**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

Form 10-KSB

X__Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2002.

___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)

|1218 - 1030 West Georgia Street

Vancouver, BC, Canada | V6E 2Y3   
|------------------------------------------------------ | ----------
|(Address of principal executive offices)               | (Zip Code)

Registrant's telephone number, including area code: (604) 682-3818

Securities to be registered under Section 12(b) of the Act:

Title of each class

N/A

Securities to be registered under Section 12(g) of the Act:

Common Stock

(Title of Class)

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 ____

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB.___

State issuer's revenue for its most recent fiscal year: $3,878,033

State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked priced of such stock, as of a specified date within the past 60 days (See definition of affiliate in Rule
12b-2): -0-

Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are
stated.

(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 registrants) State the number of shares outstanding of each of the issuer's classes of common equity, as
of the latest practicable date: 30,098,505 as of March 27, 2003.

(Documents incorporated by reference. If the following documents are incorporated by reference, briefly describe them and identify
the part of the Form 10-KSB (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of
1933 ("Securities Act"). The listed documents should be clearly described for identification purposes.





PART I

ITEM 1. DESCRIPTION OF BUSINESS.

**Background**

The Company was incorporated under the laws of Nevada on September 14, 1998, as Sabai Sabai Enterprises, Corp, and on May 25,
2000, changed its name to T.Z.F. International Investments, Inc. As a result of various acquisitions completed during the fiscal year
ending December 31, 2000, the Company has expanded rapidly. It now owns several subsidiaries and business operations in Canada
and in China through which it manufactures, markets and distributes pharmaceutical and health food products in China. The
Company's goal, through the operations of its subsidiaries, is to become a market leader in distributing domestic and imported health
foods and medicines throughout China.

**Subsidiaries and Their Operations**

The Company has four subsidiaries in China and Canada through which it manufactures, markets and distributes pharmaceutical and
health food products. All of these subsidiaries were acquired during the fiscal year ending December 31, 2000.

During the fiscal year ending December 31, 2002, the Company worked on reorganizing and consolidating the operations of its
various subsidiaries. It is currently contemplated that the Company's business operations will be organized as follows:

**Shenzhen Tianzifu Network Technology, Ltd.**-CompanyHeadquarter,China****

**T.Z.F. International Herbs Investment, Inc.**- Sales Center, North America

**T.Z.F. International Herbs (Jiangsu) Co., Ltd.****-**Production Base, Eastern China

**Tian'an Pharmacy (Xiamen) Co., Ltd**.- Production Base, Southern China

Additional information regarding each of the subsidiary companies follows:

TZF International Herbs Investment, Inc.

T.Z.F. International Herbs Investment, Inc. ("TZF Herbs") is a wholly-owned subsidiary of the Company which was incorporated in
1998 under the laws of British Columbia, Canada. It is the Company's intent for TZF Herbs to serve as its North American sales
center.

Through TZF Herbs, the Company owns the formula, distribution and intellectual property rights, including trademark, patent and
industrial design rights, for the "Snow Lotus Tea" series products. TZF Herbs acquired those rights from Shenzhen Hungyunda
Enterprises Co. Ltd. of China pursuant to an Assignment Agreement dated December 15, 1999. Prior to the execution of the
Assignment Agreement, TZF Herbs was licensed to develop, market, and distribute the "Snow Lotus Tea" products in North America,
but did not own the formula rights.

Snow Lotus Tea is primarily an extract of the snow lotus flower which grows in high elevations in the mountains of Tibet and
neighboring Chinese provinces. It is marketed as a treatment for rheumatic and rheumatoid arthritis.

In October, 1998, the Canadian Food Inspection Agency approved the sale of Snow Lotus Tea in Canada as a food product. In 1999,
Health Canada informed the Company that the sale of"Snow Lotus Tea" products("SLT") in Canada is subject to their approval due
to the level of formic-acid content, therefore the Company needs to have DIN from Health Canada before selling SLT in Canada.
Consequently, the Company spent tremendous efforts on marketing SLT outside Canada and at the same time made application to
Health CanadaforDIN.

However, it has not been easy for the Company to market SLT in other markets due to the world-wide economic downturn and the
competition, and to qualify SLT for DIN in Canada due to the differences in health food standards between Canada and China. As a
result, in 2002, the Company re-adjusted the value of SLT by having canceled 5,400,000 common shares out of 6,000,000, which were
initially issued for SLT Technology. This cancellation of shares has reduced the total intangible assets by $3,483,871. For additional
information about this reduction, see "Intangible assets - (b) Technology rights" in note 9 of the accompanying consolidated financial
statements.

The Company is currently focusing its efforts on marketing North American health food and supplements in the Chinese market.

Shenzhen Tianzifu Network Technology Ltd.

On December 31, 2000, the Company completed the purchase of all of the assets of Shenzhen Tianzifu Network Technology Ltd,
("Shenzhen Tianzifu"), a Chinese corporation with a registered address at Shenzhen Tianzifu, 8 South Road, Dong Men, LouHu
District, Shenzhen City, GuangDong Province. It will serve as the Company's China headquarters.

Currently, Shenzhen Tianzifu operates a Chinese-language health food Web site in China. Its objective, though, 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 will seek to further expand the existing distribution network and channels of all
current subsidiaries in China and will seek to carry out T.Z.F.'s business plan of building 200 chain counters and stores in the top 200
department stores national wide, 50 licensed drug stores, 60 chain stores and 20 distribution centers in selected locations in China.
During 2002, Shenzhen Tianzifu has opened29 chain counters for North American health food products across Mainland China and
plans to expand the number of these kind of counters in 2003.

Shenzhen Tianzifu 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
seek to implement a Retailer Management System, an Electronic Ordering System and an Electronic Data Interchange through which
it will control the organization of the chain stores.

T.Z.F. International Herbs (Jiangsu) Co., Ltd.

On December 31, 2000, the Company completed the purchase of all of the assets of T.Z.F. International Herbs (Jiangsu) Co., Ltd.,
formerly Second Pharmacy Factory of Yancheng City, ( "TZF Jiangsu"), a Chinese corporation. The assets were purchased from The
People's Government of JianWu County, JiangSu Province, the People's Republic of China.It is the Company's intent that T.Z.F.
Jiangsu will serve as it's base of operation for manufacturing medicines.

The cash purchase price for the assets ofT.Z.F. Jiangsuwas paid on our behalf by Xin Chen, one of our principal shareholders. These
payments were part of a total of $5,000,000 US which Mr. Chen advanced on our behalf during the fiscal year ending December 31,
2000. The funds advanced by Mr. Chen were used for a variety of purposes including being used in part for purchase of the assets ofT.Z.F. Jiangsuand 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 or about December 21, 2000 and described in a report on Form 8K dated December 21,
2000). The advances made on our behalf by Mr. Chen were initially treated as a loan. However, on December 31, 2000, Mr. Chen
agreed to convert his loan to an equity investment, and our Board of Directors authorized the issuance of shares of common stock and
warrants to Mr. Chen in full satisfaction of this loan. (See ITEM 5. Other Events).

T.Z.F. Jiangsu is a medical manufacturing plant located in Jiangsu Province. It was founded in 1971. The factory produces both
pharmaceutical active ingredients and pharmaceutical preparations including chemically combined pharmaceutical active ingredients,
tablets, capsules, syrups, infusion solutions and tincture solutions. Currently, it produces over 100 products, and is capable of
manufacturing North American standard products.

T.Z.F. Jiangsu includes an advanced production line, an infusion production line with a capacity of up to 9 million bottles per year,
and a capsule production line capable of producing up to 5 million capsules per year. It maintains a consistent program of advanced
research and development, and its assay center has various testing capabilities and a sound quality assurance system. It also has four
sales departments and four branch offices and sells its products throughout China.

It is the Company's intent to use the facilities and employees of T.Z.F. Jiangsu to continue to produce its current products and to
expand its production to include additional health products. The Company also intends to seek to expand the research and
development operations conducted at the T.Z.F. Jiangsu facility and to seek to increase the sales volume for the products which are
manufactured at its facility by expanding the sales team and linking it with the Company's existing marketing platform.

Tian'an Pharmacy (Xiamen) Co., Ltd.

On December 21, 2000, the Company acquired all of the issued and outstanding capital stock of Tian'an Investments Limited, a
British Virgin Islands corporation. The sole asset of Tian'an Investments Limited is its 100% ownership of Tian'an Pharmacy
(Xiamen) Co., Ltd. ("TZF Xiamen"), a manufacturer of Chinese herbal medicine products. TZF Xiamen is located in the Torch High
Tech Development Zone of Xiamen, China.AlthoughTZF Xiamenis capable of producing products which satisfy North American
standards, it is the Company's intent thatTZF Xiamenwill serve primarily as its base of operation for manufacturing Chinese herbal
medicines for the Chinese market.

TZF Xiamen has obtained GMP certification for facility and operation from the Chinese authority and this is a very important
milestone for TZF Xiamen because the Chinese government requires all hospitals and pharmacies in China to use medicines produced
by GMPcertified manufacturers.

At the present time, TZF Xiamen produces a total of ten different herbal medicines which are sold in China. Its most well known
product is "Japonica capsules", which are used to strengthen the body's immunity function, and to treat cancer cells in the body, and
Bear Bile Capsules, which are used to treat liver diseases and high blood pressure. "Japonica Capsules" is one of the main products in
TZF Xiamen with a great market share.

TZF Xiamen, not only manufactures, but also develops, manufactures and markets its biological and herbal and biological medicines
in China. Its newly developed product "Linglong Capsules", a new product for treating liver cancel cells, is currently under final
development and an application fee of $481,308 has been prepaid to the government for its final approval of production during the
fiscal year 2002.

Research into new products is ongoing at Tian'an Pharmacy TZF Xiamen. This research is focused on studying, developing and
producing herbal medicines which will be intended to be marketed and sold in China and in North America.

**Risk Factors**

An investment in the outstanding securities of the Company should be considered to be risky. The following discussion of risk factors
is not intended to provide an exhaustive list of all of the risks which may be associated with an investment in the Company. Any
person considering such an investment should carefully consider all of the risks involved, including, but not limited to, the risk factors
discussed below, before making an investment decision.

Limited Operating History. The Company was formed in December, 1998, and itself has no operating history or revenues from
operations. On April 30, 2000, it acquired all of the issued and outstanding stock of TZF International Herbs Investment, Inc, and in
December, 2000, it acquired Tian'an Pharmacy, TZF International Herbs (Jiangsu) Co, Ltd., and Shenzhen Tianzifu Network
Technology, Ltd. Although several of the entities acquired by the Company have established a profitable operating history, there is no
assurance the Company will be able to successfully manage and integrate their operations or that they will continue to be profitable.
As a result, the Company faces all of the risks inherent in a new business venture, including all the unforeseen costs, expenses,
problems, and difficulties to which such ventures are subject.

No Market for Stock. At the present time, there is no public market for the Company's common stock and there is no assurance that a
market will develop in the future. Although the Company intends to take steps to have its shares approved for trading on the OTC
Bulletin Board, there is no assurance that it will be successful. Even if a market should develop in the future, there is no assurance that
it will be maintained. Thus, persons who purchase shares of the Company may find it to be difficult or impossible to liquidate their
investment, because of the lack of a market or the difficulty in maintaining a market. There is currently no person or entity which is
obligated to make or maintain a market in the Company's shares.

Need for Additional Financing. The Company will require substantial additional funds to continue its acquisition and market
expansion plans. Although the Company's Chairman, Mr. Xin Chen, has previously provided substantial funds to the Company to
assist in completion of acquisitions, and has indicated a willingness and ability to provide some additional funds to the Company in
the future until the Company is in a position to raise funds from external sources, he is not obligated to provide additional funds in the
future and there is no assurance that he will be able to do so. Likewise, there is no assurance that the Company will be able to raise
funds from external sources when it seeks to do so. Therefore, no assurance can be given that additional financing will be available
when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the
Company would be required to delay, trim or eliminate its expansion plans, its research and product development programs or other
programs or services which are currently part of the business plan, or may be required to alter the business plan, which is likely to have
a material adverse effect on the Company.

