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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

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

            For the transition period from ___________ to___________

                         Commission File Number: 0-49666

                         TIENS BIOTECH GROUP (USA), INC.
             (Exact name of registrant as specified in its charter)

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

                               No. 6, Yuanquan Rd.
                         Wuqing New Tech Industrial Park
                              Tianjin, China 301700
          ------------------------------------------------------------
          (Address of principal executive offices, including zip code)

               Registrant's Telephone Number: 011 86-22-8213-7658

             Securities registered under 12(b) of the Exchange Act:

      Title of Each Class             Name of Each Exchange on which Registered
 ------------------------------       -----------------------------------------
 Common Stock, par value $0.001               The American Stock Exchange

          Securities registered under 12(g) of the Exchange Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                 Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.

                                 Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

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

Indicate by check mark if the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer.

   Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 Yes [ ] No [X]

Based upon the closing sale price of $4.28 per share of Common Stock on the
American Stock Exchange on June 30, 2006, the aggregate market value of the
3,503,586 voting stock held by non-affiliates of the Registrant was
approximately $14,995,348.

There were 71,333,586 shares of the Company's common stock outstanding on March
26, 2007.

DOCUMENTS INCORPORATED BY REFERENCE - None

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<PAGE>

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. These statements relate to future events or the
Company's future financial performance. The Company has attempted to identify
forward-looking statements by terminology including "anticipates", "believes",
"expects", "can", "continue", "could", "estimates", "expects", "intends", "may",
"plans", "potential", "predict", "should" or "will" or the negative of these
terms or other comparable terminology. These statements are only predictions,
uncertainties and other factors, including the risks outlined under Risk Factors
contained in Item 1A of this Annual Report may cause the Company's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels or activity, performance or
achievements expressed or implied by these forward-looking statements. Although
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance or achievements. The Company expectations are as of the
date this Form 10-K is filed, and the Company does not intend to update any of
the forward-looking statements after the date this Annual Report on Form 10-K is
filed to confirm these statements to actual results, unless required by law.

AVAILABILITY OF SEC FILINGS

The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy and information statements and amendments
to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The public may
read and copy these materials at the Securities and Exchange Commission's
("SEC") Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549.
The public may obtain information on the operation of the public reference room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company and other companies that file materials
with the SEC electronically. You may also obtain copies of the Company's reports
filed with the SEC, free of charge, on our website at http://www.tiens-bio.com.

                                     PART I

ITEM 1. BUSINESS

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

OVERVIEW

Tiens USA researches, develops, manufactures, and markets nutrition supplement
products, including wellness products and dietary supplement products, and
personal care products. Our operations are conducted from our headquarters in
Tianjin, People's Republic of China ("China" or the "PRC") through our 80% owned
subsidiary, Tianjin Tianshi Biological Development Co. Ltd. ("Biological"). We
sell our products to affiliated companies in China and in 63 countries
internationally.

CORPORATE HISTORY AND ORGANIZATION

Our Company was incorporated on July 13, 1990 as Super Shops, Inc. under the
laws of the State of Michigan. In October 2000, Super Shops, Inc. reincorporated
in Delaware and changed its name to MIA Acquisition Corp. On February 11, 2002,
in connection with a change in control transaction, MIA Acquisition Corp changed
its name to Strategika, Inc. From 2000 until the reorganization described below,
our Company had only nominal assets and liabilities and was a development stage
company attempting to provide network security services to companies.

                                        2
<PAGE>

Pursuant to an Agreement and Plan of Reorganization, dated August 22, 2003,
among our Company, Tianshi International Holdings Group Ltd., a British Virgin
Islands company ("Tianshi International"), and Jinyuan Li, Wenjun Jiao and
Yupeng Yan, all Chinese Nationals who were stockholders of Tianshi
International, on September 9, 2003, our Company received from the Tianshi
International stockholders all of the issued and outstanding common stock of
Tianshi International in exchange for the issuance by our Company of 68,495,000
shares of our common stock to the Tianshi International stockholders,
representing 95% of the issued and outstanding common stock of our Company at
such time, after giving effect to the issuance.

We own 100% of Tianshi International. On June 18, 2003, Tianshi International
acquired 80% of Biological's outstanding shares from Tianshi Hong Kong
International Development Co., Ltd., which is 100% owned by our Chairman, Chief
Executive Officer and President, Jinyuan Li. Biological is a Chinese-foreign
equity joint venture company established under Chinese laws on March 27, 1998,
subject to the Law on Sino Foreign Equity Joint Ventures.

Tianjin Tianshi Pharmaceuticals Co., Ltd. ("Tianshi Pharmaceuticals"), a Chinese
company, owns the remaining 20% of Biological. Tianjin Pharmaceuticals is 87.66%
owned by Tianjin Tianshi Group Co., Ltd. ("Tianshi Group"), a Chinese company,
and 7.29% owned by Mr. Li's daughter, Baolan Li. Tianshi Group is 90% owned by
Jinyuan Li and 10% owned by Baolan Li. Tianshi Group also owns 51% of Tianjin
Tianshi Biological Engineering Co. Ltd. ("Tianshi Engineering"), the entity to
which we sell all of our products for consumption in China. Baolan Li owns the
remaining 49% of Tianshi Engineering.

In April 2004, Tianshi International entered a joint venture contract with
Tianshi Pharmaceuticals to establish Tiens Yihai Co. Ltd., a Chinese-Foreign
Equity Joint Venture ("Tiens Yihai"). Tiens Yihai is 99.4% owned by Tianshi
International and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai is located
in Shanghai, China, and was established to build a new research and development
facility which would also produce our nutrition supplement, home care, and
personal care products.

PRODUCTS AND MANUFACTURING

We have developed and produce 35 nutrition supplement products, which include
wellness products and dietary supplements, and 25 personal care products, which
include skin care products and personal washing products.

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

We have put a great emphasis on product quality assurance. In 2002, we were
awarded a Quality System Certificate for compliance with the standard "ISO9001:
2000" in the area of Design and Development, Production and Service of Food and
Health Care Food in China. In addition, many of our products have received a
certificate for Hazard Analysis Critical Control Point ("HACCP"). HACCP
identifies and assesses hazards and risk associated with the manufacture,
distribution and use of food-handling establishments.

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

                                        3
<PAGE>

The following two tables describe all of our nutrition supplement products,
which include wellness products and dietary supplement products.

                               WELLNESS PRODUCTS*
                               -----------------

<TABLE>
<CAPTION>
                     PRODUCT                                           MAIN INGREDIENTS
--------------------------------------------------    --------------------------------------------------

                                                   <c>
Tianshi Nutrient Super Calcium Powder (a) (b)         Zymolytic bone calcium powder, oligosaccharide,
                                                      de-fatted milk powder, VA, VD, VC, iron
Tianshi Super Calcium Powder with Metabolic           Zymolytic bone calcium powder,oligosaccharide,
Factors (a) (b)                                       pumpkin powder, VA, VD, VB1, VB2
Tianshi Super Calcium Powder for Children (a) (b)     Zymolytic bone calcium powder, VA, VD, VC, taurine,
                                                      zinc, iron
Tianshi Super Calcium Capsules with                   Zymolytic bone calcium powder, lecithin, taurine,
Lecithin (a) (b)                                      VB1, VB12, VC, b-cyclodextrin
Tianshi ThroatCare Granules (b)                       Radix ophiopogonis, Fructus canarli, honeysuckle,
                                                      ebony, haw powder, mint, liquorice
Tianshi Grape Extract Capsules (a) (b)                Grape seed extract, starch
Tianshi Slimming Tea (a) (b)                          Folium nelumbinis, semen cassiae, oolong tea,
                                                      rhizoma alismatis, folium llicis latifoliae,
                                                      radixet rhizoma rhei, pericarpium citri
                                                      reticulatae
Tianshi Spirulina Tablets (b)                         Dried spirulina powder
Tianshi Spirulina Capsules (a) (b)                    Dried spirulina powder
Tianshi Cell Rejuvenation Capsules (a) (b)            Carrot powder, heba gynostemma pentapyllum, tea
                                                      polyphenol, VC
Tianshi Zinc Capsules (a) (b)                         Zinc lactate, glucose, egg protein powder
Tianshi Cordyceps Capsules (a) (b)                    Cordyceps mycelium powder
Tianshi Chitosan Capsules (a) (b)                     Chitosan
Tianshi Sweet Dreams Granules (a) (b)                 Fructus crataegi, fructus lycii, poria, starch,
                                                      aspartame, melatonin
Tianshi Vitality  Softgels (a) (b)                    Wheat plumule oil, lecithin, b-carotene
Tianshi Metabolic Balance Capsules (a) (b)            Radix salviae miltiorrhizae, radix polygoni
                                                      multiflori, fructus crataegi
Tianshi Lipid Metabolic Management Tea (a) (b)        Herba gynostemma pentaphyllum,folium nelumbinis,
                                                      radix polygoni mutiflori, green tea, semen cassiae
</TABLE>

                          DIETARY SUPPLEMENT PRODUCTS*
                          ---------------------------

<TABLE>
<CAPTION>
                     PRODUCTS                                          MAIN INGREDIENTS
--------------------------------------------------    --------------------------------------------------
<S>                                                   <C>
Tianshi Super Calcium Milk Powder (a) (b)             Whole milk powder, Zymolytic bone calcium powder,
                                                      non-dairy creamer, aspartame, multi-vitamins
Tianshi Double-cellulose Tablets (a) (b)              Polydextrose, haw powder, hydroxypropyl cellulose,
                                                      maize cellulose, gelatin, magnesium stearate
                                                      aspartame (phenylalanine)
Tianshi Lycopene Tablets (a) (b)                      Natural tomato power, lactose, starch, calcium
                                                      carbonate, micro-crystal cellulose, malt dextrin,
                                                      carboxymethyl amylo-sodium, magnesium stearate
Tianshi Sea Buckthorn Oil Softgels (a) (b)            Sea buckthorn oil
Tianshi Pine Pollen Powder Capsules                   Natural pine pollen powder, povidone
Tianshi Protein Powder (b)                            Soybean separating protein, whey protein, soybean
                                                      phospholipids
Tianshi Eel Oil  Capsules (a)                         Eel oil
Tianshi Multi-Vit-Mine Coffee(b)                      Instant Coffee Powder, Non-dairy Creamer,
                                                      De-fatted Milk Powder, Cocoa Powder, Milk and Egg
                                                      Yolk Powder, Vitamins, Minerals and Aspartame
Tianshi Gourmet Powder with Super Calcium (b)         Monosodium glutamate, 1+G Zymolytic bone calcium
                                                      powder
Tianshi Effervescent Vitamin C Tablets                Citric acid, sodium bicarbonate, malt dextrin,
                                                      orange powder, VC, aspartame
Tianshi Garlic Tablets                                Natural garlic, powder, lactose, starch, calcium
                                                      carbonate, micro-crystal cellulose, malt dextrin,
                                                      carboxymethl amylo-sodium, magnesium stearate
Tianshi FOS Syrup                                     Fructooligosaccharide syrup
Tianshi Tibet-Garlic Capsules                         Tibet-Garlic, Yellow Mountain chrysanthemum, Yam
Tianshi Breast Beauty Capsules                        Active collagen peptide, Extract of root of kudzu
                                                      vine, Extract of dandelion
Tianshi Hemp Seed Oil Softgels                        Hemp seeds oil, Gelatin
Tianshi Fresh Breath Spray                            Honeysuckle extract, taraxacum extract,
                                                      anti-bacteria peptide and menthol
Tianshi Sea Cucumber Capsules                         natural sea cucumber
Tianshi Snak-powder Capsules                          Agkistrodon halys powder, Zaocys dhumnades powder,
                                                      coix seed extracts, peach kernel extracts
</TABLE>

*    These products are not intended to diagnose, treat, cure or prevent any
     disease.
(a)  This product has received Halal Approval, which certifies that our
     manufacturing processes comply with the requirements of Islamic dietary
     law.
(b)  This product has received HACCP Certificate.

                                        4
<PAGE>

We have 25 products in our personal care product series. We group these products
into two categories:

o    Skin Care Products, which includes Moisturizing Cleaning Foam and
     Moisturizing Softener.

o    Personal Washing Products, which includes Tianshi Child Care Body Wash and
     Tianshi Spirulina Body Wash.

TRADEMARKS AND PATENTS

We consider the "Tiens" logo important to our business and have registered our
products under the logo "Tiens" with the State Administration of Industry and
Commerce in China. The registration is valid for a period of ten years from May
21, 2002 and can be renewed for further ten-year periods multiple times.

We have conducted extensive research and developed Tianshi Super Calcium Powder
with Metabolic Factors and Tianshi Super Calcium Powder for Children, which have
each been awarded a patent from State Intellectual Properties Office in China
with respective patent numbers of ZL97115067.2 and ZL97115068.0. These two
patents are effective for 20 years, commencing on January 13, 2001.

SUPPLIERS

We have established long-term relationships with most of our suppliers. We
believe that the raw materials required for manufacturing our products are
relatively easy to find and alternative suppliers are convenient to locate. Our
current major suppliers, all of whom are based in China, include:

<TABLE>
<CAPTION>
                     SUPPLIER                                     PRODUCT
--------------------------------------------------    -------------------------------
<S>                                                   <C>
Wuxi Changjiang Capsule Co., Ltd                      Capsules
Hangzhou Xueyu Biological Technology Co., Ltd.        Cordyceps Powder
Beijing Xinglong Extratio Co., Ltd                    Seabuckthorn Oil, Wheatgerm Oil
Fanya Dairy Product (Shanghai) Co., Ltd.              Whole & Skimmed Milk Powder
Beijing Yinhelu Co., Ltd.                             Skimmed Milk Powder
Anguo City Jinmu Chinese Herbs Co., Ltd.              Chinese Herbs
Tianjin Jianfeng Natural Production R&D Co., Ltd.     Grape Seeds Extract
Suzhou Capsule Co., Ltd.                              Capsules
Zhejiang Wanfeng Group Pharmaceutical Co. Ltd.        Cordyceps Powder
Shanghai Youpin Biological Chemical Co., Ltd.         Cordyceps Powder
</TABLE>

RESEARCH AND DEVELOPMENT

We incurred research and development expenses of $1.0 million, $0.6 million and
$0.2 million in 2006, 2005 and 2004 respectively. As of December 31, 2006, we
employed 79 staff members in research and development, and we anticipate hiring
an additional 15 research and development employees in 2007.

MARKETING AND DISTRIBUTION

In China, we sell our products to Tianshi Engineering, an affiliated Chinese
company. Tianshi Engineering, in turn, sells the products to end-users through
its chain stores and Chinese affiliated companies. Our strategy in China is to
expand our market share through opening additional branches, chain stores, and
Chinese affiliated companies of Tianshi Engineering. Tianshi Engineering
established five new branches in China during 2006, for a total of 111 branches.
Prior to 2006, Biological sold all of its products to Tianshi Engineering as
finished products at a price equal to 25% of the Chinese market price for the
products. This 25% figure was negotiated between the parties in 2003, before we
acquired Tianshi International, and we believe that it is a reasonable sales
price for us to receive. Tianshi Engineering then sells the products to
purchasers through individual distributors in its representative offices or
through its affiliates. Through this process, the commission to those individual
distributors is 52% of the Chinese market price; while the representative
offices or affiliates incur 3-6% of the Chinese market price as their operation
expenses and Tianshi Engineering retains 17-20% as expenses and profits. This is
summarized as follows:

                                        5
<PAGE>

Biological (Costs, expenses and profit)                              25%
Tianshi Engineering (expenses and profit)                         17-20%
Tianshi Engineering's Representative Offices or Affiliates          3-6%
Individual Distributors' Commission                                  52%
                                                            -----------
Chinese Market Price                                                100%

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

Internationally, our strategy is to develop a strong direct sales force through
our international affiliated companies. Currently the United States is not a
significant part of our business. We sell our products to an extensive direct
sales force of overseas affiliates and independent distributors who use the
products themselves and/or resell them to other distributors or consumers. We
sell to affiliated companies located in 63 countries, including Indonesia,
Russia, Ukraine, Nigeria, South Africa, Kazakhstan, Peru, Greece, Kenya and
Vietnam.

As operation costs vary from country to country, international market prices
vary accordingly. We sell our products to overseas affiliates at the FOB
(destination port) price, which consists of 25% of the Chinese retail price,
including customs duty, value-added tax and other miscellaneous transportation
cost. The individual distributors of overseas affiliates sell the products to
purchasers for commissions equal to 52.5% of the respective Chinese retail
prices. The overseas affiliates mark up the products to cover their expenses and
realize profits of approximately 10%.

For the year ended December 31, 2006, all of our sales were to related parties.
Sales revenue generated from sales in China to Tianshi Engineering contributed
approximately 40.5% of our total revenues.

COMPETITION

Our main competitors are direct sales companies, such as Amway, Avon, Mary Kay,
Nu Skin, Herbalife, SunRider, Unicity Network, FLP and Morinda. Some of these
competitors have been granted a direct selling business license in China
pursuant to China's recent regulations governing direct selling. The direct
selling regulations require Tianshi Engineering, our affiliate who sells our
products in China, to apply for approval to conduct a direct selling enterprise
in China. Tianshi Engineering has made an application for, but has not yet
received, a direct selling license in China.

TIENS YIHAI

In April 2004, Tianshi International entered a joint venture contract with
Tianshi Pharmaceuticals to establish Tiens Yihai. Tiens Yihai is 99.4% owned by
Tianshi International and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai is
located in Shanghai, China, and was established to build a new research and
development facility, which would also produce our nutrition supplement, home
care, and personal care products. In October 2004, the Company paid a deposit of
$3.6 million to Zhu Jia Jiao Industrial Park Economic Development Ltd
(representative of the local government, "Local Government") for acquiring the
land use right of 1,600 mu (263 acres) located in Shanghai. However, in 2005,
the Chinese central government issued its "Adjustment of Macro-Economic Policy".
This policy implemented a new system of investment and use of state-owned
assets, including land. Pursuant to this policy, local government organizations
adjusted and re-allotted projects, including investment, construction and
reconstruction of state-owned resources. As a result, projects and enterprises
that had been affected, including Tiens Yihai, were awaiting further decisions
by state and local government.

