's products in China and
Hong Kong.

Another subsidiary of the Company, Tianan Pharmacy (Xiamen) Co., Ltd. ("Tianan"), has set up
new distribution channels in over a dozen provinces of China.

Financial Condition and Results of Operations.	There have been no material changes in the
Company's financial condition and results of operation since the end of the last quarter.
However, as a result of the acquisition of its subsidiaries, the Company's financial condition and
results of operation for the quarter ended June 30, 2001 are so significantly different than its
financial condition and results of operation for the period ended June 30, 2000 that no
meaningful comparison is possible.

For example, the Company's total assets as of June 30, 2001 were $23,362,388, as compared to
total assets of $21,958,368 as of March 31, 2001 and total assets of $5,762,668 as of June 30,
2000.  Total current liabilities were $5,959,328 as of June 30, 2001, as compared to total current
liabilities of $5,404,712 as of March 31, 2001 and current liabilities of $403,708 as of June 30,
2000.  Sales revenue and net profit for the quarter ended June 30, 2001 were $4,811,377 and
$740,920, respectively, as compared to $1,630 sales revenue and a net loss of ($582,691) for the
quarter ended June 30, 2000.

Need for Additional Capital.	The Company plans to invest a total of up to US $68 million into
its subsidiaries by the end of 2001.  These funds are expected to be raised through private
placement or public sale of its securities, or through loans or additional investments from
existing shareholders.  However, the Company does not currently have any commitments to
provide any additional capital, and there is no assurance that the Company will be able to raise
all, or any substantial portion, of the funds required to carry out its plan of operations for fiscal
2001.  In the event the Company is not able to raise all, or a substantial portion of the funds, it
will be required to limit its expansion plans, and to substantially modify its plan of operations.

PART II

ITEM 1.	LEGAL PROCEEDINGS

On or about October 12, 2000, a lawsuit was filed in the courts of Vancouver, British Columbia,
Canada against a subsidiary of the Company, T.Z.F. International Herbs Investment Inc. ("TZF
Herbs") by Expediter Sales, Ltd. ("Expediter").  Prior to the lawsuit, the parties had been parties
to a distributorship agreement wherein Expediter became the exclusive distributor in Canada of
the Company's Snow Lotus Tea.  In the Statement of Claim, Expediter claims unspecified
damages for breach of contract, including lost profits, lost of business and goodwill, damages
for fraudulent misrepresentation, wrongful use of Expediter's name, and an injunction to prevent
the subsidiary from selling any herbal tea in Canada.  Although the lawsuit filed by Expediter
does not specify the amount of damages being claimed, the Company does not believe that the
amount involved could be sufficient enough to make the outcome of the lawsuit material to the
Company's operations.

In its Statement of Defence, TZF Herbs strongly denied all of Expediter's allegations and
alleged that Expediter itself had in fact breached the contract between the parties by failing to
sell the required amount of goods as set forth in the contract.  TZF Herbs continues to dispute all
claims made against it and will vigorously defend itself against the claims alleged by Expediter.



ITEM 2.  	CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  	DEFAULTS UPON SENIOR SECURITIES

None.

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

No matters were submitted to a vote of the security holders of the Company during the first
quarter ending June 30, 2001.

ITEM 5.	OTHER INFORMATION

In March 2001, the Canadian Food Inspection Agency detained approximately 3,383 cases
(20,298 bottles) of Snow Lotus Tea, a product distributed by TZF Herbs.  The product was
seized based on the Agency's claim that the product contained high levels of formic acid and
was therefore unsuitable for sale in Canada.  The product has been approved for sale as a food
provided that it is free of formic acid.  The Company intends to proceed and take the steps
necessary so that it may begin to sell the Snow Lotus Tea.

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K.

There were no reports on Form 8-K filed during the quarter ended June 30, 2001.

**SIGNATURES**

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

**T.Z.F. INTERNATIONAL INVESTMENTS, INC.**

By:/S/ CHUNG YU

Chung Yu, President, Chief Executive Officer, and a Director

By: /S/ XIN CHEN

Xin Chen, Chairman of the Board

By: /S/ HONG LI

Hong Li, a Director

By: /S/ ROBERT S. HALLAM

Robert S. Hallam, a Director

By: /S/ CHUN SHENG GUO

Chun Sheng Guo, a Director

By: /S/ QING LIU

Qing Liu, Vice President and a Director

Date:	August 14, 2001