Dependence on Key Personnel. The success of the Company will depend to a significant degree upon the ability of its senior
management personnel to integrate and consolidate the operations of its various subsidiaries. It will also depend to a significant degree
on the Company's ability to retain and integrate a substantial number of the management personnel previously employed by its
subsidiaries. Significant disruption in the Company's operations would occur if it is not able to retain its senior management personnel
and to fully integrate and develop cooperation between the separate management personnel of each of its subsidiaries. The Company
does not currently have employment contracts with any of its senior management personnel. As a result, those persons could elect to
terminate their employment with the Company at any time.

Governmental Regulation. There are substantial regulations applicable to the import and export of goods and relating to advertising
and sale of food products or over-the-counter medicines both in North America and in China. The Company believes that it currently
has all of the necessary permits to manufacture and sell its existing products in China. However, as it seeks to develop new products
and to expand its marketing and distribution networks both in China and in North America, it is likely to encounter additional
regulations. Although it is the Company's intention to comply with all applicable governmental regulations in every country in which
it conducts operations, there is no assurance that it will be able to do so. There is also no assurance that the applicable regulations in
the various countries in which the Company seeks to operate will be consistent. Finally, there is no assurance that the Company will
have the resources necessary to comply with certain regulations such as those required to seek approval to sell certain of its products in
the U.S., Canada, or other countries as over-the-counter medicine. The process of obtaining approval for sale of any product as an
over-the-counter medicine is extremely expensive and time-consuming.

Patent or Copyright Protection. The Company's success will depend upon its ability to obtain patents, obtain exclusive rights to
patents, maintain trade secret protection and operate without infringing upon the proprietary rights of third parties. The Company has
attempted to protect its products and technologies through a combination of patent and trade secret laws and will continue to do so in
the future. There can be no assurance that the Company's efforts will be successful or that competitors will not develop functionally
equivalent or superior products or technology that does not infringe the Company's patents or trade secrets. Accordingly, the Company
may be vulnerable to competitors which develop competing products or competing technology, whether independently, or as a result
of acquiring access to the Company's trade secrets.

Competition. Until recently, the Chinese health food market (including manufacturing as well as wholesale and retail distribution and
sales) has not been open to foreign investors and the Company does not believe that there are currently any national chain stores or
other national outlets for the distribution and sale of Chinese health food products in all regions of China. However, it is believed that
the domestic China health food market will open to foreign competition soon after China joins the World Trade Organization
(W.T.O.). As a result, it is anticipated that many large foreign competitors are likely to seek to enter the Chinese market in the near
future. The expected increase in foreign competition, combined with competition from both existing and newly established domestic
entities, will make the Chinese health food market extremely competitive. The Company hopes to create a competitive edge for itself
in China by quickly establishing a large distribution network for its health food products. It has obtained government approval to
establish health food counters in up to 200 department stores in China and up to 50 pharmacy stores in the province of Shanxi, as well
as approvals to establish up to 20 pharmaceutical and health food sales centers and up to 60 health food stores for sale of both Chinese
and North American products. There is no assurance that the Company will be able to complete its expansion plans or that it will be
able to compete effectively in China against both domestic and foreign competition.

Research and Development. The Company will be required to expend significant amounts of money on research and development
expenses in order to develop new products and improve the market acceptance of its existing products. There is no assurance that it
will have sufficient capital to fund all desired research and development activities or that the research and development activities its
does conduct will lead to the creation of new products.

Market Acceptance. Many Chinese health food products are not currently widely used outside of China. There is no assurance that the
Company's products, if approved for sale in the North American market and other countries as either food products or over-the-counter
medicines, will achieve market acceptance. The extent of acceptance of the Company's products by consumers and by persons in the
healthcare industry will depend upon a number of factors, including, but not limited to, recognition of the efficacy of the product,
product availability, brand name recognition, the availability and cost of competitive products, relative safety and efficacy of
competitive products, and the like. There is no assurance that the Company's products will be successful in achieving market
acceptance as either a food product or as an over-the-counter medicine.

Potential Product Liability. Testing and proposed commercialization of food products and human therapeutic products involves
inherent risk of product liability claims and associated adverse publicity. There can be no assurance that the Company will be able to
obtain or maintain sufficient insurance coverage on acceptable terms with coverage which is adequate to provide necessary protection.
Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. An inability to
obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, could
prevent or inhibit the commercialization of the Company's potential products.

Manufacturing Uncertainties. The Company's ability to commercialize its products will depend upon its ability to manufacture such
products, either directly or through third parties, at a competitive cost and in accordance with any applicable regulatory requirements.
The Company's products must be manufactured in commercial quantities at an acceptable cost and with sufficient quality, consistency,
purity and stability to make them marketable. If the Company is unable to make manufacture its products in sufficient quantities and at
a competitive cost, either in its own manufacturing facilities or through contracting with third parties, it would have a material adverse
affect upon the Company's business and potential profitability.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company currently maintains a mailing address at 1218 - 1030 West Georgia Street, Vancouver, BC, Canada, V6E 2Y3. The
Company's telephone number there is (604) 682 3818. Other than this mailing address, the Company does not maintain any other
office facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable future. The Company
pays rent in the amount of CAD $3,059.02 (approximately $2,100 U.S. dollars) per month for the use of this office space. The lease is
for two years, and commenced on September 1, 2002.

The operations of TZF Xiamen (formerly Tian'an Pharmacy") are located in a 7,100 square meter building in the Torch High
Development Zone of Xiamen, China.

The operations ofT.Z.F. International Herbs (Jiangsu) Co., Ltd.(formerly Second Factory Pharmacy) are located in a 20,000 square
meter building in Yancheng City in Jiangsu Province. Its facility includes a factory area of 20,000 square meters and office area of
8,500 square meters.

The facilities of Shenzhen Tianzifu Network Technology Ltd., are located at 8 South Road, Dong Men, LouHu District, Shenzhen****City, GuangDong Province.

ITEM 3. LEGAL PROCEEDINGS.

There is a claim filed against T.Z.F. International Herb Investment Ltd., a Canadian company registered in BC province, by Expediter
Sales Ltd., ( also a Canadian company), 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.
The BC Company terminated the contract of Expediter for non-performance and has, accordingly, counterclaimed against Expediter
for outstanding debts unpaid by Expediter.

A private settlement is under discussion between both parties and the formal settlement is expected to be in place in the near future.

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 fourth quarter of the fiscal year which ended
December 31, 2002.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

As of December 31, 2002, there was not currently a public trading market for the Company's shares. As of December 31, 2002, the
Company's securities were held of record by a total of approximately 40 persons.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

**SPECIAL NOTE OF CAUTION REGARDING 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. For that reason, these statements involve
risk and uncertainty since no one can accurately predict the future. Words such as "plans," "intends," "will," "hopes," "seeks,"
"anticipates," "expects," and the like 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 concerning 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 contained in this report on Form 10KSB and in the Company's other filings with the Securities
and Exchange Commission. No statements contained in the following discussion should be construed as a guarantee or assurance of
future performance or future results.

The following discussion and analysis should be read in combination with the accompanying audited consolidated financial statements
as of December 31, 2002, and as restated for December 31, 2001 and December 31, 2000, included in Item 8 of this Form 10K SB.
Where we mention the figures of year 2001 and year 2000, the references are to the restated financial statements. For additional
information on the restated financial statements for the year ended December 31, 2001 and December 31, 2000, see "Amendment of
prior years' operations" in note 21 of the accompanying consolidated financial statements.

We are a manufacturer and distributor of medicine products and health foods in China.

In this section we discuss our results of operations on a consolidated basis. We also discuss our liquidity and capital resources.

**1. Financial Condition**

|                                      |  |           |   |            |   | Balances December 31,
|------------------------------------- |  | --------- | - | ---------- | - | ---------------------
|                                      |  |           |   |            |   |                      
|                                      |  |           |   |            |   | 2002                 
|Current
assets                        |  |           |   |            | $ | 5,416,418            
|Property, plant and equipment         |  | 7,399,324 |   | 6,435,813  |   | 5,876,615            
|Goodwill, intangible assets and other |  | 802,095   |   | 5,345,343  |   | 5,879,508            
|Consolidated assets                   |  |           | $ | 13,617,837 | $ | 17,898,638           

TZF's consolidated assets decreased $4,280,801 from 2001 to 2002 and $2,608,662 from 2000 to 2001 after revision by bad debt
write offs known in 2002. "Net property, plant and equipment" increased by $963,511 from 2001 to 2002 due to the completion of
construction in progress at TZF Jiangsu and increased by $559,198 from 2000 to 2001 mainly reflecting the cost of construction in
progress at TZF Jiangsu. "Goodwill, intangible assets and other" decreased from 2001 to 2002 by $4,543,248 mainly because
$1,059,377 of goodwill in Shenzhen TZF Net was written off due to goodwill impairment and $3,483,871 due to a revaluation of
technology rights and a cancellation of issued common shares. The cancellation of 5,400,000 common shares as at July 14, 2002
resulted in a reduction of capital stock of $3,483,871.

The details of increases (decreases) in the fourth quarter of 2002 and 2001 are as follows:

|                                      |  |             |   |             |   | Increase (Decrease) in the Fourth Quarter
|------------------------------------- |  | ----------- | - | ----------- | - | -----------------------------------------
|                                      |  |             |   |             |   | 2002                                     
|Current assets                        |  |             | $ | (837,091)   | $ | (4,788,230)                              
|Property, plant and equipment         |  | 179,439     |   | (18,763)   
|Goodwill, intangible assets and other |  | (1,040,510) |   | 45,246     
|Consolidated assets                   |  |             | $ | (1,698,162) | $ | (4,761,747)                              

In the fourth quarter of 2001, current assets decreased by $4,788,230, the main reason of which was accounts receivable write offs by
$1,162,564 in 2000 and $1,310,469 in 2001 in restated financial statements, due to information that was known in 2002. In the fourth
quarter of 2002, goodwill, intangible assets and other decreased by $1,040,510, the main reason of which was $1,059,377 of goodwill
impairment write off in Shenzhen TZF Net. The Company has deferred liabilities of $212,562 in its Tianan subsidiary for pension and
related benefits that were accumulated prior to the date of acquisition, and unchanged from December 31, 2000 to December 31, 2002.
There are no additional unfunded pension and related benefit liabilities at December 31, 2002.

As restated, the TZF debt-to-total-capital ratios were 46.78% at year-end 2002 versus 27.31% at year-end 2001 and 29.41% at
year-end 2000, assuming that the deferred liabilities are treated as debt. Accordingly, the debt-to-total-capital ratio is calculated
defining "debt" as short-term borrowing (current liabilities), long-term debt and deferred liabilities. Total capital is defined as "debt",
plus stockholders' equity.

**2. Liquidity and capital resources**

|                |  |   |           |   |           |      |           | Balances December 31,
|--------------- |  | - | --------- | - | --------- | ---- | --------- | ---------------------
|                |  |   |           |   |           | 2002 |           | 2001                 
|Working capital |  | $ | (587,487) | $ | 1,711,797 | $    | 3,237,898
|                |  |   |           |   |           |      |           |                      

Working capital, represented by current assets less current liabilities, decreased by $2,299,284 from 2001 to 2002 and by $1,526,101
from 2000 to 2001, respectively. The TZF working capital ratio was 0.90:1 at year-end 2002, 1.4:1 at year-end 2001 and 1.59:1 at
year-end 2000.

The decrease in working capital in 2002 is due mainly to expenditures on property, plant and equipment of $1,238,844 and bad debt
write offs of $1,020,161. The decrease in working capital in 2001 is due mainly to expenditures on property, plant and equipment of
$763,335 and bad debt write offs of $1,310,469.

The quick ratio represented by the total of cash and cash equivalents and accounts receivable, versus total current liabilities (excluding
amounts due to related parties), was 0.72:1 at year-end 2002, and 0.50:1 at year-end 2001 and 1.14:1 at year-end 2000.

**3. Operating activities**

|                                        |   |         |   |             |   | Year Ended December 31,
|--------------------------------------- | - | ------- | - | ----------- | - | -----------------------
|                                        |   |         |   |             |   | 2002                   
|Cash flows used in operating activities | $ | 316,299 | $ | (1,262,780) | $ | (3,457,834)            

Net cash flows from operating activities in 2002 were $316,299 mainly due to $2,764,851 of net loss for the period, decreases in
prepaid expenses and deposits and inventory, and an increase in accounts payable. Net cash flows used in operations were $1,262,780
in 2001, reflected mainly in the increased inventories of $745,229 and the increase in prepaid expenses and deposits. Net cash flows
used in operations were $3,457,834 in 2000, reflected mainly in the increases in inventory of $1,244,642 and accounts receivable
during the initial year of operations of the subsidiary companies.