                                        6
<PAGE>

On November 10, 2006, Tiens International and the Local Government entered into
a supplemental agreement pursuant to which the parties have agreed to the
acquisition by Tiens Yihai of a reduced 486 mu (80 acres) parcel of land. The
remaining 1,114 mu (184 acres) may not be available for purchase in the future.
Therefore, the Local Government has agreed to refund to us $1.6 million of the
original $3.6 million deposit when we receive a construction license for the
development.

In order to proceed with the purchase of the property by Tiens Yihai, Tianshi
International is required to provide a loan of $6.4 million to the Local
Government for relocation costs for people living on the property. The $6.4
million loan is to be funded in two installments:

o    The first installment of $3.2 million was paid on November 27, 2006.

o    The second installment of $3.2 million is to be paid after Tiens Yihai
     obtains a construction license to develop the property. The parties have
     agreed to allow Tianshi International to reduce this second installment by
     the amount of the $1.6 million refund due to it.

In return for the loan, Tiens Yihai will receive a tax credit in the amount of
$6.4 million. There is currently no guarantee or written contract requiring the
Local Government to transfer the property to Tiens Yihai. If Tiens Yihai is not
able to acquire the property, it is not clear whether the initial loan of $3.2
million will be refunded to Tianshi International. Presently, we are unable to
forecast the direction, outcome and/or completion date of the Yihai Project. As
of December 31, 2006, Tiens Yihai was a developmental stage company and had not
yet conducted any operations.

REGULATORY FRAMEWORK

PRODUCT REGULATION

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

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

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

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

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

This certificate authorizes the sales and marketing of the product in China. The
certificate does not expire and does not require renewal. The whole process
generally takes 9 to 12 months. Dietary supplement products are not subject to
SFDA regulation.

SALES AND MARKETING REGULATIONS

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

                                        7
<PAGE>

In China, we are aiming to expand our market share through the branches, chain
stores, and affiliated companies of Tianshi Engineering, our affiliate who sells
our products in China. Because direct selling was only recently authorized in
China, the regulatory environment with respect to direct selling in this market
remains fluid and the process for obtaining the necessary governmental approvals
have been interpreted differently by different governmental authorities. The
direct selling regulations require Tianshi Engineering to apply for approval to
conduct a direct selling enterprise in China.

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

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

ENVIRONMENTAL COMPLIANCE

We are subject to China's National Environmental Protection Law, as well as a
number of other national and local laws and regulations regulating air, water
and noise pollution and setting pollutant discharge standards. We believe that
all our manufacturing operations are in material compliance with all applicable
environmental laws.

EMPLOYEES

As of December 31, 2006, we had 1,342 employees. We believe that our relations
with our employees are satisfactory.

ITEM 1A. RISK FACTORS

THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON THE
BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS,
FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY STATEMENT
IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO
BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR
STATEMENTS. WE ARE SUBJECT TO, AMONG OTHERS, THE FOLLOWING RISKS:

                          RISKS RELATED TO OUR BUSINESS

OUR REPUTATION, REVENUES AND OPERATING INCOME MAY BE ADVERSELY AFFECTED BY
PRODUCT LIABILITY CLAIMS.

As a manufacturer of products designed for human consumption, claims may be
brought against us that a product injured its consumer. Our dietary supplement
products consist of vitamins, minerals, herbs and other ingredients that are not
subject to pre-market regulatory approval. Our products could contain
contaminated substances, and some of our products contain innovative ingredients
that do not have long histories of human consumption. Previously unknown adverse
reactions resulting from human consumption of these ingredients could occur. A
product liability claim against us could result in increased costs and could
adversely affect our reputation with our customers, which in turn could
adversely affect our revenues and operating income.

                                        8
<PAGE>

OUR NEWLY DEVELOPED PRODUCTS MAY NOT BE COMPATIBLE WITH MARKET NEEDS.

Our business is particularly subject to changing consumer trends and
preferences. Our continued success depends in part on our ability to anticipate
and respond to these changes, and we may not respond in a timely or commercially
appropriate manner to such changes. Because markets for nutrition supplement
products differentiate geographically, we must accurately assess demand in each
specific market into which we wish to make sales. If we fail to accurately
assess consumer health needs in each market we target, we may face limited
market acceptance of our products, which could have a material adverse effect on
our sales and revenue.

OUR PRODUCTS MUST KEEP PACE WITH ADVANCES IN THE INDUSTRY OR THEY MAY BE
DISPLACED BY COMPETITORS' NEWLY DEVELOPED PRODUCTS.

The nutrition supplement products industry is characterized by rapid product
development, with significant competitive advantages gained by companies that
introduce products that are first to market, deliver constant innovation in
products and techniques, offer frequent new product introductions and have
competitive prices. Our future growth partially depends on our ability to
develop products that are more effective in meeting consumer needs. In addition,
we must be able to manufacture and effectively market those products. The sales
of our existing products may decline if a competing product is introduced by
other companies.

The success of our new product offerings depends upon a number of factors,
including our ability to:

o    accurately anticipate consumer needs;

o    innovate and develop new products;

o    successfully commercialize new products in a timely manner;

o    price our products competitively;

o    manufacture and deliver our products in sufficient volumes and in a timely
     manner; and

o    differentiate our product offerings from those of our competitors.

If we fail to do any of the above or we focus on technologies that do not lead
to more effective products, our current and future products could be surpassed
by more effective or advanced products of others.

OUR PRODUCTS MAY BE COPIED BY OUR COMPETITORS.

In general, we rely on trade secrets to protect our intellectual property. We
have been issued patents from the State Intellectual Properties Office in China
for two of our products: Tianshi Super Calcium Powder with Metabolic Factors and
Tianshi Super Calcium Powder for Children. These two patents are effective for
20 years, which commenced on January 13, 2001. If we fail to adequately protect
our intellectual property and trade secrets, our competitors may copy our
products, which could hurt our business.

OUR MANUFACTURING PROCESS IS SUBJECT TO RISKS

There are risks associated with ingredients mixing and production processes and
techniques. Our manufacturing process requires a significant degree of technical
expertise. If we fail to manufacture our products to specifications or
inadvertently use defective materials in the manufacturing process, the
reliability and performance of our products will be compromised.

We rely on our manufacturing operations to produce nearly all of the proprietary
products we sell. Our manufacturing operations produce all of the products we
sell. Any significant disruption in those operations for any reason, such as
regulatory requirements and loss of certifications, power interruptions, fires,
hurricanes, war or other force majeure, could adversely affect our sales and
customer relationships.

                                        9
<PAGE>

WE HAVE LIMITED CONTROL OVER THE ACTIVITIES OF OUR DISTRIBUTORS.

We place significant reliance on a network of affiliates to act as our primary
sales force. Although a majority of our affiliated companies are controlled in
whole or part by Jinyuan Li, our Chairman, Chief Executive Officer and
President, such affiliates are not employed or otherwise controlled by us and
are generally free to conduct their business at their own discretion. The
distributors are dedicated more to establishing their own reputations and
business relationships than to promoting our products. The simultaneous loss of
a number of these distributors could have a material adverse effect on our
business, financial condition, and results of operations.

WE HAVE ONLY RECENTLY BECOME PROFITABLE.

We began operating in July 1998, and incurred losses until 2002. Although we
have been profitable due to increases in sales since 2003, this relatively short
history of profitability may not be adequate to fully assess our ability to
achieve market acceptance of our products or our ability to respond to
competition and continue this level of performances. Therefore, we can give no
assurance that we will maintain profitability in the long run.

WE CONDUCT OUR BUSINESS WITH RELATED PARTIES, AND YOUR INVESTMENT MAY BE SUBJECT
TO CONFLICT OF INTEREST AND SELF-DEALING RISKS.

Due to the inter-related ownership and business dealings among us and our
affiliates, there are conflict of interest and self-dealing risks and increased
potential for manipulation of financial results. We have affiliated companies or
business entities that are owned by Jinyuan Li and his immediate family members
(mostly his daughter Baolan Li). Although all affiliated companies and business
entities were established so that they are legally and financially independent,
except for the common ownership, they are centrally administrated by Tianshi
Group. The decisions of Tianshi Group could materially affect the operation of
our business, which could be adverse to our investors.

We sell all of our products for resale in China to Tianshi Engineering. As both
we and Tianshi Engineering are majority owned by Jinyuan Li, even given
consideration to the internal price transferring policies set among the related
parties, these internal policies could be faulty or might not be strictly
followed. We are currently establishing a system to try to ensure the
independence of our operations and financial controls. However, there can be no
assurance that the systems and controls can be effectively designed.

WE FACE RISKS DUE TO OUR RELIANCE ON SALES IN INTERNATIONAL MARKETS.

Our future success will depend in part on the continued expansion of
international sales. Such international operations expose us to certain risks,
including but not limited to; a need for export licenses; unexpected regulatory
requirements; tariffs and other potential trade barriers and restrictions;
political, legal and economic instability in foreign markets; longer account
receivable cycles; difficulties in managing operations across disparate
geographic areas; foreign currency fluctuations; limited protection of our
intellectual property rights in some countries; dependence on local
distributors; and potential disruptions in sales due to military or terrorist
acts. Any or a combination of these risks could result in a material adverse
effect on our business, financial condition or results of operations.

OUR PRODUCTS ARE SUBJECT TO REGULATION OVER NUTRITIONAL SUPPLEMENT PRODUCTS IN
MARKETS OUTSIDE CHINA.

Nutrition supplement products are subject to regulatory requirements that vary
by country. Obtaining approval to sell nutrition supplement products
internationally involves complexities of dealing with a variety of governmental
regulations. We have limited experience in dealing with the specific regulations
that may be required to sell our products in certain international markets,
which could delay our ability to obtain relevant regulatory approval for our
products. In addition, our product sales in other countries are subject to
product regulatory regimes of various degrees and direct marketing or
distribution regulations. Although currently these aspects are handled by our
affiliated distributors in the relevant jurisdictions, there can be no assurance
that the current operations of our company and our affiliates and distributors
will not be adversely affected by compliance issues and changes in applicable
laws and regulations in relevant jurisdictions.

                                       10
<PAGE>

THE DISTRIBUTION OF OUR PRODUCTS IS SUBJECT TO REGULATION OUTSIDE CHINA.

Products distributed outside China are subject to government regulations of
different jurisdictions, which could be stricter than in China. In some
developed countries, the government regulations for product approval could be
stricter than in China, while in developing countries, government regulation
could be uncertain. Our products could take a significantly longer time than we
expect to gain regulatory approval or may never gain approval in certain
countries, which could limit our ability to promote, sell and distribute
products. In addition, in terms of our marketing approach, multi-level marketing
may also be prohibited in some countries. As such, our sales may be adversely
affected if such approval cannot be obtained in certain jurisdictions.

OUR MANAGEMENT LACKS EXPERIENCE OPERATING A U.S. PUBLIC COMPANY.

Our management had no experience operating a U.S. public company before our
acquisition of Tianshi International. The initial difficulties with public
company regulations faced by U.S. managers of a newly public company are
aggravated with respect to our management, by our unfamiliarity with Western
regulatory regimes and language and time zone differences. In addition,
management must integrate new accounting rules and control procedures. Learning
compliance is likely to distract management from operations to a greater degree
than might be the case of management of a U.S. company, and the period during
which our management masters the rules, when errors are more likely to occur,
may be longer. Accordingly, the expense and operational risks inherent to a
transition from private to public company are greater for Tiens USA than might
usually be the case.

                    RISKS RELATED TO DOING BUSINESS IN CHINA

WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH DOING BUSINESS IN CHINA.

As most of our operations are conducted in China, we are subject to special
considerations and significant risks not typically associated with companies
operating in North America and Western Europe. These include risks associated
with, among others, the political, economic and legal environments and foreign
currency exchange. Our results may be adversely affected by changes in the
political and social conditions in China, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency conversion and remittance abroad, and rates and methods of taxation,
among other things.

Although the majority of productive assets in China are owned by the Chinese
government, in the past several years the government has implemented economic
reform measures that emphasize decentralization and encourage private economic
activity. Because these economic reform measures may be inconsistent or
ineffectual, there are no assurances that:

o    We will be able to capitalize on economic reforms;

o    The Chinese government will continue its pursuit of economic reform
     policies;

o    The economic policies, even if pursued, will be successful; and

o    Economic policies will not be significantly altered from time to time.

THE RESEARCH, DEVELOPMENT, TESTING, MANUFACTURING AND MARKETING OF OUR PRODUCTS
ARE SUBJECT TO VARIOUS GOVERNMENTAL REGULATIONS IN CHINA.

Government regulation includes inspection of and controls over testing,
manufacturing, safety and environmental controls, efficacy, labeling,
advertising, promotion, record keeping and the sale and distribution of wellness
products. Tianshi Engineering is also subject to government regulations with
respect to the prices it will charge, the rebates it may offer to customers and
the methods of its marketing. Government regulation may substantially increase
the cost of developing, manufacturing and selling our products.

UNCERTAINTY IN THE DEVELOPMENT OF DIRECT SELLING REGULATIONS MAY ADVERSELY
AFFECT SALES OF OUR PRODUCTS IN CHINA.

Substantially all of our assets are located in China, and approximately 50%, 56%
and 40.5% of our revenues in 2004, 2005 and 2006, respectively, derive from our
operations in China. Accordingly, our operations are subject, to a significant
degree, to Chinese law. In China, we are aiming to expand our market share
through the branches, chain stores, and affiliated companies of Tianshi
Engineering, our affiliate who sells our products in China. Because direct
selling was only recently authorized in China, the regulatory environment with
respect to direct selling in this market remains fluid and the process for
obtaining the necessary governmental approvals have been interpreted differently
by different governmental authorities. The direct selling regulations require
Tianshi Engineering to apply for approval to conduct a direct selling enterprise
in China.

                                       11
<PAGE>

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

Tianshi Engineering has found that it is taking more time than anticipated to
work through the approval process with the Chinese authorities. These
authorities have broad discretion in interpreting the regulations and granting
necessary approvals. A delay in obtaining approvals at one level can delay our
ability to obtain approvals at the next level. The complexity of the approval
process as well as the government's continued cautious approach as direct
selling develops in China makes it difficult to predict a timeline for obtaining
these approvals. If Tianshi Engineering does not receive a direct selling
license in China, then its ability to compete against its competitors who have
received such a license may be hurt. As a result, Tianshi Engineering may lose
distributors who find a competitor's direct selling business and compensation
model more attractive. This could materially decrease the revenues that we
receive from sales by Tianshi Engineering in China.

DUE TO CHINESE CENTRAL GOVERNMENT POLICIES, WE MAY NOT BE ABLE TO COMPLETE
DEVELOPMENT OF OUR TIENS YIHAI RESEARCH AND DEVELOPMENT FACILITY.

In 2005, the Chinese central government issued its "Adjustment of Macro-Economic
Policy". This policy implemented a new system of investment and use of
state-owned assets, including land. Pursuant to this policy, local government
organizations adjusted and re-allotted projects, including investment,
construction and reconstruction of state-owned resources. As a result, projects
and enterprises that had been affected, including Tiens Yihai, were awaiting
further decisions by state and local government.

On November 10, 2006, Tiens International and the Local Government entered into
a supplemental agreement pursuant to which the parties have agreed to the
acquisition by Tiens Yihai of a reduced 486 mu (80 acres) parcel of land. In
order to proceed with the purchase of the property by Tiens Yihai, Tianshi
International is required to provide a loan of $6.4 million to the Local
Government for relocation costs for people living on the property. The $6.4
million loan is to be funded in two installments:

o    The first installment of $3.2 million was paid on November 27, 2006.

o    The second installment of $3.2 million is to be paid after Tiens Yihai
     obtains a construction license to develop the property. The parties have
     agreed to allow Tianshi International to reduce this second installment by
     the amount of the $1.6 million refund due to it.

In return for the loan, Tiens Yihai will receive a tax credit in the amount of
$6.4 million. There is currently no guarantee or written contract requiring the
Local Government to transfer the property to Tiens Yihai. If Tiens Yihai is not
able to acquire the property, it is not clear whether the initial loan of $3.2
million will be refunded to Tianshi International. Presently, we are unable to
forecast the direction, outcome and/or completion date of the Yihai Project. As
of December 31, 2006, Tiens Yihai was a developmental stage company and had not
yet conducted any operations.

If we are unable to receive the necessary additional construction approvals from
the Local Government for the Tiens Yihai Research and Development Facility, we
may be required to seek alternative sites for a new research and development
facility. This could delay the development of new products and materially
adversely affect our financial condition.

                                       12
<PAGE>

THE LEGAL AUTHORITIES IN CHINA ARE IN THE PROCESS OF EVALUATING HERETOFORE TAX
AND FEE BENEFITS PROVIDED TO FOREIGN INVESTORS AND COMPANIES TO ENCOURAGE
DEVELOPMENT WITHIN THE COUNTRY SUCH THAT THESE BENEFITS MAY BE LESSENED OR
REMOVED WITH THE CONSEQUENCE THAT EXPENSES MAY RISE IMPACTING MARGINS AND NET
INCOME.

In 2003 and 2004, Biological was exempt from paying income taxes in China. From
January 1, 2005 through December 31, 2007, Biological is subject to an income
tax at a reduced rate of 7.5%. From January 1, 2008 forward, Biological will be
subject to a 15% income tax rate. The legal authorities in China are evaluating
tax and fee benefits that have been available to foreign investors and companies
operating in China and tax holidays for new enterprises. It is anticipated, in
the near term, there are going to be changes that may substantially reduce or
eliminate many, if not all, the tax and other governmental fee advantages that
heretofore have been available to foreign entities and newly created entities
whether or not such new entities are foreign. The goal is to institute greater
equalization of tax and government fee treatment of all corporate and similar
entities in China. China is being encouraged to create this more equal treatment
because of its WTO obligations and public opinion within China. There may be
phase-ins of various taxes and fees for entities that currently benefit from
either no or lower tax rates and fees compared to wholly Chinese companies and
entities, but there can be no assurance of this. Even if there are phase-in
periods, the length of such periods is not known. Overall, it is expected that
the cost of operating in China will increase for those companies and entities
that have had various tax and fee advantages in the past.

WE ARE SUBJECT TO COMPLEX CHINESE BUSINESS REGULATIONS.

As China changes its economy from planned to more market-oriented, uncertainties
arise regarding governmental policies and measures. Although, in recent years,
the Chinese government has implemented measures emphasizing the use of market
forces for economic reform, reduction of state ownership of productive assets,
and establishment of sound corporate governance practices, a substantial portion
of productive assets in China are still owned by the Chinese government. For
example, all lands are state owned and leased to business entities or
individuals through governmental grants of state-owned Land Use Rights. The
grant process is typically based on government policies at the time of grant,
which can be lengthy and complex and may adversely affect our planned
manufacturing expansion. The Chinese government also exercises significant
control over China's economic growth through allocation of resources, foreign
currency control and providing preferential treatment to particular industries
or companies.

BECAUSE MOST OF OUR DIRECTORS AND OFFICERS RESIDE OUTSIDE OF THE UNITED STATES,
AND SUBSTANTIALLY ALL OF OUR ASSETS ARE LOCATED OUTSIDE OF THE UNITED STATES, IT
MAY BE DIFFICULT FOR INVESTORS TO ENFORCE THEIR LEGAL RIGHTS AGAINST SUCH
INDIVIDUALS OR SUCH ASSETS.

Most of our directors and officers reside outside of the United States, and
substantially all of our assets are located outside of the United States. As a
result, it may not be possible for investors in the United States to enforce
their legal rights, to effect service of process upon our directors or officers
or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties of our directors and officers under Federal
securities laws. Although China has executed the Agreement on Mutual Judicial
Assistance in Criminal Matters with the United States in June 2000, there is no
extradition treaty between the United States and China. Therefore, it is unclear
whether criminal penalties under United States federal securities laws would be
enforced effectively in China, if at all.

OUR OPERATING COMPANY IS SUBJECT TO RESTRICTIONS ON DIVIDEND PAYMENTS AND OTHER
DISTRIBUTIONS TO US.

Current regulations in China would permit our operating company in China to pay
dividends to us only out of its accumulated distributable profits, if any,
determined in accordance with Chinese accounting standards and regulations. In
addition, our operating company in China will be required to set aside at least
10% (up to an aggregate amount equal to half of its registered capital) of its
accumulated profits each year. Such cash reserve may not be distributed as cash
dividends. In addition, if our operating company in China incurs debt on its own
behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other payments to us.

                                       13
<PAGE>

THE CHINESE LEGAL SYSTEM IS NOT FULLY DEVELOPED AND HAS INHERENT UNCERTAINTIES
THAT COULD LIMIT THE LEGAL PROTECTIONS AVAILABLE TO INVESTORS.

The Chinese legal system is a system based on written statutes and their
interpretation by the Supreme People's Court. Prior court decisions may be cited
for reference but have limited legal precedents. Since 1979, the PRC government
has been developing a comprehensive system of commercial laws, and considerable
progress has been made in introducing laws and regulations dealing with economic
matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade. Two examples are the promulgation of the Contract
Law of the PRC to unify the various economic contract laws into a single code,
which went into effect on October 1, 1999, and the Securities Law of the
People's Republic of China, which went into effect on July 1, 1999. However,
because these laws and regulations are relatively new, and because of the
limited volume of published cases and their non-binding nature, interpretation
and enforcement of these laws and regulations involve uncertainties. In
addition, as the Chinese legal system develops, changes in such laws and
regulations, their interpretation or their enforcement may have a material
adverse effect on our business operations.

ENFORCEMENT OF REGULATIONS IN CHINA MAY BE INCONSISTENT.

Although the Chinese government introduced new laws and regulations to modernize
its securities and tax systems on January 1, 1994, China does not yet possess an
expansive body of business law. As a result, the enforcement, interpretation and
implementation of regulations may prove to be inconsistent and it may be
difficult to enforce contracts.

WE MAY EXPERIENCE LENGTHY DELAYS IN RESOLUTION OF LEGAL DISPUTES.

As China has not developed a dispute resolution mechanism similar to the Western
court system, dispute resolution over Chinese projects and joint ventures can be
difficult and there is no assurance that any dispute involving our business in
China can be resolved expeditiously and satisfactorily.

CHINESE ECONOMIC, POLITICAL AND SOCIAL CONDITIONS AS WELL AS GOVERNMENT POLICIES
COULD ADVERSELY AFFECT OUR BUSINESS.

All of our business, assets and operations are located in China. The economy of
China differs from the economies of most developed countries in many respects,
including government involvement, level of development, growth rate, control of
foreign exchange, and allocation of resources. The economy of China has been
transitioning from a planned economy to a more market-oriented economy. Although
in recent years the Chinese government has implemented measures emphasizing the
utilization of market forces for economic reform, the reduction of state
ownership of productive assets and the establishment of sound corporate
governance in business enterprises, a substantial portion of productive assets
in China is still owned by the Chinese government. In addition, the Chinese
government continues to play a significant role in regulating industry by
imposing industrial policies. It also exercises significant control over China's
economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies.

The economy of China has experienced significant growth in the past 20 years,
but growth has been uneven both geographically and among various sectors of the
economy. The Chinese government has implemented various measures from time to
time to control the rate of economic growth. Some of these measures benefit the
overall economy of China, but may have a negative effect on us. For example, our
operating results and financial condition may be adversely affected by:

o    changes in the rate or method of taxation;

o    imposition of additional restrictions on currency conversion and
     remittances abroad;

o    reduction in tariff or quota protection and other import restrictions; and

o    changes in the usage and costs of state-controlled transportation services.

                                       14
<PAGE>

FLUCTUATIONS IN THE VALUE OF THE CHINESE RENMINBI RELATIVE TO FOREIGN CURRENCIES
COULD AFFECT OUR OPERATING RESULTS.

Substantially all our revenues and expenses are denominated in the Chinese
Renminbi. However, we use the United States dollar for financial reporting
purposes. The value of Chinese Renminbi against the United States dollar and
other currencies may fluctuate and is affected by, among other things, changes
in China's political and economic conditions. The Chinese government values the
exchange rate of the Chinese Renminbi against a number of currencies, rather
than just exclusively the United States dollar. Although the Chinese government
has stated its intention to support the value of the Chinese Renminbi, we cannot
assure you that the government will not revalue it. As our operations are
primarily in China, any significant revaluation of the Chinese Renminbi may
materially and adversely affect our cash flows, revenues and financial
condition. For example, to the extent that we need to convert United States
dollars into Chinese Renminbi for our operations, appreciation of this currency
against the United States dollar could have a material adverse effect on our
business, financial condition and results of operation. Conversely, if we decide
to convert our Chinese Renminbi into United States dollars for other business
purposes and the United States dollar appreciates against this currency, the
United States dollar equivalent of the Chinese Renminbi would be reduced. To
date, we have not engaged in any hedging transactions in connection with our
operations.

                        RISKS RELATED TO OUR COMMON STOCK

THE LIQUIDITY OF OUR COMMON STOCK IS AFFECTED BY ITS LIMITED TRADING MARKET.

Shares of our common stock are traded on the American Stock Exchange under the
symbol "TBV". There is currently no broadly followed established trading market
for our common stock. An established trading market may never develop or be
maintained. Active trading markets generally result in lower price volatility
and more efficient execution of buy and sell orders. The absence of an active
trading market reduces the liquidity of shares. The trading volume of our common
stock historically has been limited and sporadic. As a result of this trading
activity, the quoted price for our common stock is not necessarily a reliable
indicator of its fair market value. Further, if we cease to be quoted, holders
would find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of our common stock and the market value of our common stock
likely would decline.

OUR COMMON STOCK MAY BE SUBJECT TO REGULATIONS PRESCRIBED BY THE SECURITIES AND
EXCHANGE COMMISSION RELATING TO "PENNY STOCK".

The Securities and Exchange Commission has adopted regulations that generally
define a penny stock to be any equity security that has a market price (as
defined in such regulations) of less than $5.00 per share, subject to certain
exceptions. If our common stock meets the definition of a penny stock, it will
be subjected to these regulations, which impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors.

WE ARE MAJORITY OWNED BY ONE STOCKHOLDER.

Our president and chief executive officer, Jinyuan Li, controls a majority of
our common stock. Mr. Li beneficially owns approximately 92% of our outstanding
common stock. As a result, Mr. Li has the ability to exert significant control
over our management and affairs requiring stockholder approval, including
approval of significant corporate transactions. This concentration of ownership
may have the effect of delaying or preventing a change in control, including a
merger, consolidation or other business combination involving us, or
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control, even if such change of control would benefit our
other shareholders.

OUR COMMON STOCK WILL LIKELY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME
FLUCTUATIONS.

The stock market has experienced extreme price and volume fluctuations in recent
years that have significantly affected the quoted prices of securities of many
companies, including companies in our industry. The changes often appear to
occur without regard to specific operating performance. In addition, there has
been a limited public market for our common stock. We cannot predict the extent
to which investor interest in us will be maintained. Such interest is necessary
for an active, liquid trading market for our common stock. Active trading
markets generally result in lower price volatility and more efficient execution
of buy and sell orders for investors. The price and trading volumes of our
common stock may fluctuate widely due to the limited public market for our
stock.

                                       15
<PAGE>

SHARES AVAILABLE FOR FUTURE SALE MAY DILUTE AND DEPRESS THE PRICE OF OUR COMMON
STOCK.

A significant number of our shares are eligible for sale pursuant to Rule 144,
and their sale could depress the market price of our stock. Some or all of the
shares of common stock may be offered from time to time in the open market
pursuant to Rule 144, and these sales may have a depressive effect on the market
for the shares of common stock. In general, a person who has held restricted
shares for a period of one year may, upon filing with the SEC a notification on
Form 144, sell into the market common stock in an amount equal to the greater of
1% of the outstanding shares or the average weekly number of shares sold in the
last four weeks prior to such sale. Such sales may be repeated once each three
months, and any of the restricted shares may be sold by a non-affiliate after
they have been held two years.

WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE, AND THE LACK OF
DIVIDENDS MAY HAVE A NEGATIVE EFFECT ON THE STOCK PRICE.

We have never declared or paid any cash dividends or distributions on our common
stock. We currently intend to retain our future earnings to support operations
and to finance expansion and, therefore, do not anticipate paying any cash
dividends on our common stock in the foreseeable future.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

We conduct our main business activities in Tianjin, China. Our primary
facilities are located at No. 6. Yuanquan Road, Wuqing New-tech Industrial Park,
Tianjin, PRC, and include:

o    three management buildings with a total area of 8,246 square meters, which
     are leased from Tianshi Group;

o    one research building with an area of 2,400 square meters, which are leased
     from Tianshi Group;

o    seven production plants with a total area is 19,425 square meters, which
     are leased from Tianshi Group; and

o    six warehouses with a total area of 18,250 square meters, three of which we
     own and three of which we lease.

We lease our office building and manufacturing facilities in Tianjin, China from
Tianshi Group, a related party through common ownership. Since 2003, Biological
has leased office space and manufacturing facilities from Tianshi Group. The
lease expires at the end of 2007 and requires annual rent at 1% of our total
gross revenues. The rent was negotiated by the parties prior to entering into
the agreement, before we acquired Tianshi International, and we believe that it
is a reasonable rent for the facilities. In addition, we are obligated to pay
insurance, maintenance and other expenses related to the premises.

ITEM 3. LEGAL PROCEEDINGS

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

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

On November 21, 2006, the annual meeting of stockholders of the Company (the
"Annual Meeting") was held at the Company's Tianjin offices for the following
purposes:

1.   Elect the following persons to the Board of Directors: Jinyuan Li, Wenjun
     Jiao, Yupeng Yan, Ping Bai, Gilbert Raker, Howard Balloch, and Socorro
     Quintero.

2.   Ratify the Board of Directors' appointment of Moore Stephens Wurth Frazer
     and Torbet, LLP, the independent public accountants as the auditor of the
     Company for the fiscal year 2006.

                                       16
<PAGE>

In this Annual Meeting, there were accordingly present, in person or by proxy,
an aggregate of 68,161,839 shares of Common Stock, such shares being a majority
of the 71,333,586 shares of Common Stock entitled to notice of and to vote at
the meeting.

The result of the vote taken for the election of directors at the meeting was as
follows:

                              No. of Shares    No. of Shares       Withheld
Directors                          For            Against         Authority
---------------------------   --------------   --------------   --------------
Jinyuan Li                        68,104,224           22,615           35,000
Wenjun Jiao                       68,096,890           29,949           35,000
Yupeng Yan                        68,098,577           28,262           35,000
Ping Bai                          68,097,977           28,862           35,000
Socorro Quintero                  68,125,488            1,351           35,000
Howard Balloch                    68,030,352           96,487           35,000
Gilbert Raker                     68,125,793            1,046           35,000

The result of the vote taken for the ratification of the appointment of Moore
Stephens Wurth Frazer and Torbet, LLP was as follows:

o    68,152,5794 shares voted in favor of the proposal,

o    4,133 shares voted against the proposal, and

o    3,820 shares abstained.

                                       17
<PAGE>

                                     PART II

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

STOCK PERFORMANCE PRESENTATION

The following chart compares the cumulative stockholder return on the Company's
common stock with the cumulative total stockholder return of (i) the AMEX
Composite Index and (ii) the Nasdaq Biotechnology Index.

                             CUMULATIVE TOTAL RETURN
                     AMONG TIENS BIOTECH GROUP (USA), INC.,
          AMEX COMPOSITE MARKET INDEX AND NASDAQ BIOTECH INDEX (1) (2)

                              [CHART APPEARS HERE]

<TABLE>
<CAPTION>
                                    OCTOBER 7,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                       2003           2003           2004           2005           2006
                                   ------------   ------------   ------------   ------------   ------------
<S>                                <C>            <C>            <C>            <C>            <C>
Tiens Biotech Group (USA), Inc.    $     100.00   $     301.25   $     175.00   $      90.50   $      98.25

AMEX Composite Index               $     100.00   $     115.51   $     141.18   $     173.14   $     202.41

Nasdaq Biotechnology Index         $     100.00   $      95.59   $     101.44   $     104.32   $     105.42
</TABLE>

(1) Assumes $100 invested on October 7, 2003 and assumes dividends reinvested.
The Company has not paid any dividends on its common stock, and no dividends are
included in the report of the Company's performance. Measurement points are at
the last trading day of the fiscal years ended December 31, 2003, 2004, 2005 and
2006. The material in this chart is not soliciting material, is not deemed filed
with the SEC and is not incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, or the Exchange Act, whether made
before or after the date of this proxy statement and irrespective of any general
incorporation language in such filing.

(2) The Company was listed on the American Stock Exchange as of April 25, 2005.
The Company's common stock began quotation on the Over the Counter Bulletin
Board on October 7, 2003. Prior to October 7, 2003, the Company's common stock
was eligible for quotation on the Over the Counter Bulletin Board, but there was
no trading activity.

MARKET PRICES OF COMMON STOCK

Our common stock was listed on the Over the Counter Bulletin Board under the
symbol "TBGU" from January 1, 2004 to April 24, 2005. The following table sets
forth the range of high and low bid prices reported by the OTCBB in each fiscal
quarter from January 1, 2005 to April 24, 2005. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions. On April 25, 2005, our common stock was
listed on the American Stock Exchange under the symbol "TBV". The table also
sets forth the range of high and low bid prices for our common stock reported by
the American Stock Exchange in each fiscal quarter from April 25, 2005 to
December 31, 2006.

                                                     High         Low
                                                  ----------   ----------
Fiscal 2005
-----------
Quarter Ended March 31, 2005                      $     7.00   $     4.88
April 1, 2005 to April 24, 2005                   $     7.50   $     4.15
April 25, 2005 to June 30, 2005                   $     6.95   $     4.93
Quarter ended September 30, 2005                  $     6.41   $     3.68
Quarter ended December 31, 3005                   $     5.40   $     2.82

Fiscal 2006
-----------
Quarter Ended March 31, 2006                      $     5.02   $     3.62
Quarter Ended June 30, 2006                       $     7.47   $     4.01
Quarter ended September 30, 2006                  $     4.40   $     2.61
Quarter ended December 31, 3006                   $     4.02   $     2.80

SHAREHOLDERS

As of March 26, 2007, there were a total of 71,333,586 shares of our common
stock outstanding, held by approximately 946 stockholders of record. This number
of holders of record does not represent the actual number of beneficial owners
of shares of our common stock because shares are frequently held in "street
name" by securities dealers and others for the benefit of individual owners who
have the right to vote their shares.

                                       18
<PAGE>

DIVIDEND POLICY

We have not declared any dividends on our common stock since inception and do
not intend to pay dividends on our common stock in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

None.

AUTHORIZATION OF SECURITIES FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

None.

ISSUER PURCHASES OF EQUITY SECURITIES

None.