The Company has 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 year ended
December 31, 2002, and compared on a consolidated basis for 2001, extracted from the applicable financial statements of those
companies, are as follows:

|                    |   | Parent   |   | Subsidiary Companies |   |           |   |          
|------------------- | - | -------- | - | -------------------- | - | --------- | - | ---------
|                    |   | TZF US   |   | The BC               |   |           |   | TZF      
|                    |   | Company  |   | Company              |   | Tianan    |   | Jiangsu  
|Revenue             |   |          |   |                      |   |           |   |          
|Sales               | $ | --       | $ | 6,429                | $ | 1,168,031 | $ | 2,661,916
|Cost of sales       |   | --       |   |                      |   | 500,811   |   | 1,919,307
|Gross profit        |   | --       |   | 6,429                |   | 667,220   |   | 742,609  
|Other income        |   |          |   |                      |   |           |   |          
|(expense)           |   | --       |   | (14,186)             |   | 15,361    |   |          
|                    |   | --       |   | (7,757)              |   | 682,581   |   | 742,609  
|Selling
expenses    |   | --       |   |                      |   | 142,876   |   | 435,138  
|Administrative      |   | 26,283   |   | 23,982               |   | 234,747   |   | 489,518  
|Depreciation        |   | --       |   | 8,994                |   | 130,671   |   | 93,072   
|Goodwill impairment |   |          |   |                      |   |           |   |          
|Loss on disposition |   |          |   |                      |   |           |   |          
|of capital
assets   |   |          |   | 26,994               |   |           |   |          
|Bad debts           |   | 8,826    |   | 599,217              |   |           |   | 77,598   
|                    |   | 35,109   |   | 659,187              |   | 508,294   |   | 1,095,326
|Profit before       |   |          |   |                      |   |           |   |          
|income taxes        |   | (35,109) |   | (666,944)            |   | 174,287   |   | (352,717)
|Income taxes        |   | --       |   |                      |   | 26,143    |   |          
|Net profit (loss)   |   |          |   |                      |   |           |   |          
|for the period      | $ | (35,109) | $ | (666,944)            | $ | 148,144   | $ | (352,717)

The details of revenue, gross profit, net income, operating expenses and goodwill impairment are as follow, utilizing restated figures
for 2001 and 2000:

|                    |   |             |           |             | For the years ended December 31 | 2002 vs 2001 |           | 2001 vs 2000
|------------------- | - | ----------- | --------- | ----------- | ------------------------------- | ------------ | --------- | ------------
|                    |   |             | 2002      |             | 2001                            |              | 2000      |             
|Revenue             |   | $           | 3,878,033 | $           | 5,114,243                       | $            | 1,868,276 | $           
|Gross profit        |   | 1,430,184   |           | 2,119,001   |                                 | 980,627      |           | (688,817)   
|Net income (loss)   |   | (2,764,851) |           | (1,077,531) |                                 | (749,965)    |           | (1,687,320) 
|Operating expenses  |   | 4,195,841   |           | 3,370,740   |                                 | 1,958,056    |           | 825,101     
|                    |   |             |           |             |                                 |              |           |             
|                    |   |             |           |             |                                 |              |           |             
|Goodwill impairment |   |             |           |             |                                 |              |           |             
|included
in         |   |             |           |             |                                 |              |           |             
|operating expenses  | $ | 1,059,377   |           |             |                                 |              | $         | 1,059,377   
|                    |   |             |           |             |                                 |              |           |             
|Gross profit, as a  |   |             |           |             |                                 |              |           |             
|percentage of sales |   | 36.88%      |           | 41.43%      |                                 | 52.49%       |           |             

**Net income**

The reported consolidated net loss of $2,764,851 (Negative $0.09 per diluted share) for 2002 compared to net loss of $1,077,531
(Negative $0.03 per diluted share) for 2001. Net loss increased by 156.59% in 2002 due to $1,059,377 of goodwill impairment in
Shenzhen TZF Net. The 2001 results included a net loss of $486,858 on cancellation of the 88% ownership of Hongkang
Pharmaceutical Company by Shenzhen Tianzifu Network Technology Ltd.

**Revenue**

Sales decreased by $1,236,210 in 2002 as compared to 2001, due to increased regulatory requirements in China. Also, the subsidiary
companies in China reorganized during the year 2002. Sales increased by $3,245,967 from 2000 to 2001 as sales in 2000 only. Gross
profit, as a percentage of sales (excluding other income) is 36.88% for year 2002, 41.43% for year 2001 and 52.49% for year 2000,
decreased by 4.55% in 2002.

**Operating expenses**

Operating expenses increased by $825,101 in 2002 as compared to 2001 and is 108.21% of sales due to the write off $1,059,377 of
goodwill impairment in Shenzhen TZF Net. Operating expenses increased by$1,274,779 in 2001 and are 41.43% of sales for 2001
and 104.81% of sales for 2000. Expenses in 2000 included stock-based compensation of $252,400 represented by the issuance of
250,000 shares for services, and $1,162,564 of bad debt write offs as restated, known in 2002.

**Goodwill and intangible assets**

Based on FAS-142, par. 18, goodwill is not amortized and is tested for impairment at a level of reporting referred to as a reporting
unit. Accordingly, the goodwill will be evaluated on an annual basis as to any possible impairment. The operations of Tianan justify
goodwill of $147,177. For the year ended December 31, 2002, $1,059,377 in Shenzhen TZF Net was written off as goodwill
impairment.

Other intangible assets, represented by deferred costs and technology rights, are evaluated periodically, in subsequent reporting
periods. Total $4,138,789 of other intangible assets in 2001 was reduced by $3,483,871 due to a reduction in issued common shares
that were initially issued for this technology. For additional information about this reduction, see "Intangible assets - (b) Technology
rights" in note 9 of the accompanying consolidated financial statements.

**4. Investing activities**

|                                  |  |  |   |             |   | Year Ended December 31,
|--------------------------------- |  |  | - | ----------- | - | -----------------------
|Cash flows provided by (used for) |  |  |   | 2002        |   | 2001                   
|investing activities              |  |  | $ | (1,238,844) | $ | 1,125,103              

TZF's capital expenditures totaled $1,238,844 in 2002, $763,355 in 2001 and $5,890,206 in 2000. Capital expenditures were incurred
mainly for property, plant and equipment at the new manufacturing facilities at Jiangsu and Tianan.

**5. Financing activities**

|                                  |  |      |   |           |   | Year Ended December 31,
|--------------------------------- |  | ---- | - | --------- | - | -----------------------
|Cash flows provided by (used for) |  | 2002 |   | 2001      |   | 2000                   
|financing activities              |  |      | $ | 1,025,883 | $ | (1,093,625)            

Financing activities reflect an increase of $790,939 in loans from related parties in 2002, and net debt reductions of $1,093,625 in
2001 and debt and financing raised of $14,157,953 in 2000. Financing activities also reflect net proceeds from the issuance of
common stock of $7,543,301 in 2000.

**6. Capital requirements**

TZF has current bank loans of $1,700,121 at the year-end 2002 as compared to $1,784,764 at year end 2001 and $1,579,202 at year
end 2000. The company during the year usually negotiates extension of repayment terms.

For 2003, TZF management expects no further major capital expenditures to be incurred, beyond completion of the present property,
plant, and equipment projects.

**7.****Assets reallocation:**

On December 31, 2002, TZF management decided to make an adjustment of intercompany investments and reallocation of
intercompany assets as follows:

TZF Canada transferred its investments in TZF Jiangsu (Canadian dollar $2,674,410.00) and in TZF Xiamen (Tianan) (Canadian
dollar $4,126,151.25) to TZF US (total Canadian dollar $6,800,561.25, converted to US dollar $4,545,438.00). After this asset
reallocation between TZF Canada and TZF US, it results in TZF US, instead of TZF Canada, owning the investments in TZF Jiangsu
of US$1,786,591 and in TZF Xianmen (Tianan) of US$2,758,847.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

**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 AUDITORS' REPORT**

To the Board of Directors and Stockholders of

T.Z.F. International Investments, Inc.

(A Nevada Corporation)

We have audited the accompanying consolidated balance sheets of T.Z.F. International Investments, Inc. (A Nevada Corporation) and
subsidiaries as of December 31, 2002, and as restated for December 31, 2001, and December 31, 2000, and the related consolidated
statements of income, retained earnings, cash flows and changes in stockholders' equity for the year ended December 31, 2002 and as
restated for the years ended December 31, 2001 and December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We also audited the adjustments described in Note 19 that were applied to restate the 2001 and 2000 financial statements. In our
opinion, such adjustments are appropriate and have been properly applied.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of T.Z.F.
International Investments, Inc. (A Nevada Corporation) as of December 31, 2002, and as restated at December 31, 2001 and December
31, 2000, and the results of its operations and its cash flows for the year ended December 31, 2002 and as restated for the years ended
December 31, 2001 and December 31, 2000 in conformity with accounting principles generally accepted in the United States of
America.

***"Moen and Company"***

***Chartered Accountants***

Vancouver, British Columbia, Canada

March 31, 2003

|                                                                                               |                                                                      |                                                           |                                        |                         | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.** |                |          
|---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------------- | -------------------------------------- | ----------------------- | ------------------------------------------ | -------------- | ---------
|                                                                                               |                                                                      |                                                           |                                        |                         | **(A Nevada Corporation)**                 |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         | **Consolidated Balance Sheets**            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         | **At December 31, 2002, 2001 and 2000**    |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Current Assets**                                                                             |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Cash and cash equivalents (note 3)                                   |                                                           |                                        | $                       | 540,747                                    | $              | 437,409  
|                                                                                               | Accounts receivable (note 4)                                         |                                                           |                                        |                         |                                            |                | 2,967,000
|                                                                                               | Prepaid expenses and deposits (note 5)                               |                                                           |                                        |                         | 486,726                                    |                | 2,093,425
|                                                                                               | Subscriptions receivable                                             |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Short-term investment - secured                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Inventories, at lower cost or market (note 6)                        |                                                           |                                        |                         | 1,421,945                                  |                | 1,989,871
|**Total current assets**                                                                       |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Investment in Guangdon HongKang Medical Company**                                            |                                                                      |                                                           |                                        |                         |                                            | 532,044       
|**Fixed Assets (Note 7)**                                                                      |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Intangible Assets (Note 9)**                                                                 |                                                                      |                                                           |                                        |                         |                                            |                | 654,918  
|**Goodwill, at cost (note 8)**                                                                 |                                                                      |                                                           |                                        |                         |                                            |                |          
|**TOTAL ASSETS (Pledged as**                                                                   |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      | **security for bank loans - Note 12)**                    |                                        |                         | **$**                                      | **13,617,837** | **$**    
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Current Liabilities**                                                                        |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Bank loans - secured (note 12)                                       |                                                           |                                        |                         |                                            | $              | 1,700,121
|                                                                                               | Accounts payable and accrued (note 10)                               |                                                           |                                        |                         | 3,204,244                                  |                | 2,312,320
|                                                                                               | Payable on acquisition of Shenzhen Tianzhifu Network Technology Ltd. |                                                           |                                        |                         | 518,590                                   
|                                                                                               | Management fees payable                                              |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Loans from related parties, unsecured, non interest                  |                                                           |                                        |                         |                                            |                |          
|                                                                                               | bearing, with no specific terms of repayment (note 11)               |                                                           | 1,099,540                              |                         | 308,601                                    |                | 515,053  
|**Total current liabilities**                                                                  |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Long-term Liabilities**                                                                      |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Long-term debt (note 13)                                             |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Deferred liabilities - pensions (note 16)                            |                                                           |                                        |                         | 212,562                                    |                | 212,562  
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Total liabilities**                                                                          |                                                                      |                                                           |                                        |                         |                                            |                |          
|**Stockholders' Equity**                                                                       |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Capital stock                                                        |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      | Authorized:100,000,000 common shares at $0.0001 par value |                                        |                         |                                            |                |          
|                                                                                               |                                                                      | Issued : 30,098,505 common shares                         |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           | (2001 - 35,897,309 shares) - par value |                         |                                            |                | 3,010    
|                                                                                               |                                                                      | Paid in capital in excess of par value of stock           |                                        |                         |                                            | 11,790,016     |          
|                                                                                               | Retained earnings (deficit)                                          |                                                           |                                        |                         |                                            |                |          
|                                                                                               | Cumulative translation adjustment (note 2)                           |                                                           |                                        |                         | 55,101                                     |                | 4,987    
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY**                                                 | **$**                                                                | **13,617,837**                                            | **$**                                  | **17,898,638**          | **$**                                      | **20,507,300**
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|**********************************************************Approved on behalf of the Company:** |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      | *"Xin Chen"*                                              |                                        | ****,                   | Chief Executive Officer                    |                |          
|                                                                                               |                                                                      |                                                           |                                        |                         |                                            |                |          
|                                                                                               |                                                                      | "Ruirong Zhang"                                           | ,                                      | Chief Financial Officer |                                            |                |          