                                       19
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth certain of our historical financial data. The
selected consolidated historical financial data set forth below are not
necessarily indicative of the results of future operations and should be read in
conjunction with the discussion under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the historical
consolidated financial statements and accompanying notes included elsewhere in
this document. The following selected financial data as of and for the years
ended December 31, 2002, 2003, 2004, 2005 and 2006 have been derived from our
audited consolidated financial statements. The consolidated financial statements
for the year ended December 31, 2002 are those of Tianshi International and its
80% owned subsidiary Biological and have been presented for comparison purposes
only.

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31
                                                ------------------------------------------------------------------------------
                                                     2002            2003            2004            2005            2006
                                                --------------  --------------  --------------  --------------  --------------
<S>                                             <C>             <C>             <C>             <C>             <C>
INCOME STATEMENT DATA:

Revenue - related parties ....................  $   14,096,726  $   38,392,208  $   58,910,532  $   68,688,669  $   66,790,466
Cost of sales ................................       8,297,845      12,725,161      17,483,739      17,451,605      18,082,441
                                                --------------  --------------  --------------  --------------  --------------
Gross profit .................................       5,798,881      25,667,047      41,426,793      51,237,064      48,708,025
Selling, general and administrative expenses .       3,193,190       3,171,338       7,363,248      13,413,875      12,789,810
                                                --------------  --------------  --------------  --------------  --------------
Income from operations .......................       2,605,691      22,495,709      34,063,545      37,823,189      35,918,215
Other income (expense), net ..................        (110,860)     (1,178,389)        388,266        (639,137)        161,091
                                                --------------  --------------  --------------  --------------  --------------
Income before provision for income taxes
  and minority interest ......................       2,494,831      21,317,320      34,451,811      37,184,052      36,079,306
Provision for income taxes ...................               0               0               0       2,984,302       2,823,899
                                                --------------  --------------  --------------  --------------  --------------
Income before minority interest ..............       2,494,831      21,317,320      34,451,811      34,199,750      33,255,407
Minority interest ............................         498,966       4,263,498       7,013,515       7,321,630       6,963,330
                                                --------------  --------------  --------------  --------------  --------------
Net income ...................................       1,995,865      17,053,822      27,438,296      26,878,120      26,292,077
Other comprehensive income
   Foreign currency translation adjustment ...               0               0          (8,239)      2,246,380       3,480,775
                                                --------------  --------------  --------------  --------------  --------------
Comprehensive income .........................  $    1,995,865  $   17,053,822  $   27,430,057  $   29,124,500  $   29,772,852
                                                ==============  ==============  ==============  ==============  ==============
Weighted average number of
  shares outstanding .........................      29,137,549      44,730,609      71,801,819      71,333,586      71,333,586
Earnings per share, basic and diluted ......    $         0.07  $         0.38  $         0.38  $         0.38  $         0.37

BALANCE SHEET DATA (at end of period):

Cash and cash equivalents and current
  investments ................................  $      302,974  $   12,725,043  $   39,243,872  $   77,545,991  $   54,270,065
Working capital ..............................       4,830,368      28,121,818      53,716,852      81,067,056      74,008,466
Total assets .................................      33,797,956      57,101,642      83,518,933     121,624,154     148,746,998
Current potion of long-term debt .............         263,677         259,364         155,442       2,130,000       2,130,000
Long-term debt ...............................         446,029         155,591      10,657,742       8,527,742       6,397,742
Stockholders' equity .........................      16,032,170      33,086,192      60,522,899      89,647,399     119,420,251
</TABLE>

                                       20
<PAGE>

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

FORWARD-LOOKING STATEMENTS:

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

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

The following discussion and analysis should be read in conjunction with "Item
6. Selected Financial Data" and our consolidated financial statements and the
related notes thereto and other financial information contained elsewhere in
this Form 10-K.

OVERVIEW

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

We develop our products at our product research and development center, which
employs highly qualified professionals in the fields of pharmacology, biology,
chemistry and fine chemistry. We have developed and produce 35 nutrition
supplement products, which include wellness products and dietary nutrition
supplements, and 25 personal care products, which include skin care products and
personal washing products.

In China, we sell our products to Tianshi Engineering, an affiliated company.
Tianshi Engineering, in turn, sells the products to end-users through its chain
stores and Chinese affiliated companies. Internationally, we sell our products
to an extensive direct sales force of overseas affiliates and independent
distributors who use the products themselves and/or resell them to other
distributors or consumers.

In April 2004, Tianshi International entered a joint venture contract with
Tianshi Pharmaceuticals to establish Tiens Yihai. Tiens Yihai is 99.4% owned by
Tianshi International and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai is
located in Shanghai, China, and was established to build a new research and
development facility which would also produce our nutrition supplement, home
care, and personal care products.

                                       21
<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005

REVENUE. In 2006 revenue was $66.8 million compared to $68.7 million in 2005, a
decrease of 2.8%. The breakdown of revenue between Chinese and international
sales is as follows.

CHINESE AND INTERNATIONAL REVENUE

Revenue                        Year 2005        Year 2006        % Change
--------------------------   --------------   --------------   ------------
China                        $   38,181,090   $   27,074,979          -29.1%
International                $   30,507,579   $   39,715,487           30.2%

In 2006 revenue from China decreased to $27.1 million, or 29.1% compared to
$38.2 million in 2005. At the beginning of 2006, we began selling semi-finished
products to Tianshi Engineering. In order to qualify for a direct selling
license in China, Tianshi Engineering, our related party customer in China, is
required to produce a part of the products that it sells in China. As a result,
in 2006, we began to sell semi-finished products to Tianshi Engineering, which
jointly shares with us licenses to produce, manufacture and sell the products.
These semi-finished products have a lower sales price than the finished products
we had previously sold to Tianshi Engineering.

In addition, we believe that sales to China in 2006 were negatively impacted by
other factors, including:

o    continued consumer uncertainty in China regarding the impact of recently
     enacted direct selling regulations and uncertainty regarding the timing of
     the direct selling license application process and approval; and

o    increased government and media scrutiny on the direct selling industry,
     particularly following publication of new direct selling regulations at the
     end of 2005.

The application of Tianshi Engineering for a direct selling license in China is
still pending. Until the application is approved, Tianshi Engineering will
continue to sell our products through its branches and chain stores in China.

In 2006, international sales increased to $39.7 million, or 30.2% compared to
$30.5 million in 2005. The strong growth reflects a significant increase in
demand for our products in Indonesia, as well as strong revenue growth in
Kazakhstan, South Africa, Thailand, Ukraine, Congo and Ghana.

COST OF SALES. Cost of sales increased by $0.6 million in 2006, a 3.6% increase
compared with 2005. Cost of sales as a percentage of revenue increased to 27.1%
for the twelve months ended December 31, 2006 compared to 25.4% for 2005. In
order to improve the quality of our products, during 2006 we introduced some new
manufacturing procedures and stricter quality control testing than previously,
which added to our manufacturing costs. However, we believe that once our
production team becomes more familiar with the new production procedures, the
manufacturing costs of our products will decrease. In addition, due to the
uncertainty of the Chinese market, we did not achieve domestic sales growth and
the average fixed cost per unit was higher than in 2005.

GROSS PROFIT. Gross profit decreased by 4.9% to $48.7 million in 2006, compared
to $51.2 million in 2005. The gross profit margin for 2006 was 72.9% compared to
74.6% in 2005 as a result of the reasons discussed under cost of sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $12.8 million in 2006, or 4.7% compared to
$13.4 million in 2005. This decrease primarily reflects a decrease in
transportation expenses, as well as a decrease in low cost supplies expenses and
expenses relating to the startup costs of Tiens Yihai. In 2006 we began to sell
semi-finished goods to Tianshi Engineering and the transportation costs that
were previously incurred by us are now incurred by Tianshi Engineering. The
selling and administrative expenses as a percentage of sales decreased to 19.1%
in 2006 from 19.5% in 2005.

OTHER INCOME (EXPENSE), NET. Other income (expense), net was $0.2 million of
income in 2006, compared to expense of $0.6 million in 2005.

                                       22
<PAGE>

The increase is a result of improved cash management, including the purchase of
an investment product and deposits in higher interest-bearing accounts.

NET INCOME. For the above stated reasons, net income in 2006 was $26.3 million
compared to $26.9 million in 2005, a decrease of 2.2%.

YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004

REVENUE. In 2005, revenue was $68.7 million compared to $58.9 million in 2004,
an increase of 16.6%. The breakdown of revenue between Chinese and international
sales is as follows.

CHINESE AND INTERNATIONAL REVENUE

Revenue                        Year 2004        Year 2005        % Change
--------------------------   --------------   --------------   ------------
China                        $   29,210,167   $   38,181,090           30.7%
International                $   29,700,365   $   30,507,579            2.7%

In 2005 revenue from China increased to $38.2 million, or 30.7% compared to
$29.2 million in 2004. The increase reflects a significant increase in the
demand for our products in China during 2005, resulting from the increase in our
networking sales forces in China and the establishment of 40 new branches in
China by Tianshi Engineering.

In 2005 international sales increased to $30.5 million, or 2.7% compared to
$29.7 million in 2004. The slight increase reflects an increase in demand from
two newly established affiliate companies located in Rwanda and Venezuela, and
relatively flat revenue in other international markets for 2005.

COST OF SALES. Although revenue increased by nearly $10 million in 2005, cost of
sales remained constant at $17.5 million, compared with 2004. Cost of sales as a
percentage of revenue decreased to 25.4% in 2005 compared to 29.7% in 2004. This
reflects improved economies of scale relating to the expansion of our
production, as well as a decrease in raw material costs per unit based on larger
raw material purchase orders.

GROSS PROFIT. Gross profit increased to $51.2 million in 2005, or 23.7%, from
$41.4 million in 2004. The gross profit margin in 2005 was 74.6% compared to
70.3% in 2004 as a result of the reasons discussed under cost of sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $13.4 million in 2005, or 82.2%, over $7.4
million in 2004. This increase reflects the steps we have taken to support
future sales increases, and was primarily attributable to an increase in head
count, resulting in an increase in related salary, welfare and insurance costs.
There was also an increase in low cost supplies expense, such as stationery and
furniture, relating to additional office space required by the additional
employees. The selling and administrative expenses as a percentage of sales
increased to 19.5% in 2005 from 12.5% in 2004.

OTHER INCOME (EXPENSE), NET. Other income (expense), net was $0.6 million of
expense in 2005, compared to income of $0.4 million in 2004. In 2005, we
incurred $532,887 of interest relating to the terms of our long-term loan
agreement with Tianyuan Capital Development Corp. Ltd., as more fully described
under the caption "Certain Relationships and Related Transactions--Loans." We
also incurred expense of $339,299 for additional taxes and penalties paid by us
to the Chinese government during the first quarter in 2005 as the result of a
VAT examination by the local government.

PROVISION FOR INCOME TAXES. Provision for income taxes increased to $3.0 million
in 2005, compared to none in 2004. This was due to our operating subsidiary in
China, Biological, becoming subject to an annual income tax rate of 7.5% in
2005. In 2003 and 2004, Biological was exempt from paying income taxes in China.
From January 1, 2005 through December 31, 2007, Biological is subject to an
income tax at a reduced rate of 7.5%. From January 1, 2008 forward, Biological
will be subject to a 15% income tax rate.

NET INCOME. Net income in 2005 was $26.9 million compared to $27.4 million in
2004. The increase in selling general and administrative expenses almost
entirely offset our improvements in revenue and gross profit margin.

                                       23
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth selected unaudited quarterly data for the periods
shown.

<TABLE>
<CAPTION>
                                                                     Quarter Ended
                     --------------------------------------------------------------------------------------------------------------
                       March 31,     June 30,     Sept. 30,      Dec. 31,     March 31,      June 30,     Sept. 30,      Dec. 31,
                         2005          2005          2005          2005          2006          2006          2006         2006
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                  <C>           <C>           <C>           <C>           <C>           <C>           <C>           <C>
Revenue-related
 parties             $ 14,295,999  $ 17,307,659  $ 19,126,809  $ 17,958,202  $ 16,722,560  $ 14,292,998  $ 19,187,748  $ 16,587,160

Cost of sales           3,457,418     4,197,812     4,954,198     4,842,177     4,806,296     3,842,392     5,066,051     4,367,702
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Gross profit           10,838,581    13,109,847    14,172,611    13,116,025    11,916,264    10,450,606    14,121,697    12,219,458
Selling, general
 and administrative
 expenses               2,633,875     2,465,676     2,795,414     5,518,910     2,566,422     3,271,232     2,803,859     4,148,297
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Income from
 operations             8,204,706    10,644,171    11,377,197     7,597,115     9,349,842     7,179,374    11,317,838     8,071,161
Other (expense)
 income, net             (463,061)     (224,103)     (126,969)      174,996       (37,721)        1,075       164,104        33,633
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Income before
 provision  for
 income taxes and
 minority interest      7,741,645    10,420,068    11,250,228     7,772,111     9,312,121     7,180,449    11,481,942     8,104,794
Provision for
 income taxes             616,259       829,185       869,769       669,089       733,531       576,029       878,931       635,408
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Income before
 minority  interest     7,125,386     9,590,883    10,380,459     7,103,022     8,578,590     6,604,420    10,603,011     7,469,386
Minority interest       1,520,106     1,995,963     2,175,715     1,629,846     1,808,881     1,419,943     2,167,747     1,566,759
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Net income           $  5,605,280  $  7,594,920  $  8,204,744  $  5,473,176  $  6,769,709  $  5,184,477  $  8,435,264  $  5,902,627

Other comprehensive
 income foreign
 currency
 translation
 adjustment                   999           999     2,047,847       196,535       717,827       267,960     1,411,012     1,083,976
                     ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------
Comprehensive
 income              $  5,606,279  $  7,595,919  $ 10,252,591  $  5,669,711  $  7,487,536  $  5,452,437  $  9,846,276  $  6,986,603
                     ============  ============  ============  ============  ============  ============  ============  ============
Weighted average
 number of shares
 outstanding           71,333,586    71,333,586    71,333,586    71,333,586    71,333,586    71,333,586    71,333,586    71,333,586
Earnings per share,
 basic and diluted   $       0.08  $       0.11  $       0.12  $       0.08  $       0.09  $       0.07  $       0.12  $       0.08
</TABLE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table sets forth payments due by period for fixed contractual
obligations as of December 31, 2006.

<TABLE>
<CAPTION>
                                             Payments due by period (1)
                              ---------------------------------------------------------
                               Less than                                    More than
                                 1 year       1-3 years      3-5 years       5 years
                              ------------   ------------   ------------   ------------
<S>                           <C>            <C>            <C>            <C>
Long-term Debt Obligations    $  2,130,000   $  4,260,000   $  2,137,742   $          0
Operating Lease Obligations        265,844              0              0              0
                              ------------   ------------   ------------   ------------
Total                         $  2,395,844   $  4,260,000   $  2,137,742   $          0
                              ============   ============   ============   ============
</TABLE>

(1) We lease our office building and manufacturing facilities in Tianjin, China
from Tianshi Group, a related party through common ownership. On June 30, 2002,
we entered into a written lease agreement with Tianshi Group to pay annual rent
at 1% of our total gross revenues. The term of this agreement is for five years
commencing on January 1, 2003. Because the rent is based upon a percentage of
our gross total revenues, we are not able to include a fixed figure in the table
relating to this obligation. The total amount paid on this was $662,082 for the
12 months ended December 31, 2006.

                                       24
<PAGE>

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The account receivable-related parties increased by $10.8 million, from $2.2
million in 2005 to $12.9 million in 2006. The increase is due primarily to
payment extensions given to Tianshi Engineering to allow it to fund its
marketing efforts in China in anticipation of receiving a direct selling license
in China.

Inventories at December 31, 2006 decreased to $6.8 million compared to $7.5
million at December 31, 2005. At the beginning of 2006 we started selling
semi-finished goods to Tianshi Engineering to enable it to qualify for a direct
selling license in China. Therefore, there were less finished products in
inventory.

Accounts payable increased to $4.1 million as of December 31, 2006 compared to
$2.7 million, as of December 31, 2005. The increase was mainly due to longer
credit terms given by our suppliers.

Property, plant and equipment increased to $30.5 million as of December 31, 2006
compared to $24.9 million as of December 31, 2005. The increase was primarily
due to costs related to the construction of a new conference center at our
headquarters in Tianjin.

We typically generate positive cash flow from operations due to favorable gross
margins. Net cash provided by operating activities decreased to $12.9 million
for the twelve months ended December 31, 2006, compared to $43.3 million for the
same period in 2005. The decrease primarily reflects an increase in accounts
receivable-related parties of $16.5 million and an increase in other
receivable-related parties of $5.7 million.

Net cash used in investing activities for 2006 increased by $29.7 million to
$35.9 million. This increase was mainly due to the short-term loan of $25.0
million made by Biological to Tianshi Engineering and a loan of $3.2 million
relating to the Yihai project made to the Local Government. Net cash used in
financing activities was $2.1 million for 2006, compared to $0.2 million for
2005. In 2006 we paid two installment payments totaling $2.1 million relating to
the $10.7 million loan for the Yihai project.

As of December 31, 2006 and December 31, 2005, we had cash of $54.3 million and
$77.5 million, respectively. The decrease was primarily due to the short-term
loan to Tianshi Engineering and the loan to the Local Government relating to the
Yihai project. Approximately 64% of the cash was held in the bank account of
Biological and 27% in the bank account of Tiens Yihai.

Going forward, our primary requirements for cash consist of:

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

o    continued promotion of networking sales activities;

o    the development costs of new products; and

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

We anticipate that our current operating activities will enable us to meet our
anticipated cash requirements for 2007. We estimate that the construction of our
Tiens Yihai research, development and manufacturing facility will require
approximately $200 million. If we receive approval to proceed with the
development of the Tiens Yihai project, we may require additional financing to
fund the project.