|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|----------------------------------------------------------------------------------------- | ------------------------------------------- | ----------------------------------------- | ----------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------- | ----------- | --------------- | ----------- | --------------- | ------------------- | ---------------------------------------------------------------------------- | -------------
|                                                                                          |                                             |                                           |                                     |                                                                                     | See Accompanying Notes and Independent Auditors' Report                             |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **(A Nevada Corporation)**                                                          |                                                                                     |                
|                                                                                          |                                             |                                           |                                     |                                                                                     | **Consolidated Statements of Income**                                               |                 |            
|                                                                                          |                                             |                                           |                                     | **For the Years Ended December 31, 2002, 2001 and 2000**                           
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(In US Dollars)**                                                                 |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | Cumulative From                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **Inception
Date**                                                           |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **********************************************************of Sep.
15,
1998** |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **********************************************************to
December 31,**  |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************************************2002**                     |              
|**Revenue**                                                                               |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | Sales                                       |                                           |                                     |                                                                                     |                                                                                     |                 |             | $               | 10,860,552  | $               | 3,878,033           | $                                                                            | 5,114,243    
|                                                                                          | Cost of sales                               |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 | 6,317,149   |                 | 2,447,849           |                                                                              | 2,995,242    
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | 4,543,403                                                                    |              
|                                                                                          | Other income (expense)                      |                                           |                                     |                                                                                     |                                                                                     |                 | 513,640     |                 | 26,949      |                 | 258,271             |                                                                              | 227,464      
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | 5,057,043                                                                    |              
|**Expenses**                                                                              |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | Selling expenses                            |                                           |                                     |                                                                                     |                                                                                     |                 |             | 1,290,137       |             | 881,788         |                     | 408,349                                                                      |              
|                                                                                          | Administration Costs                        |                                           |                                     |                                                                                     |                                                                                     |                 |             | 2,959,625       |             | 959,182         |                     | 1,447,765                                                                    |              
|                                                                                          | Depreciation and amortization               |                                           |                                     |                                                                                     | 466,087                                                                             |                 | 248,339     |                 | 204,157     |                 | --                 
|                                                                                          | Loss on disposition of fixed assets         |                                           |                                     | 26,994                                                                              |                                                                                     | 26,994          |             | --              |             | --             
|                                                                                          | Amortization of goodwill (reversal)         |                                           | --                                  |                                                                                     | --                                                                                  |                 | --          |                 | --         
|                                                                                          | Goodwill impairment (Note 8)                |                                           |                                     |                                                                                     | 1,059,377                                                                           |                 | 1,059,377   |                 | --          |                 | --                 
|                                                                                          | Stock-based compensation                    |                                           |                                     |                                                                                     |                                                                                     | 252,400         |             | --              |             | --              |                     | 252,400                                                                     
|                                                                                          | Bad debts                                   |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 | 3,493,194   |                 | 1,020,161           |                                                                              | 1,310,469    
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | 9,547,814                                                                    |              
|**Profit (loss) before income taxes**                                                     |                                             |                                           |                                     | (4,490,771)                                                                         |                                                                                     | (2,738,708)     |             | (993,468)       |             | (749,965)      
|**Income taxes**                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             | 110,206         |             | 26,143          |                     | 84,063                                                                       |              
|**Net profit (loss) for the period**                                                      |                                             |                                           | $                                   | **(4,600,977)**                                                                     | **$**                                                                               | **(2,764,851)** | **$**       | **(1,077,531)** | **$**       | **(749,965)**  
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**********************************************************Basic profit (loss) per share** |                                             |                                           |                                     |                                                                                     |                                                                                     | **$**           | **(0.09)**  | **$**           | **(0.03)**  | **$**           | **(0.04)**         
|**Diluted profit (loss) per share, excluding**                                            |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          | **anti-dilution effects on loss per share** |                                           |                                     | **$**                                                                               | **(0.09)**                                                                          | **$**           | **(0.03)**  | **$**           | **(0.02)** 
|**Weighted average number of**                                                            |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                
|                                                                                          | common shares used to                       |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | compute profit per share                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     | Basic                                                                               |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     | Diluted                                                                             |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     | See Accompanying Notes and Independent Auditors' Report                             |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(A Nevada Corporation)**                                                          |                 |            
|                                                                                          |                                             |                                           |                                     | **Consolidated Statements of Retained Earnings (Deficit)**                         
|                                                                                          |                                             |                                           |                                     |                                                                                     | **For the Years Ended December 31, 2002, 2001 and 2000**                           
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(In US Dollars)**                                                                 |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | Cumulative From                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | Inception
Date                                                               |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************of Sep.
15,
1998**                                 |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************to
December 31,**                                  |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************2002**                                             |              
|**Retained earnings (deficit),**                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                
|beginning of period                                                                       |                                             |                                           |                                     |                                                                                     |                                                                                     | $               | --          | $               | (1,836,126) | $               | (758,595)           | $                                                                            | (8,630)      
|**Net profit (loss) for the period**                                                      |                                             |                                           |                                     | (4,600,977)                                                                         |                                                                                     | (2,764,851)     |             | (1,077,531)     |             | (749,965)      
|**Retained earnings (deficit),**                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                    
|end of period                                                                             |                                             |                                           |                                     |                                                                                     |                                                                                     |                 | **$**       | **(4,600,977)** | **$**       | **(4,600,977)** | **$**               | **(1,836,126)**                                                              | **$**        
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **************************See Accompanying Notes and Independent Auditors' Report** |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(A Nevada Corporation)**                                                          |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **Consolidated Statements of Cash Flows**                                           |                 |            
|                                                                                          |                                             |                                           |                                     | **For the Years Ended December 31, 2002, 2001 and 2000**                           
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(In US Dollars)**                                                                 |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | Cumulative From                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | Inception
Date                                                               |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************of Sep.
15,
1998**                                 |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************to
December 31,**                                  |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | **************************2002**                                             |              
|**Cash derived from (used for)**                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          | **Operating activities**                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Net profit (loss) for the period          |                                     |                                                                                     | $                                                                                   | (4,600,977)     | $           | (2,764,851)     | $           | (1,077,531)     | $                   | (749,965)                                                                   
|                                                                                          |                                             | Items not requiring use of cash           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                             
|                                                                                          |                                             |                                           | Depreciation and amortization       |                                                                                     |                                                                                     | 466,087         |             | 248,339         |             | 204,157         |                     | 13,591                                                                      
|                                                                                          |                                             |                                           | Loss on disposition of fixed assets |                                                                                     | 26,994                                                                              |                 | 26,994      |                 | --          |                 | --                 
|                                                                                          |                                             |                                           | Goodwill impairment                 |                                                                                     | 1,059,377                                                                           |                 | 1,059,377   |                 | --          |                 | --                 
|                                                                                          |                                             |                                           | Stock-based compensation            |                                                                                     |                                                                                     |                 | 252,400     |                 | --          |                 | --                  |                                                                              | 252,400      
|                                                                                          |                                             | Cumulative translation adjustment         |                                     | 55,101                                                                              |                                                                                     | 50,114          |             | 604             |             | 4,383          
|                                                                                          |                                             | Changes in non-cash working capital items |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          |                                             |                                           | Accounts receivable                 |                                                                                     |                                                                                     |                 |             |                 |             | (2,967,000)     |                     | (1,370,223)                                                                  |              
|                                                                                          |                                             |                                           | Prepaid expenses and deposits       |                                                                                     |                                                                                     | (486,726)       |             | 1,606,699       |             | (2,058,741)     |                     | (34,684)                                                                    
|                                                                                          |                                             |                                           | Inventories                         |                                                                                     |                                                                                     |                 |             |                 |             |                 | (1,421,945)         |                                                                              | 567,926      
|                                                                                          |                                             |                                           | Subscriptions receivable            |                                                                                     |                                                                                     |                 |             | --              |             | --              |                     | 406,434                                                                      |              
|                                                                                          |                                             |                                           | Accounts payable and accrued        |                                                                                     |                                                                                     | 3,204,244       |             | 891,924         |             | (438,110)       |                     | 2,749,930                                                                   
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | (4,412,445)                                                                  |              
|                                                                                          | **Financing activities**                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Issuance of shares for cash               |                                     |                                                                                     |                                                                                     | 7,199,367       |             | --              |             | (406,434)       |                     | 7,543,301                                                                   
|                                                                                          |                                             | Net gain on acquisition                   |                                     |                                                                                     |                                                                                     |                 |             | 3,333,103       |             | --              |                     | --                                                                           |              
|                                                                                          |                                             | Capital contributed                       |                                     |                                                                                     |                                                                                     |                 |             |                 | 453,798     |                 | 434,357             |                                                                              | 19,441       
|                                                                                          |                                             | Management fees payable                   |                                     |                                                                                     |                                                                                     |                 | --          |                 | --          |                 | (150,004)           |                                                                              | 150,004      
|                                                                                          |                                             | Payable on acquisition                    |                                     |                                                                                     |                                                                                     |                 |             | --              |             | --              |                     | (518,590)                                                                    |              
|                                                                                          |                                             | Bank loans                                |                                     |                                                                                     |                                                                                     |                 |             |                 |             | 1,700,121       |                     | (84,643)                                                                     |              
|                                                                                          |                                             | Long-term debt                            |                                     |                                                                                     |                                                                                     |                 |             |                 | 154,220     |                 | (114,770)           |                                                                              | (37,148)     
|                                                                                          |                                             | Deferred liabilities, pension             |                                     | 212,562                                                                             |                                                                                     | --              |             | --              |             | 212,562        
|                                                                                          |                                             | Loans from related parties                |                                     |                                                                                     |                                                                                     |                 | 1,099,540   |                 | 790,939     |                 | (206,452)           |                                                                              | 515,053      
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | 14,152,711                                                                   |              
|                                                                                          | **Investing activities**                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Fixed assets acquired                     |                                     |                                                                                     |                                                                                     |                 |             |                 | (7,892,405) |                 | (1,238,844)         |                                                                              | (763,355)    
|                                                                                          |                                             | Intangible assets                         |                                     |                                                                                     |                                                                                     |                 |             |                 | (100,560)   |                 | --                  |                                                                              | 2,121        
|                                                                                          |                                             | Goodwill                                  |                                     |                                                                                     |                                                                                     |                 |             |                 |             | (1,206,554)     |                     | --                                                                           |              
|                                                                                          |                                             | Investment in Hongkang                    |                                     |                                                                                     |                                                                                     |                 | --          |                 | --          |                 | 532,044             |                                                                              | (532,044)    
|                                                                                          |                                             | Short-term investment                     |                                     |                                                                                     |                                                                                     |                 |             | --              |             | --              |                     | 1,354,293                                                                    |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | (9,199,519)                                                                  |              
|**Cash, increase (decrease)**                                                             |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          |                                             |                                           |                                     | during the
period                                                                   |                                                                                     |                 |             |                 |             |                 | 540,747             |                                                                              | 103,338      
|**Cash, beginning of period**                                                             |                                             | --                                        |                                     | 437,409                                                                             |                                                                                     | 1,668,711       |             | 54,370         
|**Cash, end of period**                                                                   |                                             |                                           |                                     |                                                                                     |                                                                                     | **$**           | **540,747** | **$**           | **540,747** | **$**           | **437,409**         | **$**                                                                        | **1,668,711**
|                                                                                          |                                             |                                           |                                     |                                                                                     | See Accompanying Notes and Independent Auditors' Report                             |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **(A Nevada Corporation)**                                                          |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **Consolidated Statements of Income**                                               |                 |            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **For the Fourth Quarter Ended December 31, 2002, 2001 and 2000**                  
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | **(In US Dollars)** |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**********************************************************Revenue**                       |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | Sales                                       |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             | $               | 963,719             | $                                                                            | (4,021,579)  
|                                                                                          | Cost of sales                               |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | 700,505             |                                                                              | (3,437,039)  
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | Other income (expense)                      |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 | 29,665      |                 | (40,962)            |                                                                              | 226,549      
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**Expenses**                                                                              |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | Selling expenses                            |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             | 404,363         |                     | 91,185                                                                       |              
|                                                                                          | Administration Costs                        |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             | 417,224         |                     | 795,986                                                                      |              
|                                                                                          | Depreciation and amortization               |                                           |                                     |                                                                                     |                                                                                     |                 | (89,207)    |                 | 73,978      |                 | --                 
|                                                                                          | Loss on disposition of fixed assets         |                                           |                                     |                                                                                     |                                                                                     | --              |             | --              |             | --             
|                                                                                          | Amortization of goodwill (reversal)         |                                           |                                     |                                                                                     | --                                                                                  |                 | (45,246)    |                 | --         
|                                                                                          | Goodwill impairment (Note 8)                |                                           |                                     |                                                                                     |                                                                                     |                 | 1,059,377   |                 | --          |                 | --                 
|                                                                                          | Stock-based compensation                    |                                           |                                     |                                                                                     |                                                                                     |                 |             | --              |             | --              |                     | --                                                                          
|                                                                                          | Bad debts                                   |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | 418,753             |                                                                              | 1,310,469    
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**Profit (loss) before income taxes**                                                     |                                             |                                           |                                     | (1,917,631)                                                                         |                                                                                     | (2,851,874)     |             | 7,237          
|**Income taxes**                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             | 20,646          |                     | (262,415)                                                                    |              
|**Minority interest**                                                                     |                                             |                                           |                                     |                                                                                     |                                                                                     |                 | --          |                 | (66,390)    |                 | --                 
|**Net profit (loss) for the period**                                                      |                                             |                                           |                                     |                                                                                     | **$**                                                                               | **(1,938,277)** | **$**       | **(2,523,069)** | **$**       | **7,237**      
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**********************************************************Basic profit (loss) per share** |                                             |                                           |                                     |                                                                                     |                                                                                     | **$**           | **(0.06)**  | **$**           | **(0.07)**  | **$**           | **0.00**           
|**Diluted profit (loss) per share, excluding**                                            |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          | **anti-dilution effects on loss per share** |                                           |                                     | **$**                                                                               | **(0.06)**                                                                          | **$**           | **(0.07)**  | **$**           | **0.00**   
|**Weighted average number of**                                                            |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                
|                                                                                          | common shares used to                       |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | compute profit per share                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     | Basic                                                                               |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     | Diluted                                                                             |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     | See Accompanying Notes and Independent Auditors' Report                            
|                                                                                          |                                             |                                           |                                     |                                                                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                 |            
|                                                                                          |                                             |                                           |                                     | **(A Nevada Corporation)**                                                         
|                                                                                          |                                             |                                           |                                     | **Consolidated Statements of Retained Earnings (Deficit)**                         
|                                                                                          |                                             |                                           |                                     | **For the Fourth Quarter Ended December 31, 2002, 2001 and 2000**                  
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | (In US
Dollars)     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**************************Retained earnings (deficit),**                                  |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                    
|beginning of period                                                                       |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             | $               | (2,662,700) | $               | 686,943             | $                                                                            | (765,832)    
|**Net profit (loss) for the period**                                                      |                                             |                                           |                                     |                                                                                     |                                                                                     | (1,938,277)     |             | (2,523,069)     |             | 7,237          
|**Retained earnings (deficit),**                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                    
|end of period                                                                             |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 | **$**       | **(4,600,977)** | **$**               | **(1,836,126)**                                                              | **$**        
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     | **************************See Accompanying Notes and Independent Auditors' Report** |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                          |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **(A Nevada Corporation)**                                                          |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **Consolidated Statements of Cash Flows**                                           |                                                                                     |                
|                                                                                          |                                             |                                           |                                     | **For the Fourth Quarter Ended December 31, 2002, 2001 and 2000**                  
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | (In US
Dollars)     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**Cash derived from (used for)**                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                
|                                                                                          | Operating activities                        |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Net profit (loss) for the period          |                                     |                                                                                     |                                                                                     |                 | $           | (1,938,277)     | $           | (2,523,069)     | $                   | 7,237                                                                       
|                                                                                          |                                             | Items not requiring use of cash           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                             
|                                                                                          |                                             |                                           | Depreciation and amortization       |                                                                                     |                                                                                     |                 |             | (89,207)        |             | 73,978          |                     | 8,089                                                                       
|                                                                                          |                                             |                                           | Loss on disposition of fixed assets |                                                                                     |                                                                                     |                 | --          |                 | --          |                 | --                 
|                                                                                          |                                             |                                           | Goodwill impairment                 |                                                                                     |                                                                                     |                 | 1,059,377   |                 | (45,246)    |                 | --                 
|                                                                                          |                                             |                                           | Minority interest                   |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | --                                                                           |              
|                                                                                          |                                             |                                           | Cumulative translation adjustment   |                                                                                     |                                                                                     |                 | 43,494      |                 | 4,214       |                 | 3,811              
|                                                                                          |                                             | Changes in non-cash working capital items |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          |                                             |                                           | Accounts receivable                 |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | (539,508)                                                                    |              
|                                                                                          |                                             |                                           | Prepaid expenses and deposits       |                                                                                     |                                                                                     |                 |             | 1,100,993       |             | (1,600,127)     |                     | (29,300)                                                                    
|                                                                                          |                                             |                                           | Inventories                         |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              | 134,163      
|                                                                                          |                                             |                                           | Subscriptions receivable            |                                                                                     |                                                                                     |                 |             |                 |             | --              |                     | 406,434                                                                      |              
|                                                                                          |                                             |                                           | Advances on inventory purchase      |                                                                                     |                                                                                     |                 | --          |                 | --          |                 | 102,511            
|                                                                                          |                                             |                                           | Accounts payable and accrued        |                                                                                     |                                                                                     |                 |             | (495,768)       |             | (715,805)       |                     | 2,661,350                                                                   
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | **Financing activities**                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Issuance of shares for cash               |                                     |                                                                                     |                                                                                     |                 |             | --              |             | (406,434)       |                     | 5,264,000                                                                   
|                                                                                          |                                             | Net gain on acquisition                   |                                     |                                                                                     |                                                                                     |                 |             |                 |             | --              |                     | --                                                                           |              
|                                                                                          |                                             | Capital contributed                       |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | 79,917              |                                                                              | --           
|                                                                                          |                                             | Management fees payable                   |                                     |                                                                                     |                                                                                     |                 |             |                 | --          |                 | (158,505)           |                                                                              | (35,720)     
|                                                                                          |                                             | Payable on acquisition                    |                                     |                                                                                     |                                                                                     |                 |             |                 |             | --              |                     | (518,590)                                                                    |              
|                                                                                          |                                             | Bank loans                                |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | 60,460                                                                       |              
|                                                                                          |                                             | Long-term debt                            |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | (23,289)            |                                                                              | (363)        
|                                                                                          |                                             | Deferred liabilities, pension             |                                     |                                                                                     |                                                                                     | --              |             | --              |             | 212,562        
|                                                                                          |                                             | Loans from related parties                |                                     |                                                                                     |                                                                                     |                 |             |                 | 562,061     |                 | (120,457)           |                                                                              | (394,641)    
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          | **Investing activities**                    |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|                                                                                          |                                             | Fixed assets acquired                     |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | 112,818             |                                                                              | (55,215)     
|                                                                                          |                                             | Intangible assets                         |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 | --                  |                                                                              | --           
|                                                                                          |                                             | Goodwill                                  |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     | --                                                                           |              
|                                                                                          |                                             | Investment in Hongkang                    |                                     |                                                                                     |                                                                                     |                 |             |                 | --          |                 | --                  |                                                                              | (532,044)    
|                                                                                          |                                             | Short-term investment                     |                                     |                                                                                     |                                                                                     |                 |             |                 |             | --              |                     | 2,530,348                                                                    |              
|                                                                                          |                                             | Deposits on proposed acquisitions         |                                     |                                                                                     |                                                                                     | --              |             | --              |             | 1,824,924      
|                                                                                          |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                 |             |                 |                     |                                                                              |              
|**Cash, increase (decrease)**                                                             |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             |                
|                                                                                          |                                             |                                           |                                     | during the
period                                                                   |                                                                                     |                 |             |                 |             |                 |                     |                                                                              | 67,234       
|**Cash, beginning of period**                                                             |                                             |                                           |                                     | 473,513                                                                             |                                                                                     | 1,131,049       |             | 308,154        
|**Cash, end of period**                                                                   |                                             |                                           |                                     |                                                                                     |                                                                                     |                 |             | **$**           | **540,747** | **$**           | **437,409**         | **$**                                                                        | **1,668,711**

See Accompanying Notes and Independent Auditors' Report

|                               |                                                    | **T.Z.F. INTERNATIONAL INVESTMENTS, INC.**                                    |            
|------------------------------ | -------------------------------------------------- | ----------------------------------------------------------------------------- | -----------
|                               |                                                    | ******************(A Nevada Corporation)**                                    |            
|                               |                                                    | **************Consolidated Statement of Changes in Stockholders' Equity**    
|                               |                                                    | **********From Date of Inception on September 15, 1998 to December 31, 2002**
|                               |                                                    |                                                                               |            
|                               |                                                    |                                                                               |            
|                               |                                                    |                                                                               |            
|                               |                                                    |                                                                               | Number of  
|                               |                                                    |                                                                               | Common     
|                               |                                                    |                                                                               | Shares     
|                               |                                                    |                                                                               |            
|                               | 9/25/98 issuance of common                         |                                                                               |            
|                               |                                                    | stock for cash                                                                | 1,000,000  
|                               | Net loss for the year ended December 31,
1998      |                                                                               |            
|Balance, December 31, 1998     | 1,000,000                                          | 1,000                                                                         | 1,500      
|                               | 2/17/99 issuance of common                         |                                                                               |            
|                               |                                                    | stock for cash                                                                | 600,000    
|                               | Net loss for the year ended December 31,
1999      |                                                                               |            
|Balance, December 31, 1999     | 1,600,000                                          | 1,600                                                                         | 60,900     
|                               | 4/30/00 cancellation of                            |                                                                               |            
|                               |                                                    | common stock and                                                              |            
|                               |                                                    | transfer of par value
to                                                      |            
|                               |                                                    | paid-in capital (note
1)                                                      | (1,000,000)
|Balance, April 30, 2000        |                                                    |                                                                               |            
|                               | before forward split                               | 600,000                                                                       | 600        
|                               |                                                    |                                                                               |            
|05/15/00 10 to 1 forward split | 6,000,000                                          | 600                                                                           | 61,900     
|                               | 05/15/00 issuance of common                        |                                                                               |            
|                               |                                                    | stock for services                                                            | 250,000    
|                               | 05/15/00 issuance of common                        |                                                                               |            
|                               |                                                    | stocks for the BC
Company                                                     | 18,451,843 
|                               | 7/4/00 issuance of common                          |                                                                               |            
|                               |                                                    | stock for cash                                                                | 340,000    
|                               | 9/30/00 issuance of common                         |                                                                               |            
|                               |                                                    | stock for cash                                                                | 615,466    
|                               | 10/19/00 issuance of common                        |                                                                               |            
|                               |                                                    | stock for cash                                                                | 10,000     
|                               | 11/19/00 issuance of common                        |                                                                               |            
|                               |                                                    | stock for cash                                                                | 230,000    
|                               | 12/28/00 issuance of common                        |                                                                               |            
|                               |                                                    | stock for debt                                                                | 10,000,000 
|                               | Net profit for the year ended December 31,
2000    |                                                                               |            
|                               | Negative goodwill - gain on                        |                                                                               |            
|                               |                                                    | acquisition TZF
Jiangsu - note 1                                              |            
|                               | Cumulative translation                             |                                                                               |            
|Balance, December 31, 2000     | 35,897,309                                         | 3,590                                                                         | 15,225,943 
|                               | 1/1/01 capital contributed                         |                                                                               |            
|                               | 12/31/01 capital contribution adjustment           |                                                                               |            
|                               | 12/31/01 cancellation of common stock              | (398,804)                                                                     | (40)       
|                               | Net profit for year ended December 31,
2001        |                                                                               |            
|                               | Cumulative translation                             |                                                                               |            
|Balance, December 31, 2001     | 35,498,505                                         | 3,550                                                                         | 14,838,990 
|                               | 9/30/02 capital contribution adjustment            |                                                                               |            
|                               | 7/14/02 cancellation of common stock
(Note 12)     | (5,400,000)                                                                   | (540)      
|                               | 12/31/02 capital contribuiton adjustment           |                                                                               |            
|                               | Net profit (loss) for year ended December
31, 2002 |                                                                               |            
|                               | Cumulative translation                             |                                                                               |            
|Balance, December 31, 2002     | 30,098,505                                         | 3,010                                                                         | 11,790,016 