MANAGEMENT ASSUMPTIONS

Management anticipates, based on internal forecasts and assumptions relating to
our current operations that existing cash and funds generated from operations
will be sufficient to meet working capital for at least the next 12 months. In
the event that our business plans change, our assumptions change or prove
inaccurate or if other capital resources and projected cash flow otherwise prove
to be insufficient to fund operations (due to unanticipated expense, technical
difficulties, or otherwise), we could be required to seek additional financing.
There can be no assurance that we will be able to obtain additional financing on
terms acceptable to us, or at all.

                                       25
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

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

REVENUE RECOGNITION

We recognize revenue from domestic sales by distributors in China, net of sales
commissions and taxes only when the related Chinese distributor recognizes sales
of the Company's products to unaffiliated third parties. We recognize revenue
from international sales (non-Chinese) to both affiliated and unaffiliated third
parties, net of commissions and taxes as goods are shipped and clear review by
the international customs department.

We generally are not contractually obligated to accept returns. However, on a
case by case negotiated basis, we permit customers to return their products. In
accordance with SFAS No. 48, "Revenue Recognition when the Right of Return
Exists", revenue is recorded net of an allowance for estimated returns. Such
reserves are based upon management's evaluation of historical experience and
estimated costs. The amount of the reserves ultimately required could differ
materially in the near term from amounts included in the accompanying
consolidated financial statements.

As of December 31, 2006, Tianshi Engineering, an affiliated company, owned all
of the related party distributors which sell our products in China.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Our trade accounts receivables are mainly due from related companies. Management
reviews its accounts receivable on a regular basis to determine if the bad debt
allowance is adequate at each year-end, paying particular attention to the age
of receivable outstanding.

INVENTORIES

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

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 155, "Accounting for Certain Hybrid Financial Instruments", which amends
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS No. 155 provides guidance to simplify the
accounting for certain hybrid instruments by permitting fair value
re-measurement for any hybrid financial instrument that contains an embedded
derivative, as well as, clarifies that beneficial interests in securitized
financial assets are subject to SFAS No. 133. In addition, SFAS No. 155
eliminates a restriction on the passive derivative instruments that a qualifying
special-purpose entity may hold under SFAS No. 140. SFAS No. 155 is effective
for all financial instruments acquired, issued or subject to a new basis
occurring after the beginning of an entity's first fiscal year that begins after
September 15, 2006. We do not expect the adoption of SFAS to have a material
impact on our consolidated financial statements.

                                       26
<PAGE>

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets", which amends SFAS No. 140. SFAS No. 156 specifically provides
guidance addressing the recognition and measurement of separately recognized
servicing assets and liabilities, common with mortgage securitization
activities, and provides an approach to simplify efforts to obtain hedge
accounting treatment. SFAS No. 156 is effective for all separately recognized
servicing assets and liabilities acquired or issued after the beginning of an
entity's fiscal year that begins after September 15, 2006, with early adoption
being permitted. We do not expect the adoption of SFAS 156 to have a material
impact on our consolidated results of operations and financial condition.

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. The requirements of FIN 48 are
effective for our fiscal year beginning January 1, 2007. We do not expect the
adoption of FIN 48 to have a material impact on our consolidated results of
operations and financial condition.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006. We do not expect the adoption of SAB 108 to have a material impact on our
consolidated results of operations and financial condition.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("SFAS 157"), which provides enhanced
guidance for using fair value to measure assets and liabilities. This standard
also responds to investors' requests for expanded information about the extent
to which companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. The standard applies whenever other standards require (or permit)
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new circumstances. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 12, 2007,
and interim periods within those fiscal years. Early adoption is permitted. We
are currently evaluating whether the adoption of SFAS157 will have a material
effect on our consolidated results of operations and financial condition.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, "Employer's Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
132(R)" ("SFAS 158"). SFAS 158 requires an employer to recognize the overfunded
or underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. The standard also
requires an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited exceptions. An
employer with publicly traded equity securities is required to initially
recognize the funded status of a defined benefit postretirement plan and to
provide the required disclosures as of the end of the fiscal year ending after
December 15, 2006. An employer without publicly traded equity securities is
required to recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after June 15, 2007. We do not expect the adoption of SFAS 158 to have a
material impact on our consolidated results of operations and financial
condition.

                                       27
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

EFFECTS OF INFLATION

We are subject to commodity price risks arising from price fluctuations in the
market prices of the various raw materials that comprise our products. Price
risks are managed by each business unit through productivity improvements and
cost-containment measures. For the time being, the management does not believe
that inflation risk is material to our business or our consolidated financial
position, results of operations or cash flows.

EFFECT OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES

Our operating subsidiary, Biological, is located in China, buys all of its raw
materials in China, and sells 40.5% of our products in China, using the Chinese
Renminbi ("RMB") as the functional currency. Based on Chinese government
regulations, all foreign currencies under the category of current accounts are
allowed to be freely exchanged with hard currencies.

On July 21, 2005, the Chinese government approved the increase in the valuation
of RMB against the US dollar by 2%. Because we report our revenues in US
dollars, changes in the valuation of RMB may impact our net income. Given the
uncertainty of exchange rate fluctuations, we cannot estimate the effect of
these fluctuations on its future business, product pricing, results of
operations or financial condition. Currently we have not entered agreements or
purchased instruments to hedge our exchange rate risks, although we may do so in
the future.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statement required by this item may be found following the
signature page of this annual report.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including our
chief executive officer and the chief financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, as of the end of the period covered by this report (the
"Evaluation Date"). Based on this evaluation, our chief executive officer and
chief financial officer concluded as of the Evaluation Date that our disclosure
controls and procedures were effective such that the material information
required to be included in our SEC reports is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms relating
to our company, including our consolidating subsidiaries, and was made known to
them by others within those entities, particularly during the period when this
report was being prepared.

Additionally, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date. We have not identified any significant
deficiencies or material weaknesses in our internal controls, and therefore
there were no corrective actions taken.

                                       28
<PAGE>

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below are the names of the directors, executive officers and key
employees of the Company as of March 29, 2007. With the exception of Jinyuan Li,
who served on the Board since the reorganization in September 2003, all other
directors served on the Board since January 2004.

NAME                       AGE        POSITION
-------------------------  ---------  -----------------------------------------
Jinyuan Li                 49         Chairman,  Chief Executive Officer,
                                       President and Director

Wenjun Jiao                43         Chief Financial Officer and Director

Yupeng Yan                 44         Executive Vice President and Director

Socorro Quintero           55         Director

Howard Balloch             56         Director

Gilbert Raker              63         Director

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

JINYUAN LI

Mr. Li has served as the Chairman of the Board and a Director since September
2003. Mr. Li is also the President and founder of the Company. He also serves as
President of Tianshi Group and has held that position since 1995. Mr. Li has 14
years of experience in the petroleum and plastics industries. He holds a number
of leadership positions in government and social associations, including as
commissioner of the Tianjin Political Consultative Conference; Standing Director
of China Entrepreneur's National Council; Executive Commissioner of All-China
Federation of Industry and Commerce; Vice President of Chinese Bioengineering
Association; and Vice president of Chinese Healthcare Association. Mr. Li was
elected as one of the Top Ten Most Outstanding Talents in the Greater China
Area; one of the Ten Most Popular Personages Among the High-Ranking, by China
Economic Forum; Excellent Entrepreneur, by the Organization Committee of the
Second Chinese Entrepreneur Forum in 2003, and as the Most Creative Chinese
Businessman of Asia in 2004. Mr. Li holds a MBA degree from Nankai University.

WENJUN JIAO

Mr. Jiao has served as the Chief Financial Officer of the Company since
September 2003. Prior to that, Mr. Jiao served as the Chief Financial Officer of
Tianjin Tianshi Biological Development Co. Ltd from May 2001 through 2003. Mr.
Jiao holds a Doctorate Degree in Accounting form Tianjin University of Finance
and Economics and a MBA Degree from Oklahoma City University. Mr. Jiao is a
Certified Public Accountant in China. Before he joined Tianjin Tianshi
Biological Development Co. Ltd, Mr. Jiao served as CFO of various large
companies and as chairman of a consulting company in China. Mr. Jiao has 19
years of sound financial management experience in the manufacturing, trade,
construction and consulting industries and received the "2005 Top Ten CFO of
China Award" in 2005.

YUPENG YAN

Mr. Yan has served as Executive Vice-President of the Company since September
2003. Prior to that, Mr. Yan served as Vice-President of Tianshi Group from
March 1997 to May 2004. Since June 2004, Mr. Yan has also served as head of
Tianshi Marketing Group. Mr. Yan currently holds a number of leadership
positions including Vice-Dean of Tianshi Occupational Technique Institute, and
Vice-Chairman of Tianshi Science and Technique Association. Mr. Yan was elected
as one of the Chinese Ten Outstanding Professional Managers in 2004. Mr. Yan
received an Executive Masters of Business Administration Degree from Nankai
University in July 2004.

                                       29
<PAGE>

SOCORRO QUINTERO

Dr. Quintero serves as a director of the Company. Dr. Quintero is an Associate
Professor of Finance at Oklahoma City University's Meinders School of Business
("OCU"). Prior to joining OCU in 1993, she served as Assistant Professor of
Finance at the University of South Florida. Dr. Quintero has extensive work
experience in various industrial engineering capacities and management levels
while working for Atlantic Steel Company, Abbott Laboratories and Levi Strauss &
Co. She received a Bachelor of Science in Physics from the University of the
Philippines, a Master of Science in Industrial Engineering from the Georgia
Institute of Technology, and a Doctorate degree in Finance from the University
of Texas at Austin.

GILBERT RAKER

Mr. Raker serves as a director of the Company, and has served as the President,
Chief Executive Officer and Chairman of the Board of SEMX Corporation (Pink
Sheets: SEMX) since 1988. SEMX Corporation manufactures materials and components
used in microelectronic circuitry, primarily for the automotive, consumer
electronics, defense, medical and aerospace industries. Prior to 1988, Mr. Raker
worked at two private equity investment firms and was employed as Chief
Financial Officer by two New York Stock Exchange listed companies and several
private companies. Mr. Raker received his Bachelor of Science degree in
Chemistry from Eastern University and his Master of Business Administration in
Production Management from Syracuse University.

HOWARD BALLOCH

Mr. Balloch serves as a director of the Company, and has been the President and
Chief Executive Officer of the Canada China Business Council since 2001. In
addition, Mr. Balloch served as the Canadian ambassador to the People's Republic
of China from February of 1996 until July of 2001. Mr. Balloch currently serves
on the board of directors of the following companies: Magic Lantern Group, Inc.
(AMEX: GML), Zi Corporation (TSX: ZIC, NASDAQ: ZICA), Oztime Media, a
wholly-owned subsidiary of Zi Corporation, Ivanhoe Energy, Inc. (TSX: IE,
NASDAQ: IVAN), Ivanhoe Mines Ltd. (TSX, NYSE, NASDAQ: IVN), East Energy Corp
(TSX: EEC), Methanex Corporation (TSX: MX, NASDAQ: MEOH), Maple Leaf Education
Holding and Capital Club, Beijing. Mr. Balloch is the founder and President of
The Balloch Group, an investment advisory and merchant banking firm located in
Beijing, China. He currently serves as an Adjunct Professor of International
Business at the University of British Columbia. Mr. Balloch received his
Bachelor of Arts and Master of Arts degrees from McGill University.

AUDIT COMMITTEE

The Board of Directors has established an audit committee in accordance with
Rule 10A-3 of the Exchange Act. The members of the Audit Committee are Socorro
Quintero (Chairman), Howard Balloch and Gilbert Raker, each of whom are
independent as defined under Section 121(A) of the American Stock Exchange
listing standards currently in effect. None of the Audit Committee members is a
current officer or employee of the Company or any of its affiliates.

The Board of Directors has determined that Socorro Quintero and Gilbert Raker
each qualify as an "audit committee financial expert" under Item 401(b) of
Regulation S-K of the Exchange Act.

                                       30
<PAGE>

CODE OF BUSINESS CONDUCT AND ETHICS

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

The Code of Business Conduct and Ethics was filed as an exhibit to the Company's
annual report on Form 10-KSB for the year ended December 31, 2004. A written
copy of the Code of Business Conduct and Ethics will be provided upon request at
no charge by writing to the Company's corporate secretary, Alexander Jiao, at
Tiens Biotech Group (USA), Inc., No. 6, Yuanquan Road, Wuqing New-Tech
Industrial Park, Tianjin, China 301700.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of Forms 3 and 4 and amendments to these forms
furnished to the Company, all parties subject to the reporting requirements of
Section 16(a) of the Exchange Act filed all such required reports during and
with respect to 2006.

ITEM 11. EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

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

The objectives of our compensation programs.

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

What our compensation program is designed to reward.

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

Elements of compensation.

Each executive officer receives cash compensation as a base salary. Base salary
for our executive officers is fixed by their respective employment agreements,
as described under "Employment Agreements." Jinyuan Li and Wenjun Jiao's
salaries for 2006 were fixed pursuant to employment agreements with Biological
entered into in 2005. Their base salaries were based on our CEO's subjective
perceptions of salaries paid by comparable companies for comparable positions.
Executive officers also will receive payments upon termination of their
employment agreements for specified reasons.

                                       31
<PAGE>

Jinyuan Li holds 92.3% of our shares of common stock. Our other executive
officers have also been shareholders of our common stock as disclosed under
"Security Ownership Table" since the reorganization of our Company in September
2003. Each of our executive officers received shares in the Company as a result
of their share ownership of our business before the reorganization. Our CEO
believes that the executive officers' equity interest in our Company motivates
them to maximize the success of our business and therefore did not consider
bonuses for 2006. We do not currently have a stock option plan, but may consider
adopting one in the future to further incentivize its employees.

Why we chose to pay each element.

We have entered into long-term employment agreements with Messrs. Li and Jiao
which provides for a base salary.

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

How we determine the amount for each element to pay.

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

The amount of the payments required to be paid upon termination of employment
agreements for specified reasons are determined according to local Chinese
employment regulations.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K of the
Exchange Act with management and the full Board. Based on that review and
discussion, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in the Company's Annual Report
on Form 10-K for 2006.

The Compensation Committee

Gilbert Raker, Chairman

Wenjun Jiao

Yupeng Yan

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2006, the members of the Compensation Committee were Gilbert Raker,
Wenjun Jiao, Yupeng Yan, and Ping Bai (who resigned as a director as of February
25, 2007). The Compensation Committee did not deliberate on executive
compensation for fiscal 2006. Wenjun Jiao, Yupeng Yan and Ping Bai were each an
employee and officer of the Company during 2006. No member of the Compensation
Committee has a relationship that would constitute an interlocking relationship
with Executive Officers or Directors of the Company or another entity.

                                       32
<PAGE>

SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation paid or earned by each of the
named executive officers for the fiscal year ended December 31, 2006.

<TABLE>
<CAPTION>
                                                                                            CHANGE IN
                                                                                             PENSION
                                                                                              VALUE
                                                                                               AND
                                                                             NON-EQUITY    NONQUALIFIED
                                                                             INCENTIVE       DEFERRED
                                                          STOCK    OPTION       PLAN       COMPENSATION    ALL OTHER
NAME AND                            SALARY       BONUS    AWARDS   AWARDS   COMPENSATION     EARNINGS     COMPENSATION      TOTAL
PRINCIPAL POSITION (1)     YEAR      ($)          ($)      ($)      ($)         ($)            ($)            ($)            ($)
------------------------   ----   ----------   --------   ------   ------   ------------   ------------   ------------   ----------
<S>                        <C>    <C>          <C>        <C>      <C>      <C>            <C>            <C>            <C>
Jinyuan Li                 2006   $  166,660   $      0   $    -   $    -   $          -   $          -   $          -   $  166,660
 Chairman,                 2005   $  145,455   $      0   $    -   $    -   $          -   $          -   $          -   $  145,455
 Chief Executive Officer   2004   $  145,455   $      0   $    -   $    -   $          -   $          -   $          -   $  145,455
 and President

Wenjun Jiao                2006   $   77,000   $      0   $    -   $    -   $          -   $          -   $          -   $   77,000
 Chief Financial Officer   2005   $   48,000   $      0   $    -   $    -   $          -   $          -   $          -   $   48,000
                           2004   $   35,670   $      0   $    -   $    -   $          -   $          -   $          -   $   35,670
</TABLE>

(1)  Ping Bai and Yupeng Yan were employee Directors of the Company during 2006
     but did not qualify as a "named executive officer" because their respective
     total compensation was less than $100,000.

GRANTS OF PLAN BASED AWARDS; OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END;
OPTION EXERCISES AND STOCK VESTED

The Company does not have any stock option plans.

PENSION BENEFITS

None.

NONQUALIFIED DEFERRED COMPENSATION

The Company does not provide any nonqualified deferred compensation to any of
its employees.

EMPLOYMENT AGREEMENTS

The Company's subsidiary, Biological, has entered into an employment agreement
with each of its named executive officers and employee directors of the Company.
Jinyuan Li's contract is dated June 1, 2005 and has an indefinite period. Wenjun
Jiao's contract is dated June 1, 2005 and terminates on June 30, 2010. The
employment contracts for Ping Bai and Yupeng Yan are dated April 1, 2004 and
expire on March 31, 2009. Under each of these employment contracts, the employee
may rescind the contract with 30 days written notice. For 2006, the Companied
paid a salary of $166,660 to Jinyuan Li and $77,000 to each of Ping Bai, Wenjun
Jiao and Yupeng Yan.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

The employment contracts of Messrs. Li and Jiao each provide for a one-time lump
sum payment equal to six months of the employee's then current salary if we
terminate their employment contract for one of the following reasons:

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

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

                                       33
<PAGE>

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

o    We are contemplating bankruptcy and determine to reduce staff.