See Accompanying Notes and Independent Auditors' Report

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

**(A Nevada Corporation)**

**Notes to Consolidated Financial Statements**

**December 31, 2002**

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

**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.

**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. ("The BC Company), Tianan Investment Limited (and its wholly-owned subsidiary Tianan
Pharmacy (Xiamen) Co. Ltd.) ("Tianan"), TZF International Herbs (Jiangsu) Co. Ltd. ("TZF Jiangsu" and Shenzhen Tianzhifu
Network Technology Ltd. ("Shenzhen TZF Net"). 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 consolidated financial statements of the Company to December 31, 2001 were prepared in accordance with the provisions of
Statement of Financial Accounting Standard No. 7, "Accounting and Reporting by Development Stage Enterprises", which included
cumulative figures for the statement of operations and cash flows from the date of inception on September 15, 1998 to December 31,
2001. Commencing January 1, 2002, the Company is not considered to still be a development stage company and, accordingly, the
figures from date of inception are not disclosed for the current year or in the comparative figures.

**Business Combinations**

The Company uses the Purchase Method in accounting for its acquisitions.

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.

**Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)**

**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.

**Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)**

**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 December 31, 2001 as defined in FASB 107, does not differ materially from the aggregate carrying values of
its financial instruments recorded in the accompanying balance sheets. 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                 
|Electronic 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. 142, "Accounting for the Impairment on disposal of Long-Lived Assets" 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 does not have a material effect on the Company's results of operations,
cash flows or financial position in these financial statements.

**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, Tiana Pharmacy (Xiamen) Co. Ltd, T.Z.F. International Herbs (Jiangsu)
Co. Ltd. and Shenzhen Tianzifu Network Technology Ltd. are in Chinese Yuan. 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:

|                           |   |        | Year Ended  
|-------------------------- | - | ------ | ------------
|                           |   |        | December 31,
|                           |   | 2002   |             
|                           |   |        |             
|Balance, Beginning of
year | $ | 4,987  | $           
|Change during the year     |   | 50,114 |             
|                           |   |        |             
|Balance, End of year       | $ | 55,101 | $           

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 year.

**Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)****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 December 31, 2002 the inventories total $1,421,945 (December 31,
2001 - $1,989,871) (see note 6)

**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.

**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 adopted the consensus in the Issue in fiscal 2001.

**Segmented Information**

The Company's identifiable assets as at December 31, 2002, on a consolidated basis, are located in the following countries:



| | Canada | $             | 30,104 |           
| | ------ | ------------- | ------ | ----------
| |        | China         |        | 13,480,408
| |        | United States |        | 107,325   
| |        |               | $      | 13,617,837
| |       

**Note 3. CASH AND CASH EQUIVALENTS - $540,747**

The total for cash and equivalents as at December 31, 2002, is made up as follows:

|                    |   | TZF US  |   | The BC  |   |         |   | TZF     |   | Shenzhen |   |        
|------------------- | - | ------- | - | ------- | - | ------- | - | ------- | - | -------- | - | -------
|                    |   | Company |   | Company |   | Tianan  |   | Jiangsu |   | TZF Net  |   | Total  
|Petty cash          | $ |         | $ |         | $ | 223     | $ | 21,794  | $ | 120      | $ | 22,137 
|Cash in trust       |   |         |   | 160     |   |         |   |         |   |          |   | 160    
|Cash in bank        |   | 107,325 |   | 7,984   |   | 354,490 |   | 13,657  |   | 25,315   |   | 508,771
|Short-term
deposits |   |         |   |         |   |         |   | 9,679   |   |          |   | 9,679  
|Total               | $ | 107,325 | $ | 8,144   | $ | 354,713 | $ | 45,130  | $ | 25,435   | $ | 540,747
|                    |   |         |   |         |   |         |   |         |   |          |   |        

Note 4. ACCOUNTS RECEIVABLE

The accounts receivable balance as at December 31, 2002, is made up as follows:

|                                  |   | TZF US  |   | The BC  |   |           |   | TZF       |   | Shenzhen |   |          
|--------------------------------- | - | ------- | - | ------- | - | --------- | - | --------- | - | -------- | - | ---------
|                                  |   | Company |   | Company |   | Tianan    |   | Jiangsu   |   | TZF Net  |   | Total    
|Accounts
receivable, trade        | $ |         | $ |         | $ | 288,415   | $ | 1,024,344 | $ | 447      | $ | 1,313,206
|Accounts
receivable,
Canadian GST |   |         |   | 2,526   |   |           |   |           |   |          |   | 2,526    
|Short-term loans                  |   |         |   |         |   | 754,180   |   |           |   |          |   | 754,180  
|Accounts
receivable, other        |   |         |   |         |   |           |   | 143,834   |   | 753,254  |   | 897,088  
|Total                             | $ | 0       | $ | 2,526   | $ | 1,042,595 | $ | 1,168,178 | $ | 753,701  | $ | 2,967,000
|                                  |   |         |   |         |   |           |   |           |   |          |   |          

Note 5. PREPAID EXPENSES AND DEPOSITS

The balance of prepaid expenses and deposits as at December 31, 2002, is made up as follows:

|                                                     |  |  |  |  |         | The BC  |   |         |         | Shenzhen |   |        
|---------------------------------------------------- |  |  |  |  | ------- | ------- | - | ------- | ------- | -------- | - | -------
|                                                     |  |  |  |  |         | Company |   | Tianan  |         | TZF Net  |   | Total  
|Rental deposits                                      |  |  |  |  | $       | 5,418   | $ |         | $       |          | $ | 5,418  
|Prepaid to Beijing Zhong Buo for website development |  |  |  |  |         |         | 0
|Prepaid new medicine application fees                |  |  |  |  | 481,308 |         |   |         | 481,308
|                                                     |  |  |  |  |         |         |   |         |         |          |   |        
|Total                                                |  |  |  |  | $       | 5,418   | $ | 481,308 | $       | 0        | $ | 486,726
|                                                     |  |  |  |  |         |         |   |         |         |          |   |        

Note 6. INVENTORIES

The inventories as at December 31, 2002, are made up as follows:

|                    |  |  |   | The BC  |   |         |   | TZF     |   | Shenzhen |   |          
|------------------- |  |  | - | ------- | - | ------- | - | ------- | - | -------- | - | ---------
|                    |  |  |   | Company |   | Tianan  |   | Jiangsu |   | TZF Net  |   | Total    
|Raw
materials       |  |  | $ |         | $ | 11,020  | $ | 215,073 | $ |          | $ | 226,093  
|Packaging
materials |  |  |   |         |   | 10,509  |   | 167,025 |   |          |   | 177,534  
|Finished
products   |  |  |   |         |   | 191,607 |   | 415,288 |   |          |   | 606,895  
|Other               |  |  |   |         |   |         |   | 93,591  |   | 317,832  |   | 411,423  
|Total               |  |  | $ | 0       | $ | 213,136 | $ | 890,977 | $ | 317,832  | $ | 1,421,945
|                    |  |  |   |         |   |         |   |         |   |          |   |          

Note 7. FIXED ASSETS

The totals for fixed assets and accumulated depreciation as at December 31, 2002, are made up as follows:

(a) Fixed asset Schedule by Category

|                              |   |        |   |           |   |           |   |           |   |           |   |          
|----------------------------- | - | ------ | - | --------- | - | --------- | - | --------- | - | --------- | - | ---------
|                              |   |        |   | The BC    |   |           |   | TZF       |   | Shenzhen  |   |          
|**Cost**                      |   |        |   | Company   |   | Tianan    |   | Jiangsu   |   | TZF Net   |   | Total    
|Computer equipment            | $ | 14,364 | $ |           | $ |           | $ |           | $ | 14,364   
|Office equipment              |   |        |   | 14,286    |   |           |   |           |   |           |   | 14,286   
|Property, plant and equipment |   | 49,810 |   | 2,334,558 |   | 5,830,404 |   | 220,488   |   | 8,435,260
|Subtotal                      |   |        |   | 78,460    |   | 2,334,558 |   | 5,830,404 |   | 220,488   |   | 8,463,910
|Deduct: Cost of assets        |   |        |   |           |   |           |   |           |   |          
|disposed of                   |   |        |   | (26,994)  |   |           |   |           |   |           |   | (26,994) 
|Total                         |   |        | $ | 51,466    | $ | 2,334,558 | $ | 5,830,404 | $ | 220,488   | $ | 8,436,916
|**Accumulated Depreciation**  |   |        |   |           |   |           |   |           |   |          
|Computer equipment            |   | 7,953  |   |           |   |           |   |           |   | 7,953    
|Office equipment              |   |        |   | 6,681     |   |           |   |           |   |           |   | 6,681    
|Property, plant and equipment |   | 22,816 |   | 843,237   |   | 125,956   |   | 30,949    |   | 1,022,958
|Total                         |   |        |   | 37,450    |   | 843,237   |   | 125,956   |   | 30,949    |   | 1,037,592
|**Net Book Value**            |   |        |   |           |   |           |   |           |   |           |   |          
|Computer equipment            |   | 6,411  |   |           |   |           |   |           |   | 6,411    
|Office equipment              |   |        |   | 7,605     |   |           |   |           |   |           |   | 7,605    
|Property, plant and equipment |   |        |   | 1,491,321 |   | 5,704,448 |   | 189,539   |   | 7,385,308
|Total                         |   |        | $ | 14,016    | $ | 1,491,321 | $ | 5,704,448 | $ | 189,539   | $ | 7,399,324

|**Fixed Assets**                              |  |           |           |           | Additions / |                  |           |           | Accumulated |                | Net      
|--------------------------------------------- |  | --------- | --------- | --------- | ----------- | ---------------- | --------- | --------- | ----------- | -------------- | ---------
|                                              |  |           |           | Balance   |             | (Deductions)     |           | Balance   |             | Depreciation & |          
|                                              |  |           |           | 12/31/01  |             | 2002             |           | 12/31/02  |             | Amortization   |          
|Tianan                                        |  |           | 2,341,865 |           | (7,307)     |                  | 2,334,558 |           | 843,237     |                | 1,491,321
|TZF Jiangsu                                   |  |           | 4,697,028 |           | 1,133,376   |                  | 5,830,404 |           | 125,956     |                | 5,704,448
|Shenzhen TZF Net                              |  | 100,072   |           | 120,416   |             | 220,488          |           | 30,949    |             | 189,539       
|BC Company                                    |  |           | 86,101    |           | (7,641)     |                  | 78,460    |           | 37,450      |                | 41,010   
|Acquisition during the year                   |  | 7,225,066 |           | 1,238,844 |             | 8,463,910        |           | 1,037,592 |             | 7,426,318     
|Deduct: Cost of assets                        |  |           |           |           |             |                  |           |           |             |               
|disposed of -- BC Company                     |  |           |           | (26,994)  |             | (26,994)         |           |           |             | (26,994)      
|Total                                         |  |           | 7,225,066 |           | 1,211,850   |                  | 8,436,916 |           | 1,037,592   |                | 7,399,324
|                                              |  |           |           |           |             |                  |           |           |             |                |          
|                                              |  |           |           |           |             |                  |           |           |             |                |          
|**Accumulated Depreciation and Amortization** |  |           |           |           |             |                 
|                                              |  |           |           |           |             | Depreciation     |           |           |             |                |          
|                                              |  |           |           | Balance   |             | and Amortization | Balance   |           |             |                |          
|                                              |  |           |           | 12/31/01  |             | 2002             |           | 12/31/02  |             |                |          
|Tianan                                        |  | $         | 712,566   | $         | 130,671     | $                | 843,237   |           |             |                |          
|TZF Jiangsu                                   |  |           | 32,884    |           | 93,072      |                  | 125,956   |           |             |                |          
|ShenZhen TZF Net                              |  | 15,347    |           | 15,602    |             | 30,949           |           |           |             |               
|BC Company                                    |  |           | 28,456    |           | 8,994       |                  | 37,450    |           |             |                |          
|Total                                         |  | $         | 789,253   | $         | 248,339     | $                | 1,037,592 |           |             |                |          
|                                              |  |           |           |           |             |                  |           |           |             |                |          