Assuming that Messrs. Li and Jiao were terminated for one of the above-stated
reason, Mr. Li would receive $83,330 and Mr. Jiao would receive $38,500. There
are no other circumstances, including a change of control of our Company, where
we are required to make any additional payment to Messrs. Li and Jiao.

DIRECTOR COMPENSATION

For the fiscal year ended December 31, 2006, members of the Board who are not
employees of the Company are entitled to receive an annual cash retainer of
$30,000.

DIRECTOR SUMMARY COMPENSATION TABLE

The table below summarizes the compensation paid by the Company to non-employee
Directors for the fiscal year ended December 31, 2006.

<TABLE>
<CAPTION>
                                                         CHANGE IN
                                                          PENSION
                                                           VALUE
                       FEES                             AND DEFERRED
                    EARNED OR      STOCK      OPTION    COMPENSATION    ALL OTHER
                   PAID IN CASH    AWARDS     AWARDS      EARNINGS     COMPENSATION    TOTAL
NAME (1)               ($)          ($)        ($)          ($)            ($)          ($)
----------------   ------------   --------   --------   ------------   ------------   --------
<S>                <C>            <C>        <C>        <C>            <C>            <C>
Howard Balloch     $     30,000   $      0   $      0   $          0   $          0   $ 30,000
Ping Bai (2)       $          0   $      0   0      0   $          0   $          0   $      0
Gilbert Raker      $     30,000   $      0   $      0   $          0   $          0   $ 30,000
Socorro Quintero   $     30,000   $      0   $      0   $          0   $          0   $ 30,000
Yupeng Yan (2)                0   $      0   0      0   $          0   $          0   $      0
</TABLE>

(1)  Jinyuan Li and Wenjun Jiao are not included in this table as they are
     employees of the Company and thus receive no compensation for their
     services as Directors. Their compensation is disclosed in the table in the
     "Summary Compensation Table".

(2)  Yupeng Yan and Ping Bai were employee Directors of the Company during 2006
     and received no additional compensation for their services as Directors.
     They are not named executive officers and are excluded from the "Summary
     Compensation Table".

                                       34
<PAGE>

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

The following table sets forth information with respect to the beneficial
ownership of shares of common stock as of March 28, 2007 by each person or
entity who is known by the Company to beneficially own five percent or more of
the common stock; each director and executive officer of the Company; and all
directors and executive officers of the Company as a group.

NAME OF BENEFICIAL OWNER (1)           NUMBER OF SHARES   PERCENT OF CLASS
------------------------------------   ----------------   ----------------
Jinyuan Li                                   65,835,000               92.3%
Wenjun Jiao                                     665,000                  *
Yupeng Yan                                      665,000                  *
Socorro Maria Quintero                               --                 --
Howard R. Balloch                                    --                 --
Gilbert D. Raker                                     --                 --
All Directors and Executive Officers
 as a Group (6 persons)                      67,165,000               94.2%

----------
* Less than one percent.
(1) Unless otherwise indicated, the address for each named individual or group
is c/o Tiens Biotech Group (USA), Inc., No. 6, Yuanquan Road, Wuqing New-Tech
Industrial Park, Tianjin, China 301700.

Unless otherwise indicated, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of common
stock beneficially owned by them. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days upon the
exercise of options, warrants or convertible securities (in any case, the
"Currently Exercisable Options"). Each beneficial owner's percentage ownership
is determined by assuming that the Currently Exercisable Options that are held
by such person (but not those held by any other person) have been exercised and
converted.

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

We market all of our products through various domestic and international
business entities that are related to our company through common ownership.
Related party sales amounted to 100% of our total consolidated sales.

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

Internationally, we sell our products directly to our overseas affiliates. Due
to the common ownership, there are no formal sales or administrative agreements
among Biological and those overseas related parties. The business operations
among these related entities are regulated through internal ordinances.

Our related party transactions are required to be reviewed and approved or
ratified by a majority of our non-interested Board of Directors. The following
table is provided to facilitate your understanding of the relationships between
related parties and us and their transactions with us during 2006 and 2005.

                                       35
<PAGE>

<TABLE>
<CAPTION>
                                                              DECEMBER 31,     DECEMBER 31,
                                                                 2006             2005
                                                             -------------   -------------
<S>                                                          <C>             <C>
Revenue-related party                                        $  66,790,466   $  68,688,669
Accounts receivable, trade - related parties, net of         $  12,926,670   $   2,165,958
 allowance   for   doubtful   accounts  of  $86,776  and
 $206,916 as of December 31, 2006 and 2005, respectively
Other receivables - related parties                          $   8,397,227   $   3,281,081
Loans receivable - related parties                           $  25,640,000   $           0
Advances from customers - related parties                    $   1,570,120   $   2,077,130
Other payables - related parties                             $     522,105   $   1,816,534
Current portion of long-term debt - related party            $   2,130,000   $   2,130,000
Notes payable - related party                                $   6,397,742   $   8,527,742
</TABLE>

REVENUE

Related party sales amounted to $66.8 million and $68.7 million for 2006 and
2005, respectively, which represent 100% of our sales for those periods.

ACCOUNTS RECEIVABLE

Related party accounts receivable amounted to $12.9 million and $2.2 million as
of December 31, 2006 and 2005, respectively, net of an allowance for doubtful
accounts of $86,776 and $206,916, respectively. Historically, Tianshi
Engineering remitted payment to us upon sales to third party customers. However,
in order to support Tianshi Engineering's marketing efforts in anticipation of
receiving a direct selling license in China, we have agreed to allow Tianshi
Engineering to retain those collections. Balances not remitted to us within 90
days are converted to other receivables - related parties. Beginning on January
1, 2007, the other receivables - related parties became interest bearing. The
stated interest rate is the interest rate for the same level of loan stipulated
by the People's Bank of China. The credit terms provide an interest-free credit
term of three months. Any amounts exceeding this term are transferred from
accounts receivable - related parties to other receivable - related parties.
Beginning January 1, 2007, the other receivables - related parties will then
become interest bearing once a loan contract is adopted. The interest rate is
the interest rate, on the date the loan commences, that is stipulated by the
People's Bank of China for a loan of the same level.

OTHER RECEIVABLES

We are owed $8.4 million and $3.3 million as of December 31, 2006 and 2005,
respectively, classified as other receivables from related parties. In addition
to other receivables which arise from accounts receivable older than three
months, other receivables are also generated from our various cash advances and
short-term loans and the allocation of administrative and operating costs and
various non-operational transactions incurred with related parties. On October
15, 2005 the Company made a loan of $2.4 million with no interest to Tianjin
Juchao Commercial and Trading Co., Ltd ("Juchao"), a Chinese company owned 40%
by Jinyuan Li and 60% by Baolan Li, his daughter. Subsequently, during the
second quarter of 2006, the owners began dissolving Juchao and the related $2.4
million other receivable obligation was transferred to and assumed by Tianshi
Group.

LOANS RECEIVABLE

Related party loans receivable were $25.6 million in 2006 and $0 in 2005. On
October 1, 2005, Biological loaned Tianshi Engineering $25.6 million. The loan
was non-interest bearing, matured on December 31, 2005 and was repaid upon
maturity. The purpose of the loans was to enable Tianshi Engineering to
strengthen its sales network in China. On January 1, 2006, this amount was
loaned to Tianshi Engineering again, with a maturity date of December 31, 2006.
On December 22, 2006, the loan was extended to June 30, 2007 and was converted
to an interest-bearing loan. The interest rate for the loan is the current
interest rate for the same level of loan stipulated by the People's Bank of
China.

                                       36
<PAGE>

NOTES PAYABLE

In 2004, Tianshi International entered a term loan agreement with Tianyuan
Capital Development Corp. Ltd. ("Tianyuan Capital"), pursuant to which Tianyuan
Capital agreed to lend $10.65 million in the aggregate to Tianshi International,
at an interest rate of 5% per year, with interest payable on June 30 and
December 31, commencing December 31, 2004. Tianshi International must repay the
loan in ten consecutive semi-annual installments of $1,065,000 commencing June
30, 2006 and ending June 30, 2011. Tianshi International used the loan proceeds
in Tiens Yihai. Mr. Jinyuan Li owns 100% of Tianyuan Capital. Interest of
$532,887 and two installment payments totaling $2,130,000 were made in 2006.

ADVANCES FROM CUSTOMERS

Advances from related party customers were $1.6 million and $2.1 million as of
December 31, 2006 and 2005, respectively. These advances represent prepayments
made to us to insure that overseas customers could obtain enough of our products
to meet their market demands.

OTHER PAYABLES

Other payables due to related parties were $0.5 million and $1.8 million as of
December 31, 2006 and 2005, respectively. These amounts arose from cash advances
from related parties such as management fees due to related parties and various
non-operational transactions.

TRANSACTIONS WITH TIANSHI GROUP

Since 2003, Biological has leased office space and manufacturing facilities from
Tianshi Group. The lease expires at the end of 2007 and requires annual rent at
1% of our total gross revenues. The rent was negotiated by the parties prior to
entering into the agreement, before we acquired Tianshi International, and we
believe that it is a reasonable rent for the facilities. The term of this
agreement is for five years commencing on January 1, 2003. In addition, we are
obligated to pay insurance, maintenance and other expenses related to the
premises. The total amount paid on this lease amounted to $662,082 for the 12
months ended December 31, 2006.

On November 10, 2006, Tiens International signed a supplemental agreement with
the Local Government in Shanghai relating to the Tiens Yihai project. Pursuant
to that agreement, Tiens International has agreed to loan the Local Government
$6.4 million. In addition, Tianshi Group has agreed to provide a guarantee on
behalf of the Local Government for an additional loan from Commercial Bank of
$6.4 million.

In February 2006, we transferred an amount of $440,366 from construction in
progress to other receivables-related parties. This pertained to the transfer of
certain assets to Tianshi Group that were no longer necessary for our
operations.

On November 10, 2006, Tiens International and the Local Government entered into
a supplemental agreement relating to the Tiens Yihai research and development
project. Pursuant to that agreement, the parties have agreed to the acquisition
by Tiens Yihai of a reduced 486 mu (80 acres) parcel of land. The remaining
1,114 mu (184 acres) may not be available for purchase in the future. Therefore,
the Local Government has agreed to refund to us $1.6 million of the original
$3.6 million deposit when we receive a construction license for the development.

In order to proceed with the purchase of the property by Tiens Yihai, Tianshi
International is required to provide a loan of $6.4 million to the Local
Government for relocation costs for people living on the property. The $6.4
million loan is to be funded in two installments:

o    The first installment of $3.2 million was paid on November 27, 2006.

o    The second installment of $3.2 million is to be paid after Tiens Yihai
     obtains a construction license to develop the property. The parties have
     agreed to allow Tianshi International to reduce this second installment by
     the amount of the $1.6 million refund due to it.

                                       37
<PAGE>

In return for the loan, Tiens Yihai will receive a tax credit in the amount of
$6.4 million and accrue interest on the loan at a rate equal to the rate
stipulated by the People's Bank of China for loans of the same size. In
addition, Tianshi Group has agreed to provide a guarantee on behalf of the Local
Government for an additional loan from a commercial bank for $6.4 million.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The Board has reappointed Moore Stephens Wurth Frazer and Torbet, LLP as
independent auditors to audit our financial statements for the fiscal year ended
December 31, 2006. Moore Stephens Wurth Frazer and Torbet, LLP has served as our
independent auditor since 2002.

PUBLIC ACCOUNTING FEES

                          2006         2005
                       ----------   ----------
Audit Fees             $  240,000   $  220,000
Audit Related Fees     $        0   $        0
Tax Fees               $   10,000   $   10,000
All Other Fees         $   11,000   $   35,000

Audit fees were for professional services rendered by Moore Stephens Wurth
Frazer and Torbet, LLP during the 2005 and 2006 fiscal years for the audit of
our annual financial statements and the review of the financial statements
included in our quarterly reports on Forms 10-Q and 10-QSB, and services that
are normally provided by Moore Stephens Wurth Frazer and Torbet, LLP in
connection with statutory and regulatory filings or engagements for those fiscal
years. Moore Stephens Wurth Frazer and Torbet, LLP did not bill any other fees
for services rendered to us during the fiscal years ended December 31, 2005 and
2006 for assurance and related services in connection with the audit or review
of our financial statements. Tax fees involved preparation of the consolidated
tax returns. All other fees consisted of professional advice on the Company's
compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

PRE-APPROVAL OF SERVICES

The Audit Committee has adopted pre-approval policies for all services,
including both audit and non-audit services, provided by the Company's
independent auditors. For audit services, each year the independent auditor
provides the Audit Committee with an engagement letter outlining the scope of
the audit services proposed to be performed during the year, which must be
formally accepted by the Audit Committee before the audit commences. The
independent auditor also submits an audit services fee proposal, which also must
be approved by the Committee before the audit commences. The audit, tax, and all
other fees and services described above were pre-approved for 2005 and 2006.

                                       38
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXHIBITS

EXHIBIT NO.   DESCRIPTION
-----------   ------------------------------------------------------------------
2.1           Agreement and Plan of Reorganization, as amended, dated as of
              August 22, 2003, by and among Strategika, Tianshi International
              and the Stockholders of Tianshi International. (1)

3.1           Certificate of Incorporation of MIA Acquisition Corp. (2)

3.2           By-laws of MIA Acquisition Corp. (2)

3.3           Certificate of Amendment to Certificate of Incorporation of MIA
              Acquisition Corp. changing the company's name to Strategika, Inc.
              (2)

4.1           Specimen Stock Certificate. (2)

10.1          Stock Purchase Agreement, dated February 11, 2002, by and between
              Rene Larrave and MIA Acquisition Corp. (2)

10.3          Product Purchase and Sales Agreement, dated June 25, 2003, by and
              between Tianjin Tianshi Biological Development Co., Ltd. And
              Tianjin Tianshi Biological Engineering Co. Ltd. (3)

10.4          Lease Agreement, dated June 30, 2002, by and between Tianshi Group
              Co. Ltd. and Tianjin Tianshi Biological Development Co., Ltd. (3)

10.5          Supplemental Lease Agreement, dated June 30, 2005 by and between
              Tianshi Group Co. Ltd. and Tianjin Tianshi Biological Development
              Co., Ltd. (3)

10.6*         Term Loan Agreement, dated January 1, 2006 by and between Tianjin
              Tianshi Biological Development Co., Ltd. and Tianjin Tianshi
              Biological Engineering Co., Ltd.

10.7*         Term Loan Agreement, dated December 22, 2006 by and between
              Tianjin Tianshi Biological Development Co., Ltd. and Tianjin
              Tianshi Biological Engineering Co., Ltd.

10.8*         Supplemental Agreement for the Construction and Development of
              Tiens Yihai Industrial Park Project, dated November 10, 2006 by
              and between Shanghai Zhu Jia Jiao Industrial Park Economic
              Development Ltd. Company, Tianshi International Holdings Group
              Ltd. Company and Zhu Jia Jiao Townhouse, Qing Pu District,
              Shanghai.

21.1*         Subsidiaries.

23.1*         Consent of Independent Accountants, Moore Stephens Wurth Frazer
              and Torbet, LLP.

31.1*         Certification of the Chief Executive Officer pursuant to Section
              302 of the Sarbanes-Oxley Act of 2002.

31.2*         Certification of the Chief Financial Officer and Chief Financial
              Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

* Filed herewith

(1)  Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB filed
     with the Securities and Exchange Commission on March 31, 2005.
(2)  Filed as an exhibit to the Registrant's Form 10-KSB filed with the
     Securities and Exchange Commission on March 7, 2002.
(3)  Filed as an exhibit to the Registrant's Form 10-K filed with the Securities
     and Exchange Commission on March 31, 2006.

                                       39
<PAGE>

                                   SIGNATURES

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

                                           TIENS BIOTECH GROUP (USA), INC.


Date:  March 29, 2007

                                           /s/ Jinyuan Li
                                           -------------------------------------
                                           Jinyuan Li
                                           Chief Executive Officer and President
                                           (Principal Executive Officer)

Date:  March 29, 2007

                                           /s/ Wenjun Jiao
                                           -------------------------------------
                                           Wenjun Jiao
                                           Chief Financial Officer
                                           (Principal Accounting Officer)

                                       40
<PAGE>

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

SIGNATURE                   TITLE                                 DATE
-------------------------   -----------------------------------   --------------
/s/ Jinyuan Li              Chairman of the Board,                March 29, 2007
-------------------------   Chief President
Jinyuan Li                  (Principal Executive Officer)

/s/ Wenjun Jiao             Chief Financial Officer               March 29, 2007
-------------------------   (Principal Accounting Officer)
Wenjun Jiao                 and Director

/s/ Yupeng Yan              Executive Vice President              March 29, 2007
-------------------------   And Director
Yupeng Yan

/s/ Gilbert Raker           Director                              March 29 2007
-------------------------
Gilbert Raker

/s/ Howard Balloch          Director                              March 29, 2007
-------------------------
Howard Balloch

/s/ Socorro Quintero        Director                              March 29, 2007
-------------------------
Socorro Quintero

                                       41
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Tiens Biotech
Group (USA), Inc. and Subsidiaries as of December 31, 2006 and 2005, and the
related consolidated statements of income and other comprehensive income, and
equity, and cash flows for each of the three years in the period ended December
31, 2006. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tiens Biotech Group
(USA), Inc. and Subsidiaries as of December 31, 2006 and 2005, and the results
of their operations and their cash flows for each of the years in the three year
period ended December 31, 2006, in conformity with accounting principles
generally accepted in the United States of America.