Note 8. GOODWILL

As at December 31, 2002, goodwill is made up as follows:

|                                |  |  |  |    |   |             |   |             |   | Shenzhen  |   |        
|------------------------------- |  |  |  | -- | - | ----------- | - | ----------- | - | --------- | - | -------
|                                |  |  |  |    |   |             |   | Tianan      |   | TZF Net   |   | Total  
|Goodwill on acquisitions        |  |  |  |    | $ | 147,177     | $ | 1,059,377   | $ | 1,206,554
|Deduct: Goodwill impairment     |  |  |  |    |   |             |   |             |   |          
|in year ended December 31, 2002 |  |  |  | -- |   | (1,059,377) |   | (1,059,377)
|                                |  |  |  |    |   |             | $ | 147,177     | $ | 0         | $ | 147,177
|                                |  |  |  |    |   |             |   |             |   |           |   |        

The goodwill will be evaluated at each reporting period as to any possible impairment. The anticipated earnings of Tianan justify the
goodwill of $147,177. Based on FAS-142, par. 18, goodwill is not amortized and is tested for impairment at a level of reporting
referred to as a reporting unit. Accordingly, the goodwill incurred by Shenzhen TZF Net of $1,059,377 is written off in the year ended
December 31, 2002 as goodwill impairment.

**Note 9. INTANGIBLE ASSETS**

**Summary of Intangible Assets**

|                            |   |           |   |             |   | Write Down
by         |   |         
|--------------------------- | - | --------- | - | ----------- | - | --------------------- | - | --------
|                            |   |           |   |             |   | reduction in
issued   |   |         
|                            |   |           |   | Balance     |   | ********Common
Shares |   | Balance 
|                            |   |           |   | 12/31/01    |   | ********-- (b) Below  |   | 12/31/02
|Deferred costs -- (a) Below | $ | 100,560   | $ |             | $ | 100,560              
|Technology rights           |   | 4,038,229 |   | (3,483,871) |   | 554,358              
|Total                       |   |           | $ | 4,138,789   | $ | (3,483,871)           | $ | 654,918 
|                            |   |           |   |             |   |                       |   |         

**************************************(a) Deferred Costs**

As at December 31, 2002, deferred costs are as follows:

|                                                     |  |  |   |  |   |        |   |        |   | Shenzhen |   |        
|---------------------------------------------------- |  |  | - |  | - | ------ | - | ------ | - | -------- | - | -------
|                                                     |  |  |   |  |   |        |   | Tianan |   | TZF Net  |   | Total  
|Website development - to be amortized over 30 months |  |  |   |  |   |       
|after completion of the Website                      |  |  | $ |  | $ | 67,809 | $ | 67,809
|New product development costs                        |  |  |   |  |   | 32,751 |   |        |   | 32,751  
|                                                     |  |  |   |  |   |        | $ | 32,751 | $ | 67,809   | $ | 100,560
|                                                     |  |  |   |  |   |        |   |        |   |          |   |        

(b) Technology RightsBy 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
Common Shares 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).

As at July 14, 2002 the technology rights have been reevaluated by management resulting in a write down of the technology rights by
$3,483,871 (CAD$5,400,000) and a return to treasury of 5,400,000 Common Shares previously issued for this technology and,
accordingly, a reduction in issued capital stock of par value of $540 and a reduction in additional paid in capital of $3,483,331. The
vendors of the technology are to retain 600,000 Common Shares.

**Note 10. ACCOUNTS PAYABLE AND ACCRUED**

Details of the total of accounts payable and accrued as at December 31, 2002, are as follows:

| |                 |   | TZF US  |   | The BC  |   |         |   | TZF       |   | Shenzhen  |   |          
| | --------------- | - | ------- | - | ------- | - | ------- | - | --------- | - | --------- | - | ---------
| |                 |   | Company |   | Company |   | Tianan  |   | Jiangsu   |   | TZF Net   |   | Total    
| | A/P, trade      | $ | 4,693   | $ | 12,211  | $ | 29,798  | $ | 1,104,435 | $ | 62,591    | $ | 1,213,728
| | Accrued payroll |   |         |   |         |   | 9,257   |   | 59,056    |   | 62,522    |   | 130,835  
| | Taxes payable   |   |         |   |         |   | 36,092  |   | 98,027    |   | 53,308    |   | 187,427  
| | Other payables  |   |         |   |         |   | 63,499  |   | 364,917   |   | 1,243,838 |   | 1,672,254
| | Total           | $ | 4,693   | $ | 12,211  | $ | 138,646 | $ | 1,626,435 | $ | 1,422,259 | $ | 3,204,244

**Note 11. RELATED PARTY TRANSACTIONS**

The amount of $1,099,540 represents loans to the Company from related parties as at December 31, 2002, is unsecured, non interest
bearing, with no specific terms of repayment.

**Note 12. BANK LOANS**

Details of bank loans as at December 31, 2002, are as follows:

a) TZF Jiangsu

As at December 31, 2002, TZF Jiangsu has bank loans, as follows, secured by its assets:

|                                              |  |  |  |               |  |           | Principal |               | 
|--------------------------------------------- |  |  |  | ------------- |  | --------- | --------- | ------------- | 
|                                              |  |  |  | Period of     |  | Chinese   |           | Equivalent to | 
|                                              |  |  |  | Loan          |  | RMB       |           | US$           | 
|Industries and Commerce Bank of Jianhu, China |  |  |  |               |  |          
|                                              |  |  |  | 8/6/02-8/5/03 |  | 9,560,000 |           | 1,155,985     | 
|                                              |  |  |  |               |  |           |           |               | 
|                                              |  |  |  |               |  |           |           |               | 

(b) TZF Xiamen

As at December 31, 2002, TZF Tianan has bank loans, as follows, secured by its assets:

|                                  |  |  |  |                   |  |           | Principal |               | 
|--------------------------------- |  |  |  | ----------------- |  | --------- | --------- | ------------- | 
|                                  |  |  |  | Period of         |  | Chinese   |           | Equivalent to | 
|                                  |  |  |  | Loan              |  | RMB       |           | US$           | 
|Fujian Xingye Bank, Xiamen, China |  |  |  |                   |  |           |           |              
|                                  |  |  |  | 7/25/02 -
7/24/02 |  | 4,500,000 |           | 544,136       | 

Management of the company proposes to apply for renewal of these loans prior to their due date.

Summary of the above Bank loans payable at December 31, 2002:

|                                              |  |  |   |           |   |           |   | TZF       |   |          
|--------------------------------------------- |  |  | - | --------- | - | --------- | - | --------- | - | ---------
|                                              |  |  |   |           |   | Tianan    |   | Jiangsu   |   | Total    
|Fujian Xingye Bank, Xiamen, China             |  |  | $ | 544,136   | $ |           | $ | 544,136  
|Industries and Commerce Bank of Jianhu, China |  |  |   | 1,155,985 |   | 1,155,985
|                                              |  |  |   |           |   |           |   |           |   |          
|Total                                         |  |  |   |           | $ | 544,136   | $ | 1,155,985 | $ | 1,700,121

**Note 13. LONG-TERM LIABILITIES**

a) The long-term debt of $154,220 represents unsecured, non-interest bearing long-term accounts payable owing by Second Pharmacy,
with payment deferred.

b) The deferred liabilities of $212,562 for pensions apply to Tianan.

**Note 14. INCOME TAXES**

(a) The most recent Federal Income Tax filing for the Company for the US was for the year ended December 31, 2001, 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, 2000 and 2001. To December 31,
2001, the BC Company had a total loss of CAD$1,203 (equivalent to US$776).

(c) The income tax incurred for the Chinese subsidiary companies is of $26,143.

(d) No deferred tax is recorded as an asset at December 31, 2002 as it is offset by a provision, due to uncertainty of utilization of the
tax losses.

**Note 15. LEASE OBLIGATIONS**

**Lease of Premises**

The Company entered into a lease for offices with Burrard International Holdings Inc. for two years for monthly rent and costs of
CAD$3,059, that commenced on September 1, 2002. The last months rent of CAD$5,690 is due at the time of signing. This amount
has been paid and is recorded as prepaid expense and deposit as at December 31, 2002.

Commitment for future lease payments is as follows:

|Year Ending     |   |       
|--------------- | - | ------
|December 31     |   | Total 
|2003            | $ | 36,708
|2004 (8 months) | $ | 24,472

**Note 16. PENSION AND EMPLOYMENT LIABILITIES**

The Company has liabilities which are deferred as at December 31, 2002, for pension, post-employment benefits or post-retirement
benefits in Tianan in the amount of $212,562. This liability is unchanged from December 21, 2000. The parent company and other
subsidiary companies, (except for Tianan) do not have any liabilities for pensions and related costs.

**Note 17. LAWSUITS** (See Note 20 - Subsequent Events)

a) 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 of a 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.

b) Canadian Freightways Limited v. Expediter Sales Ltd. (Expediter") and the BC Company

Canadian Freightways Limited has commenced a Small Claims action against Expediter for unpaid shipping invoices. Expediter added
the BC Company as a third party. The amount claimed is $4,299.17.

**Note 18. OPERATIONS OF SUBSIDIARY COMPANIES**

Details of the operating figures for the Company and the four subsidiary companies for the year ended December 31, 2002, extracted
from the applicable financial statements of those companies, are as follows:

|                              |   | TZF US   |   | The BC    |   |           |   | TZF       |   | Shenzhen    |   |            
|----------------------------- | - | -------- | - | --------- | - | --------- | - | --------- | - | ----------- | - | -----------
|                              |   | Company  |   | Company   |   | Tianan    |   | Jiangsu   |   | TZF Net     |   | Total      
|Revenue                       |   |          |   |           |   |           |   |           |   |             |   |            
|Sales                         | $ |          | $ | 6,429     | $ | 1,168,031 | $ | 2,661,916 | $ | 41,657      | $ | 3,878,033  
|Cost of sales                 |   |          |   |           |   | 500,811   |   | 1,919,307 |   | 27,731      |   | 2,447,849  
|Gross profit                  |   |          |   | 6,429     |   | 667,220   |   | 742,609   |   | 13,926      |   | 1,430,184  
|Other income (expense)        |   | (14,186) |   | 15,361    |   |           |   | 25,774    |   | 26,949     
|                              |   |          |   | (7,757)   |   | 682,581   |   | 742,609   |   | 39,700      |   | 1,457,133  
|Selling expenses              |   |          |   |           |   | 142,876   |   | 435,138   |   | 303,774     |   | 881,788    
|Administrative costs          |   | 26,283   |   | 23,982    |   | 234,747   |   | 489,518   |   | 184,652     |   | 959,182    
|Depreciation and amortization |   | 8,994    |   | 130,671   |   | 93,072    |   | 15,602    |   | 248,339    
|Loss on disposition of        |   |          |   |           |   |           |   |           |   |             |   |            
|capital assets                |   |          |   | 26,994    |   |           |   |           |   |             |   | 26,994     
|Goodwill impairment           |   |          |   |           |   |           |   |           |   | 1,059,377   |   | 1,059,377  
|Bad debts                     |   | 8,826    |   | 599,217   |   |           |   | 77,598    |   | 334,520     |   | 1,020,161  
|                              |   | 35,109   |   | 659,187   |   | 508,294   |   | 1,095,326 |   | 1,897,925   |   | 4,195,841  
|Profit (loss) before          |   |          |   |           |   |           |   |           |   |             |   |            
|income taxes                  |   | (35,109) |   | (666,944) |   | 174,287   |   | (352,717) |   | (1,858,225) |   | (2,738,708)
|Income taxes                  |   |          |   |           |   | 26,143    |   |           |   |             |   | 26,143     
|Net profit (loss)             |   |          |   |           |   |           |   |           |   |             |   |            
|for the period                | $ | (35,109) | $ | (666,944) | $ | 148,144   | $ | (352,717) | $ | (1,858,225) | $ | (2,764,851)