/S/ Moore Stephens Wurth Frazer and Torbet, LLP

Walnut, California


March 19, 2007

                                       F-1
<PAGE>

                  TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEETS
                          AS OF DECEMBER 31, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                          2006            2005
                                                                     -------------   -------------
<S>                                                                  <C>             <C>
                                     ASSETS
                                     ------
CURRENT ASSETS:
    Cash                                                             $  54,270,065   $  77,545,991
    Accounts receivable, trade - related parties, net of
      allowance for doubtful accounts of $86,776 and $206,916
      as of December 31, 2006 and 2005, respectively                    12,926,670       2,165,958
    Accounts receivable, trade - third parties                              18,135               -
    Inventories                                                          6,845,108       7,516,352
    Other receivables                                                      349,905         234,486
    Other receivables - related parties                                  8,397,227       3,281,081
    Employee advances                                                      111,121         145,071
    Prepaid expense                                                      2,135,917       1,698,090
                                                                     -------------   -------------
      Total current assets                                              85,054,148      92,587,029
                                                                     -------------   -------------
PLANT AND EQUIPMENT, net                                                30,511,319      24,877,688
                                                                     -------------   -------------
OTHER ASSETS:
    Intangible assets, net                                                 510,183         476,637
    Long-term prepaid expenses                                           7,031,348       3,682,800
    Loans receivable - related party                                    25,640,000               -
                                                                     -------------   -------------
      Total other assets                                                33,181,531       4,159,437
                                                                     -------------   -------------
        Total assets                                                 $ 148,746,998   $ 121,624,154
                                                                     =============   =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES:
    Accounts payable                                                 $   4,123,105   $   2,698,813
    Advances from customers - related parties                            1,570,120       2,077,130
    Wages and benefits payable                                             992,068       1,045,052
    Other taxes payable                                                    969,760       1,413,054
    Other payables                                                         500,213         339,390
    Other payables - related parties                                       522,105       1,816,534
    Dividend payable to minority interest                                  238,311               -
    Current portion of long term debt                                    2,130,000       2,130,000
                                                                     -------------   -------------
      Total current liabilities                                         11,045,682      11,519,973

LONG TERM DEBT, net of current portion                                   6,397,742       8,527,742
                                                                     -------------   -------------
      Total liabilities                                                 17,443,424      20,047,715
                                                                     -------------   -------------
MINORITY INTEREST                                                       11,883,323      11,929,040
                                                                     -------------   -------------

SHAREHOLDERS' EQUITY:
    Common stock, $0.001 par value, 260,000,000 shares authorized,
      71,333,586 issued and outstanding, respectively                       71,334          71,334
    Paid-in-capital                                                      8,842,009       8,842,009
    Statutory reserves                                                   9,420,783       9,420,783
    Retained earnings                                                   95,371,137      69,079,060
    Accumulated other comprehensive income                               5,714,988       2,234,213
                                                                     -------------   -------------
      Total shareholders' equity                                       119,420,251      89,647,399
                                                                     -------------   -------------
        Total liabilities and shareholders' equity                   $ 148,746,998   $ 121,624,154
                                                                     =============   =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-2
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004

<TABLE>
<CAPTION>
                                                     2006            2005            2004
                                                -------------   -------------   -------------
<S>                                             <C>             <C>             <C>
REVENUE                                         $  66,790,466   $  68,688,669   $  58,910,532

COST OF SALES                                      18,082,441      17,451,605      17,483,739
                                                -------------   -------------   -------------
GROSS PROFIT                                       48,708,025      51,237,064      41,426,793

SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES      12,789,810      13,413,875       7,363,248
                                                -------------   -------------   -------------
INCOME FROM OPERATIONS                             35,918,215      37,823,189      34,063,545

OTHER (EXPENSE) INCOME, net                           161,091        (639,137)        388,266
                                                -------------   -------------   -------------
INCOME BEFORE PROVISION FOR INCOME TAXES
   AND MINORITY INTEREST                           36,079,306      37,184,052      34,451,811

PROVISION FOR INCOME TAXES                          2,823,899       2,984,302               -
                                                -------------   -------------   -------------
INCOME BEFORE MINORITY INTEREST                    33,255,407      34,199,750      34,451,811

MINORITY INTEREST                                   6,963,330       7,321,630       7,013,515
                                                -------------   -------------   -------------
NET INCOME                                         26,292,077      26,878,120      27,438,296

OTHER COMPREHENSIVE INCOME (LOSS):
    Foreign currency translation adjustment         3,480,775       2,246,380          (8,239)
                                                -------------   -------------   -------------
COMPREHENSIVE INCOME                            $  29,772,852   $  29,124,500   $  27,430,057
                                                =============   =============   =============
EARNINGS PER SHARE, BASIC AND DILUTED           $        0.37   $        0.38   $        0.38
                                                =============   =============   =============
WEIGHTED AVERAGE NUMBER OF SHARES                  71,333,586      71,333,586      71,801,819
                                                =============   =============   =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-3

<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

<TABLE>
<CAPTION>
                                           Number        Common      Paid-in       Statutory      Retained
                                         of shares       stock       capital       reserves       earnings
                                        ------------    --------   ------------   -----------   ------------
<S>                                       <C>           <C>        <C>            <C>           <C>
BALANCE, January 1, 2004                  71,998,586    $ 71,999   $  8,841,344   $ 3,730,137   $ 20,453,290
    Cancellation of common stock            (665,000)       (665)           665
    Receipt of stock receivable
    Foreign currency translation loss
    Net income                                                                                    27,438,296
    Adjustment to statutory reserve                                                 5,690,646     (5,690,646)
                                        ------------    --------   ------------   -----------   ------------
BALANCE, December 31, 2004                71,333,586      71,334      8,842,009     9,420,783     42,200,940
    Net Income                                                                                    26,878,120
    Foreign currency translation gain
                                        ------------    --------   ------------   -----------   ------------
BALANCE, December 31, 2005                71,333,586      71,334      8,842,009     9,420,783     69,079,060
    Net Income                                                                                    26,292,077
    Foreign currency translation gain
                                        ------------    --------   ------------   -----------   ------------
BALANCE, December 31, 2006                71,333,586    $ 71,334   $  8,842,009   $ 9,420,783   $ 95,371,137
                                        ============    ========   ============   ===========   ============

<CAPTION>
                                                      Accumulated
                                                         other
                                          Stock      comprehensive
                                        receivable   income (loss)       Totals
                                        ----------   -------------   -------------
<S>                                     <C>          <C>             <C>
BALANCE, January 1, 2004                $   (6,650)  $      (3,928)  $  33,086,192
    Cancellation of common stock
    Receipt of stock receivable              6,650                           6,650
    Foreign currency translation loss                       (8,239)         (8,239)
    Net income                                                          27,438,296
    Adjustment to statutory reserve
                                        ----------   -------------   -------------
BALANCE, December 31, 2004                       -         (12,167)     60,522,899
    Net Income                                                          26,878,120
    Foreign currency translation gain                    2,246,380       2,246,380
                                        ----------   -------------   -------------
BALANCE, December 31, 2005                       -       2,234,213      89,647,399
    Net Income                                                          26,292,077
    Foreign currency translation gain                    3,480,775       3,480,775
                                        ----------   -------------   -------------
BALANCE, December 31, 2006              $        -   $   5,714,988   $ 119,420,251
                                        ==========   =============   =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-4

<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                   2006            2005            2004
                                                              -------------   -------------   -------------
<S>                                                           <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                $  26,292,077   $  26,878,120   $  27,438,296
    Adjustments to reconcile net income to cash
      provided by operating activities:
       Minority interest                                          6,963,330       7,321,630       7,013,515
       Depreciation                                               2,509,261       1,701,415       1,303,433
       Amortization                                                 103,694         134,070          51,718
       Loss on sale of assets                                         2,550         289,632         124,536
       Bad debts                                                   (123,302)        173,169          30,442
       Inventory write off                                           59,832         154,525               -
        (Increase) decrease in assets:
       Accounts receivable, trade - related parties             (16,542,297)      3,810,415      (6,079,930)
       Accounts receivable, trade - third parties                   (17,763)              -               -
       Other receivables                                           (125,232)        303,201        (389,216)
       Other receivables - related parties                       (5,667,880)      2,096,269      11,773,082
       Inventories                                                  847,005      (2,949,054)       (563,202)
       Employee advances                                             38,067         (67,007)        746,324
       Prepaid expense                                             (394,419)     (1,081,102)        415,194
      Increase (decrease) in liabilities:
       Accounts payable                                           1,305,537         850,852        (740,810)
       Accounts payable - related parties                                          (211,274)       (549,371)
       Advances from customers - related parties                   (565,520)      1,366,951      (4,468,312)
       Wages and benefits payable                                   (93,942)        862,872         139,923
       Other taxes payable                                         (481,080)        763,249         416,390
       Other payables                                               153,890          70,110         236,218
       Other payables - related parties                          (1,324,779)        837,554        (367,014)
                                                              -------------   -------------   -------------
         Net cash provided by operating activities               12,939,029      43,305,597      36,531,216
                                                              -------------   -------------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Loans to related party                                      (24,992,000)              -               -
    Loan to Chinese Government                                   (3,178,500)              -               -
    Acquisition of intangibles                                      (42,273)       (113,133)       (158,153)
    Purchase of land use right                                            -               -      (3,593,700)
    Proceeds from sales of equipment and automobiles                 76,596          28,581         713,036
    Purchase of equipment and automobiles                        (7,769,394)     (6,100,936)     (4,268,097)
                                                              -------------   -------------   -------------
         Net cash used in investing activities                  (35,905,571)     (6,185,488)     (7,306,914)
                                                              -------------   -------------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments, net of borrowings on short term notes payable               -               -      (5,324,000)
    Payments on long term debt                                   (2,130,000)       (156,984)       (259,513)
    Payments to minority interest shareholder                             -         (58,136)     (7,778,113)
    Proceeds from long term debt                                          -               -      10,657,742
    Proceeds of stock receivable                                          -               -           6,650
                                                              -------------   -------------   -------------
         Net cash used in financing activities                   (2,130,000)       (215,120)     (2,697,234)
                                                              -------------   -------------   -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                           1,820,616       1,397,130          (8,239)
                                                              -------------   -------------   -------------
(DECREASE) INCREASE IN CASH                                     (23,275,926)     38,302,119      26,518,829

CASH, beginning of year                                          77,545,991      39,243,872      12,725,043
                                                              -------------   -------------   -------------
CASH, end of year                                             $  54,270,065   $  77,545,991   $  39,243,872
                                                              =============   =============   =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-5
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

NOTE 1 - BACKGROUND

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

Pursuant to an Agreement and Plan of Reorganization, dated August 22, 2003 (the
"Agreement"), the Company, Tianshi International Group Limited ("Tianshi
International"), and Jinyuan Li, Wenjun Jiao and Yupeng Yan, all Chinese
Nationals who were stockholders of Tianshi International (the "Tianshi
Stockholders"), on September 9, 2003, the Company received from the Tianshi
Stockholders all of the issued and outstanding common stock of Tianshi
International in exchange for the issuance by the Company of 68,495,000 shares
of its common stock to the Tianshi Stockholders, representing 95% of the issued
and outstanding common stock of the Company at such time, after giving effect to
the issuance.

The purchase of Tianshi International and the issuance of the Company's common
stock in connection with the purchase have been accounted for as a reverse
acquisition presented as a recapitalization, except no goodwill or other
intangible assets have been recorded. For accounting purposes, the original
Tianshi International is considered the acquirer in the reverse acquisition. The
historical financial statements are those of the original Tianshi International.

Tianshi International was incorporated March 24, 2003, in the territory of the
British Virgin Islands. On June 18, 2003, Tianshi International acquired 80% of
Tianjin Tianshi Biological Development Co., Ltd ("Biological") from Tianshi Hong
Kong International Development Co., Ltd. ("Tianshi Hong Kong"), which is 100%
owned by the Company's Chairman, Chief Executive Officer and President, Jinyuan
Li. Biological is a Chinese-foreign equity joint venture company established
under the laws of the People's Republic of China (the "PRC" or "China") on March
27, 1998. Biological is subject to the Law on Sino Foreign Equity Joint
Ventures, its implementation regulations and other related rules and
regulations. Biological is an independent legal entity having the legal
structure of a limited liability company, similar to a regular corporation with
limited liability organized under state laws in the United States of America.
The Articles of Association of Biological provides for a 50-year term with
registered capital of $10,000,000. As an approved Chinese-foreign equity joint
venture, Biological receives special income tax incentive treatment from both
the local (Wuqing County) and central governments in China.

The original partners in this joint venture were Tianshi Hong Kong, incorporated
in Hong Kong which owned 80% of the joint venture, and Tianjin Tianshi
Biological Engineering Co., Ltd ("Tianshi Engineering"), which owned the
remaining 20% of Biological.

Tianshi Hong Kong is owned 100% by Jinyuan Li. Tianshi Engineering is 49% owned
by Ms. Baolan Li and 51% by Tianjin Tianshi Group Co., Ltd. ("Tianshi Group").
In June 2003, Tianshi Engineering transferred its 20% interest in Biological for
no consideration to Tianjin Tianshi Pharmaceuticals Co., Ltd ("Tianshi
Pharmaceuticals") and Tianshi International acquired 80% of Biological from
Tianshi Hong Kong for no consideration. This transfer was made for no
consideration, since Jinyuan Li is president and sole shareholder of both
companies.

                                      F-6
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

As result of the above transactions, Tianshi International is now a wholly owned
subsidiary of the Company and Biological remains an 80% owned subsidiary of
Tianshi International. The summary of Tiens' organization is described as
follows:

As of December 31, 2006, Tiens is owned 4.91% by public stockholders, 2.8% by
officers and 92.29% by Mr. Jinyuan Li. Tiens owns 100% of Tianshi International.
Tianshi International owns 80% of Biological.

Tianshi Group is owned 90% by Mr. Jinyuan Li and 10% by his daughter, Ms. Baolan
Li. Tianshi Group owns 87.66% of Tianshi Pharmaceuticals and 51% of Tianshi
Engineering. Tianshi Pharmaceuticals owns 20% of Biological.

Ms. Baolan Li owns 49% of Tianshi Engineering and 7.29% of Tianshi
Pharmaceuticals. Tianjin Feishi Transportation Co., Ltd. owns 5.05% of Tianshi
Pharmaceuticals.

On April 20, 2004, Tianshi International entered a joint venture contract (the
"Joint Venture Project") with Tianshi Pharmaceuticals to establish Tiens Yihai
Co. Ltd. ("Tiens Yihai"). Tiens Yihai is located in Shanghai, PRC, and is in the
business of research and development, production and marketing of healthcare,
home care and personal care products. Tiens Yihai is a foreign investment joint
venture which is incorporated under the laws of PRC. Tiens Yihai is classified
as a Foreign Investment Enterprise ("FIE") in the PRC and is subject to the FIE
laws of the PRC. Tiens Yihai is a Chinese registered limited liability company
with a legal structure similar to a regular corporation and a limited liability
company organized under state laws in the United States of America. The Articles
of Association provide for a 50-year term beginning on May 27, 2004 with
registered capital of $200,000,000. Tianshi International contributes 99.4% of
the registered capital and Tianshi Pharmaceuticals contributes the remained
0.6%.

The Company through its subsidiaries is primarily engaged in the manufacturing
of nutritional supplement products, including wellness products and dietary
supplement products, and personal care products. In the PRC, the Company sells
its products to Tianshi Engineering. Tianshi Engineering, in turn, sells the
products to end-users through its chain stores and Chinese affiliated companies.
Outside the PRC, the Company sells its products to an extensive direct sales
force of overseas affiliates and independent distributors who use the products
themselves and/or resell them to other distributors or consumers. The Company
sells to affiliated companies located in 63 countries.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
---------------------

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

                                      F-7
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

THE REPORTING ENTITY
--------------------

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

<TABLE>
<CAPTION>
                    Subsidiary                                                   % Ownership
--------------------------------------------------   -------------------------   ------------
<S>                                                  <C>                                <C>
Tianshi International Holdings Group, Ltd            British Virgin Islands             100.0%
Tianjin Tianshi Biological Development Co., Ltd      P.R.C.                              80.0%
Tiens Yihai Co., Ltd.                                P.R.C.                              99.4%
</TABLE>

PRINCIPLES OF CONSOLIDATION
---------------------------

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

USE OF ESTIMATES
----------------

The preparation of financial statements in conformity with U.S.GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the combined financial statements and accompanying notes. Management believes
that the estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates.

FOREIGN CURRENCY TRANSLATION
----------------------------

The reporting currency of the Company is the US dollar. Biological's and Tiens
Yihai's financial records are maintained and the statutory financial statements
are stated in its local currency, Renminbi (RMB), as their functional currency.
Results of operations and cash flow are translated at average exchange rates
during the period, and assets and liabilities are translated at the unified
exchange rate as quoted by the People's Bank of China at the end of each
reporting period.

This quotation of the exchange rates does not imply free convertibility of RMB
to other foreign currencies. All foreign exchange transactions continue to take
place either through the People's Bank of China or other banks authorized to buy
and sell foreign currencies at the exchange rate quoted by the People's Bank of
China. The rate of exchange quoted by the People's Bank of China on December 31,
2006 was US$1.00 = RMB7.8003. The weighted average translation rate of US$1.00 =
RMB7.9637 was applied to income statement accounts.

Approval of foreign currency payments by the Bank of China or other institutions
requires submitting a payment application form together with invoices, shipping
documents and signed contracts. Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than
the functional currency are included in the results of operations as incurred.
These amounts are not material to the consolidated financial statements.

                                      F-8
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------

The Company's financial instruments consist primarily of cash, trade receivable,
trade payables, advances, other receivables, and debt instruments. The
management believes that the carrying values of these financial instruments
approximate their fair values because of their short-term nature. Long term debt
is priced at current interest rates, and thus approximates fair values.

CASH AND CASH EQUIVALENTS
-------------------------

Cash includes cash on hand and demand deposits in accounts maintained with banks
of which no deposits are covered by insurance. The Company has not experienced
any losses in such accounts and believes it is not exposed to any significant
risks on its cash in bank accounts.