**Note 19. AMENDMENT OF PRIOR YEARS' OPERATIONS**

The previously issued financial statements for the years ended 2000 and 2001, respectively, have been amended by the following bad
debt write offs:

|**Summary of Accounts Receivable Write Offs, determined in 2002 as**            
|--------------------------------------------------------------------------------
|**Uncollectible, and applied to the year of Revenue Relating to Those Accounts**
|                                                                                
|                                                                                
|The BC Company                                                                  
|Tianan                                                                          
|TZF Jiangsu                                                                     
|Shenzhen TZF Net                                                                
|TZF US Company                                                                  
|Total                                                                           
|                                                                                

The financial statements of preceding years have been restated as follows:

|**Amendment of Accounts Receivable**      |   |           |   |          
|----------------------------------------- | - | --------- | - | ---------
|                                          |   |           |   |          
|                                          |   |           |   |          
|Balance, in previous financial statements | $ | 4,069,810 | $ | 5,204,977
|Deduct: Amendment by accumulated          |   |           |   |          
|write off as bad debts                    |   | 2,473,033 |   | 1,162,564
|Accounts receivable as amended            | $ | 1,596,777 | $ | 4,042,413

|**Amendment of Expenses**                        |   |           |   |          
|------------------------------------------------ | - | --------- | - | ---------
|                                                 |   |           |   |          
|                                                 |   |           |   |          
|Total expenses, in previous financial statements | $ | 2,060,271 | $ | 795,492  
|Add: Amendment by write off bad debts            |   |           |   |          
|in 2001 and 2000, known in 2002                  |   | 1,310,469 |   | 1,162,564
|Total expenses, as amended                       | $ | 3,370,740 | $ | 1,958,056

|**Amendment of Net Profit (Loss)**                        |   |             |   |            
|--------------------------------------------------------- | - | ----------- | - | -----------
|                                                          |   |             |   |            
|                                                          |   |             |   |            
|Net profit for the year, in previous financial statements | $ | 232,938     | $ | 412,599    
|Amendment by write off bad debts in 2001                  |   |             |   |            
|and 2000, known in 2002                                   |   | (1,310,469) |   | (1,162,564)
|Net profit (loss) as amended                              | $ | (1,077,531) | $ | (749,965)  

|**Amendment of Basic Profit (Loss) per Share**         |   |        |   |       
|------------------------------------------------------ | - | ------ | - | ------
|                                                       |   |        |   |       
|                                                       |   |        |   |       
|Basic loss per share, in previous financial statements | $ | (0.01) | $ | (0.02)
|Increase in loss per share due to amendment of prior   |   |        |   |       
|years financial statements for bad debt expenses       |   | (0.02) |   | (0.02)
|Amended basic profit (loss) per share                  | $ | (0.03) | $ | (0.04)

|**Amendment of Retained Earnings**                      |   |             |   |          
|------------------------------------------------------- | - | ----------- | - | ---------
|                                                        |   |             |   |          
|**(a) Previously Reported Figures**                     |   |             |   |          
|                                                        |   |             |   |          
|                                                        |   |             |   |          
|Balance, in previous financial statements               |   |             |   |          
|at beginning of year (deficit)                          | $ | 403,969     | $ | (8,630)  
|Net profit in the year in previous financial statements |   | 232,938     |   | 412,599  
|Balance in previous financial statements at end of year |   | 636,907     |   | 403,969  
|                                                        |   |             |   |          
|**(b) Amended Figures**                                 |   |             |   |          
|                                                        |   |             |   |          
|                                                        |   |             |   |          
|Amended balance, at beginning of year (deficit)         | $ | (758,595)   | $ | (8,630)  
|Amended Net Profit (Loss) in the year                   |   | (1,077,531) |   | (749,965)
|Amended balance at end of year (deficit)                |   | (1,836,126) |   | (758,595)

**Note 20. SUBSEQUENT EVENTS**

****The Company is subsequently negotiating settlement of the lawsuits as outlined in Note 17 (above).



PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT.

The directors and executive officers currently serving the Company are as follows:

|Name           | Age | Tenure                                                
|-------------- | --- | ------------------------------------------------------
|Xin Chen       | 40  | President, Chairman and a Director since
February 1999
|Chung Yu       | 43  | Director since February 1999                          
|Qing Liu       | 48  | Director since February 1999                          
|Hong Li        | 42  | Director since February 2000                          
|Henry Sun      | 43  | Director since August 2002                            
|Rui Rong Zhang | 40  | Chief Financial Officer since August 2002             

The directors named above will serve until the next annual meeting of the Company's stockholders. Thereafter, directors will be
elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of
directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement, plan or
understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer
was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current directors to the Company's board. There are also no
arrangements, agreements or understandings between non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the management of the Company's affairs.

Biographical Information of Directors and Executive Officers follows:

**Xin Chen.**

Mr. Chen is a founding director and President and Chairman of the board of directors of the Company. Presently, Mr. Chen is also the
Chairman, President and CEO of Xin Hai Group and the Chairman of its subsidiaries Ningbo Success Information Industry Co Ltd.
and Shanghai New Star Real Estate Development Co., Ltd. Ningbo Success Information Industry Co., Ltd., is listed on the Shen Zhen
Stock Exchange in China Mr. Chen is also the honorary Dean of the Finance Faculty and visiting professor at JiangXi Finance
University and a visiting professor at the Beijing Commerce University.

**Chung Yu.**

Mr. Chung Yu is the honorary president of the Canadian Chinese Herbal Professional & Merchants Association, Vice-Chairman of the
Canadian Chinese Chamber of Commerce, and a member of the Chinese Entrepreneurial Society of Canada. Mr. Chung Yu was the
former director and vice-president of Hong Kong KunZe Enterprise Ltd., president of China Hua Pu Group, and a director of RoRo
International Trading, Ltd.

**Qing Liu.**

Mr. Liu is a founding director of the Company. From 1995 to 1999, Mr. Liu was the Chairman and President of Beijing T.Z.F.
Commerce and Trade Group, Chairman of the Board of Directors of Beijing YoungHeng Advertising Company, President of Beijing
Kai Huan medicine manufacturing company, and the President of Beijing Zhong Jia Yi Medical and Pharmaceutical Technology
Development Company. Mr. Liu is the honorary Chairman of the S.T.A.U.N.C.H. (The Society for Therapeutic Alternatives Using
Natural Chinese Healing Methods) Foundation in Canada and a committee member of the Chinese Business Association of Canada.

**Hong Li.**

Mr. Li is a director of the Company, and is involved with introducing investors from Asia. Mr. Li was the Secretary of the Board of
Directors of Shenzhen Tianyuan Industry, Inc. Mr. Li was also the Vice President of Hainan HengTai Group, Ltd, a Shanghai Stock
Exchange listed company. Presently, Mr. Li is a director of ShenZhen Xinhai Industrial & Trading, Ltd., and is a director and CEO of
Ningbo Success Information Industry Co. Ltd.

**Henry Sun.**

Mr. Sun is a new director of the Company since last August. He has more than twenty years of experience in trading, banking,
high-tech investment and consulting. He is currently a member of the Board of Directors for TRM Corporation of Portland, OR, USA,
a company traded on NASDAQ, a member of the Advisory Board of Jefferson Banks, Inc. of Pennsylvania, and a member of the
Board of Directors for Newark Symphony and Chairman of its Marketing Committee.

**Rui Rong Zhang**.

Mr. Zhang is the Chief Financial Officer of the Company and is in charge of the Company's financial operations in China. He had
more than ten years of intensive auditing and accounting experience both in governmental agencies and private companies before join
the company in 2002.

Compliance with Section 16(a) of the Exchange Act

The Company's officers and directors, with the exception of Dr. Sun and Mr. Zhang, have each filed an Annual Statement of Changes
in Beneficial Ownership of Securities on Form 5.

ITEM 10. EXECUTIVE COMPENSATION.

There are no compensations for any directors and officers of the Company, except Mr. Qing Liu who has a management fee of $2,500
Cdn. per month.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of December 31, 2002, the stock ownership of each executive officer and director of T.Z.F.
International Investments, Inc., of all executive officers and directors as a group, and of each person known by T.Z.F. International
Investments, Inc. to be a beneficial owner of 5% or more of its Common Stock. Except as otherwise noted, each person listed below is
the sole beneficial owner of the shares and has sole investment and voting power as such shares. No person listed below has any
options, warrants or other rights to acquire additional securities of T.Z.F. International Investments, Inc., except as may be otherwise
noted.

|Name and Address                                                                       | Number of Shares Owned Beneficially | % of Class Owned
|-------------------------------------------------------------------------------------- | ----------------------------------- | ----------------
|Xin Chen (1)4/F, Chaoshan Building

No.8 Dong Men Nan Road                             | 13,800,000 (3)                      | 49.31 %         
|Chung Yu (1)10100 Francis Road

Richmond BC V6J 5E7                                    | 1,050,000 (3)                       | 3.75 %          
|Qing Liu (1)#211-8680 Lansdowne Road

Richmond BC V6X 1B9                              | 1,062,256                           | 3.80 %          
|Hong Li (1)41-6171 Azure Road

Richmond BC V7C 2P3                                     | 20,000                              | 0               
|Henry Sun

1201 Market St., Suite1600

Wilmington, Delaware 19801 USA                  | 0                                   | 0               
|Rui Rong Zhang

4/F, Chaoshan Building

No.8 Dong Men Nan Road

Shenzhen, China 518001 | 0                                   | 0               
|All directors and executive officers (5
persons)                                       | 15,932,256                          | 56.93 %         

(1)The person listed is an officer, a director, or both, of the Company.

- 500,000 shares are held by Wei Tang, Mr. Chen's spouse, and he may be considered the beneficial owner of these.

- 50,000 shares are held by Ai Hong Gao, Mr. Yu's spouse, and he may be considered the beneficial owner of these.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

As of December 31, 20002, the Company had outstanding loans from related parties totaling $1,099,540 owed to Mr. Xin Chen. These amounts are unsecured, non-interest bearing obligations, with no specific terms of
repayment.

During the fiscal year ending December 31, 2002, Mr. Xin Chen, Chairman of the Board of the Company, advanced a total of approximately $5,500,000 on the behalf of the Company.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The Exhibits listed below are filed as part of this Annual Report.

Exhibit No. Document

2.1 Agreement for Share Exchange (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

2.2 Stock Purchase Agreement (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

3.1 Articles of Incorporation (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

3.1a Amendment to Articles of Incorporation (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

3.2 Bylaws (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

4.1 Specimen Common Stock Certificate (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on August 21, 2000).

(a) Exhibits 99.1 and 99.2**,** CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002****are filed herewith.

(b) No reports on Form 8-K were filed by the Company during the last quarter of its fiscal year ending December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer (or those persons performing similar functions), after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date within 90 days of the filing of this annual report (the "Evaluation
Date"), have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective to ensure the timely collection, evaluation and disclosure of information
relating to the Company that would potentially be subject to disclosure under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. There were
no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the Evaluation Date.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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

By: /S/ XIN CHEN

Xin Chen, President and Chairman

By: /S/ CHUNG YU

Chung Yu, a Director

By: /S/ HONG LI

Hong Li, a Director

By: /S/ HENRY SUN

Henry Sun, a Director

By: /S/ QING LIU

Qing Liu, a Director

By: /S/ RUIRONG ZHANG

Ruirong Zhang, Chief Financial Officer

Date: April 15 , 2003

Exhibit 99.1
T.Z.F. INTERNATIONAL INVESTMENTS, INC.CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I,Xin Chen, certify that:

1. I have reviewed this annual report on Form 10-KSB of T.Z.F. International Investments, Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.Date: April 15, 2003
By:/S/ XIN CHEN

Xin Chen, President, Chief Executive Officer, and a Director

Exhibit 99.2
T.Z.F. INTERNATIONAL INVESTMENTS, INC.
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rui Rong Zhang, certify that:

1. I have reviewed this annual report on Form 10-KSB of T.Z.F. International Investments, Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.Date: April 15, 2003
By: /S/ RUIRONG ZHANG

Ruirong Zhang, Chief Executive Officer