ALLOWANCES FOR DOUBTFUL ACCOUNTS
--------------------------------

The Company's trade accounts receivables are mainly due from related companies.
Management reviews its accounts receivable on a regular basis to determine if
the bad debt allowance is adequate at each year-end paying particular attention
to the age of receivable outstanding. At December 31, 2006 and 2005, receivables
outstanding more than 180 days totaled $31,586 and $4,694,584, respectively. The
Company did not incur any losses on receivables for the periods reported.

The following table represents the changes of allowance for doubtful accounts:

<TABLE>
<CAPTION>
                                      Balance at     Charged to                    Balance at
                                      Beginning      Costs and                       End of
                                      of Period       Expences       Recovery        Period
                                     ------------   ------------   ------------   ------------
<S>                                  <C>            <C>            <C>            <C>
Year ended December 31, 2006
Reserves and allowances deducted
 from asset accounts:
Allowance for doubtful accounts      $    206,916   $     86,776   $    206,916   $     86,776

Year ended December 31, 2005
Reserves and allowances deducted
 from asset accounts:
Allowance for doubtful accounts      $     30,442   $    176,474   $          -   $    206,916

Year ended December 31, 2004
Reserves and allowances deducted
 from asset accounts:
Allowance for doubtful accounts      $          -   $     30,442   $          -   $     30,442
</TABLE>

INVENTORIES
-----------

Inventories are stated at the lower of cost or market using the first-in,
first-out basis. The Company reviews its inventory annually for possible
obsolete goods or to determine if any reserves are necessary for potential
obsolescence.

PREPAID EXPENSE
---------------

Prepaid expense consists of advances to suppliers and short-term prepaid
expenses. The Company reviews its advances to suppliers annually for determining
whether provisions should be accounted. The amount included in Prepaid Expense
is the net amount of any provisions.

LOANS RECEIVABLE - RELATED PARTY
--------------------------------

The loans receivable - related party represents a loan of $25,640,000 that has
been made to Tianshi Engineering (see Note 4).

PLANT AND EQUIPMENT, NET
------------------------

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

                                      F-9
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

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

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

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

Long-term assets of the Company are reviewed annually as to whether their
carrying value has become impaired. The Company considers assets to be impaired
if the carrying value exceeds the future projected cash flows from related
operations. The Company also re-evaluates the periods of depreciation to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. As of December 31, 2006, the Company expects these assets to be
fully recoverable.

OTHER ASSETS
------------

All the land located in the PRC is owned by the government and cannot be sold to
any individual or company. However, the government grants the user a "land use
right" to use the land. The Company acquired two land use rights for fifty years
from the PRC on December 1, 1999 and October 4, 2004 for $635,795 in total. The
costs of the rights are being amortized over ten years, using the straight-line
method. Other intangible assets include patents and trademarks and are amortized
over the estimated useful life ranging from five to ten years.

A portion of long-term prepaid expense represents a deposit made in October 2004
with a local government agency in the amount of $3.59 million to acquire the
land use right for land located in Shanghai, China. The land use right deposit
is in connection with Tiens Yihai Industrial Park Project ("Tiens Yihai
Project") described in Note 10. The land use right is for a term of 50 years and
as of December 31, 2006, the Company has not legally acquired the right from the
government, but the Company is actively pursuing and working with the government
to complete the necessary procedures to obtain final approval on the land use
right.

On November 10, 2006, the Company signed a Supplemental Agreement for the
Construction and Development of "Tiens Yihai Industrial Park Project" (the
"Supplemental Agreement") with the same local government agency, agreeing to
provide a loan of $6,357,000 to the local government agency for Tiens Yihai
Project (see Note 10). Half of the loan, $3,178,500 was funded on November 27,
2006. Since this loan was related to the acquisition of land use right, it was
also included in Long-term prepaid expense.

                                      F-10
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

MINORITY INTEREST
-----------------

Minority interest represents the outside shareholder's 20% ownership of
Biological and 0.6% ownership of Tiens Yihai. The net income is net of minority
interest.

REVENUE RECOGNITION
-------------------

The Company recognizes revenue from domestic sales by distributors in China, net
of sales commissions and taxes only when the related Chinese distributor
recognizes sales of the Company's products to unaffiliated third parties. The
Company recognizes revenue from international sales (non-Chinese) to both
affiliated and unaffiliated third parties, net of commissions and taxes as goods
are shipped and clear review by the international customs department.

The Company is generally not contractually obligated to accept returns. However,
on a case by case negotiated basis, the Company permits customers to return
their products. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 48, "Revenue Recognition when the Right of Return Exists", revenue
is recorded net of an allowance for estimated returns. Such reserves are based
upon management's evaluation of historical experience and estimated costs. The
amount of the reserves ultimately required could differ materially in the near
term from amounts included in the accompanying consolidated financial
statements.

RESEARCH AND DEVELOPMENT
------------------------

Research and development expenses include salaries, supplies, and overhead such
as depreciation, utilities and other costs. These costs are expensed as incurred
in accordance with SFAS No. 2, "Accounting for Research and Development Costs."
The Company expensed research and development cost of $1 million, $0.6 million
and $0.2 million in 2006, 2005 and 2004, respectively. These costs are included
in selling, general and administrative expenses in the accompanying statements.

INCOME TAXES
------------

The Company has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No.
109 requires the recognition of deferred income tax liabilities and assets for
the expected future tax consequences of temporary differences between income tax
basis and financial reporting basis of assets and liabilities. Provision for
income taxes consists of taxes currently due plus deferred taxes. There are no
deferred tax amounts at December 31, 2006 and 2005.

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

                                      F-11
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

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

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

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

EARNINGS PER SHARE
------------------

The Company has adopted SFAS No. 128, "Earnings per Share". SFAS No. 128
requires the presentation of earnings per share ( "EPS" ) as Basic EPS and
Diluted EPS. Basic EPS excludes dilution and is computed by dividing net income
(loss) attributable to common stockholders by the weighted average number of
common shares outstanding for the period. There are no differences between Basic
and Diluted EPS for the periods ended December 31, 2006, 2005 and 2004.

OTHER COMPREHENSIVE INCOME (LOSS)
---------------------------------

Other comprehensive income (loss) represents foreign currency translation
adjustment for the year. The amounts shown in the Consolidated Statements of
Income and Other Comprehensive Income and Consolidated Statements of Equity do
not include other comprehensive income attributed to minority interest.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------

In February 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 155, "Accounting for Certain Hybrid Financial Instruments", which amends
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS No. 155 provides guidance to simplify the
accounting for certain hybrid instruments by permitting fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative, as
well as clarifies that beneficial interests in securitized financial assets are
subject to SFAS No. 133. In addition, SFAS No. 155 eliminates a restriction on
the passive derivative instruments that a qualifying special-purpose entity may
hold under SFAS No. 140. SFAS No. 155 is effective for all financial instruments
acquired, issued or subject to a new basis occurring after the beginning of an
entity's first fiscal year that begins after September 15, 2006. We do not
expect the adoption of SFAS 155 to have a material impact on the consolidated
financial statements.

                                      F-12
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets", which amends SFAS No. 140. SFAS No. 156 specifically provides
guidance addressing the recognition and measurement of separately recognized
servicing assets and liabilities, common with mortgage securitization
activities, and provides an approach to simplify efforts to obtain hedge
accounting treatment. SFAS No. 156 is effective for all separately recognized
servicing assets and liabilities acquired or issued after the beginning of an
entity's fiscal year that begins after September 15, 2006, with early adoption
being permitted. We do not expect the adoption of SFAS 156 to have a material
impact on our consolidated results of operations and financial condition.

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The requirements of FIN 48 are
effective for our fiscal year beginning January 1, 2007. We do not expect the
adoption of fin 48 to have a material impact on our consolidated results of
operations and financial condition.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006. We do not expect the adoption of SAB 108 to have a material impact on our
consolidated results of operations and financial condition.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements" ("SFAS 157"), which provides enhanced
guidance for using fair value to measure assets and liabilities. This standard
also responds to investors' requests for expanded information about the extent
to which companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. The standard applies whenever other standards require (or permit)
assets or liabilities to be measured at fair value.

The standard does not expand the use of fair value in any new circumstances.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 12, 2007, and interim periods within those fiscal years. Early
adoption is permitted. We are currently evaluating whether the adoption of
SFAS157 will have a material effect on our consolidated results of operations
and financial condition.

                                      F-13
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, "Employer's Accounting for Defined Benefit Pension and Other
Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and
132(R)" ("SFAS 158"). SFAS 158 requires an employer to recognize the overfunded
or underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. The standard also
requires an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited exceptions. An
employer with publicly traded equity securities is required to initially
recognize the funded status of a defined benefit postretirement plan and to
provide the required disclosures as of the end of the fiscal year ending after
December 15, 2006. An employer without publicly traded equity securities is
required to recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after June 15, 2007. We do not expect the adoption of SFAS 158 to have a
material impact on our consolidated results of operations and financial
condition.

RECLASSIFICATION
----------------

Certain prior year amounts have been reclassified to conform to the current
presentation.

NOTE 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid for the year ended December 31, 2006 and 2005 amounted to
$2,731,755 and $2,302,275. No income taxes were paid for the year ended December
31, 2004 as the Company was not taxed during that year.

Interest paid amounted to $532,887, $515,692 and $173,078 for the years ended
December 31, 2006, 2005 and 2004, respectively.

In February 2006, the Company transferred construction in progress no longer
useful to the Company totaling $440,366 to Tianshi Group. This amount was
outstanding on December 31, 2006 and was included in Other Receivables - related
party of the Consolidated Balance Sheets as of December 31, 2006.

In April 2006, the board of Biological declared a dividend in the amount of
$7,546,745 to its minority shareholder (Tianshi Pharmaceuticals). The Company
used the dividend to offset the receivables from Tianshi Engineering in the
amount of $7,308,434 on June 22, 2006. The right of offset existed because:

     1.   Tianshi Engineering had determinable outstanding payables to the
          Company;

     2.   Tianshi Pharmaceuticals had determinable outstanding payables to
          Tianshi Engineering, its affiliate;

     3.   The Company had a determinable obligation to pay a dividend to Tianshi
          Pharmaceuticals;

     4.   The Company had the right to setoff the amount owed by Tianshi
          Engineering and the amount owed by the Company to Tianshi
          Pharmaceuticals;

     5.   Each of the Company, Tianshi Pharmaceuticals and Tianshi Engineering
          agreed to the offset; and

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

                                      F-14
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

The remaining balance of $238,311 is disclosed under dividend payable to
minority interest in the accompanying consolidated balance sheets.

NOTE 4 - LOAN RECEIVABLE - RELATED PARTIES

During the last quarter of 2005, Tianshi Engineering borrowed RMB 200,000,000
($25,640,000) from Biological. This amount was repaid to Biological by December
31, 2005. Then this amount was loaned to Tianshi Engineering again on January 1,
2006 with a due date of December 31, 2006. The loan was originally interest
free. The purpose of the loan is to help Tianshi Engineering to strengthen its
sales network in China. On December 22, 2006, the loan was extended to June 30,
2007 and was converted to an interest-bearing loan. The stated interest rate is
the current interest rate for the same level of loan stipulated by the People's
Bank of China. As of December 31, 2006, the interest rate was 6.30%

NOTE 5 - EMPLOYEE ADVANCES

Employee advances represents cash advances to various employees of the Company.
In the PRC, a majority of business transactions are completed in cash. These
cash advances represent monies advanced to certain employees to pay for various
expenses and purchases related to the Company's daily operations. Employee
advances amounted to $111,121 and $145,071 at December 31, 2006 and December 31,
2005, respectively.

NOTE 6 - INVENTORIES

Inventories consist of the following at December 31, 2006 and 2005,
respectively:

                                                         2006           2005
                                                     ------------   ------------
Raw materials                                        $  2,106,929   $  2,538,980
Packing materials                                       1,113,360        999,392
Miscellaneous supplies                                    377,819        302,510
Work in process                                           688,007        129,144
Processing materials                                      369,618        813,713
Finished goods                                          2,189,375      2,732,613
                                                     ------------   ------------
Total                                                $  6,845,108   $  7,516,352
                                                     ============   ============

The Company has written off obsolete goods that amounted to $59,832, $154,525
and $0 for the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET

Plant and equipment consists of the following at December 31, 2006 and 2005:

                                      F-15
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

                                                        2006           2005
                                                    ------------   ------------
Buildings and improvements                          $ 14,829,748   $ 13,907,626
Office facilities                                        323,753        283,503
Computer equipment and software                        1,622,731      1,441,159
Equipment                                              9,329,628      7,352,056
Vehicles                                               5,187,572      3,619,837
Construction in progress                               7,629,623      3,991,285
                                                    ------------   ------------
Total                                                 38,923,055     30,595,466
Less: accumulated depreciation                        (8,411,736)    (5,717,778)
                                                    ------------   ------------
Plant and equipment, net                            $ 30,511,319   $ 24,877,688
                                                    ============   ============

Depreciation expense for the years ended December 31, 2006, 2005 and 2004
amounted to $2,509,261, $1,701,415 and $1,303,433, respectively.

NOTE 8 - OTHER RECEIVABLE - RELATED PARTIES

Other receivable - related parties are generated by the Company making various
cash advances and short term loans, the allocation of various expenses to
related parties, and amounts transferred from accounts receivable.

The following table summarizes the other receivables balance from related
parties as of December 31:

                                                     December 31,   December 31,
                                                         2006          2005
                                                     ------------   ------------
Tianjin Juchao Commercial and Trading Co., Ltd       $          -   $  2,411,657
Tianjin Tianshi Biological Engineering Co., Ltd         5,592,772              -
Xiong Real Estate Development                               1,039        620,000
Tianjin Tianshi Technical School                           46,589              -
JinMao (Group) Holding                                    104,466        101,044
Shanghai Tianshi Jinquan Investment Co.                     2,129              -
Tianjin Tianshi Group Co., Ltd                          2,650,232        148,380
                                                     ------------   ------------
              Total                                  $  8,397,227   $  3,281,081
                                                     ============   ============

NOTE 9 - INTANGIBLE ASSETS

Amortization expense for the years ended December 31, 2006, 2005 and 2004
amounted to $103,694, $134,070 and $51,718, respectively, and intangible assets
consists of the following at December 31:

                                      F-16
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

                                                        2006          2005
                                                    ------------   ------------
Land use rights                                     $    673,627   $    635,795
Other intangible assets                                  267,815        150,965
Less accumulated amortization                           (431,259)      (310,123)
                                                    ------------   ------------
Intangible assets, net                              $    510,183   $    476,637
                                                    ============   ============

NOTE 10 - INVESTMENT IN TIENS YIHAI CO. LTD.
--------------------------------------------

On April 20, 2004, Tianshi International entered a Joint Venture Project with
Tianshi Pharmaceuticals to establish Tiens Yihai. On September 15, 2004, the
board of directors of Tianshi International ratified the Joint Venture Project.
The total amount to be invested in Tiens Yihai will amount to $400 million, of
which $200 million will be registered capital. Tianshi International will
contribute $198.8 million, representing approximately 99.4% of the registered
capital of Tiens Yihai, and Tianshi Pharmaceuticals will contribute $1.2 million
representing 0.6% of the registered capital of Tiens Yihai. Tianshi
International will secure additional financing for the remaining $200 million.

A total of 15%, or approximately $30,000,000, of the registered capital is
required to be contributed by the joint venture partners, within three months
after the business license has been issued. The remaining registered capital
amounts are required to be contributed by each joint venture partner by May 27,
2007. Tianshi International has made its required capital contribution in the
amount of $29,861,853.

In October 2004, the Company paid a 10% deposit totaling of $3.59 million to Zhu
Jia Jiao Industrial Park Economic Development Ltd (representative of the local
government, "Local Government") for acquiring the land use right of 1,600 mu
(263 acres) located in Shanghai. However, in 2005, the Chinese central
government issued its "Adjustment of Macro-Economic Policy". This policy
implemented a new system of investment and use of state-owned assets, including
land. Pursuant to this policy, local government organizations have been
adjusting and re-allotting projects, including investment, construction and
reconstruction of state-owned resources. As a result, projects and enterprises
that had been affected, including Tiens Yihai, which project is proposed to be
constructed on state-owned property, were awaiting further decisions by state
and local government.

On November 10, 2006, Tiens International and the Local Government entered into
the Supplemental Agreement. In order to proceed with the purchase of the
property by Tiens Yihai, Tianshi International is required to provide a loan of
RMB50,000,000 ($6,357,000) to the Local Government for relocation costs for
people living on the property. The RMB50,000,000 ($6,357,000) loan is to be
funded in two installments:

     o    The first installment of RMB25,000,000 ($3,178,500) was paid on
          November 27, 2006.
     o    The second installment of RMB25,000,000 ($3,178,500) is to be paid
          after Tiens Yihai obtains a construction engineering license to
          develop the property.

                                      F-17
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

There is currently no guarantee or written contract requiring the government to
transfer the property to Tiens Yihai. If Tiens Yihai is not able to acquire the
property, it is not clear whether the initial loan of RMB25,000,000 ($3,178,500)
will be refunded to Tianshi International.

In return for the loan of RMB50,000,000 ($6,357,000), Tiens Yihai will receive a
tax credit in the amount of RMB50,000,000 ($6,357,000) and accrue interest at a
rate equal to the interest rate stipulated by the People's Bank of China for a
loan of the same level. In addition, Tianshi Group, a related party, has agreed
to provide a guarantee on behalf of the Local Government for an additional loan
from a commercial bank of RMB50,000,000 ($6,357,000).

Presently, we are unable to forecast the direction, outcome and/or completion
date of the Yihai Project. As of December 31, 2006, Tiens Yihai was a
developmental stage company and had not yet conducted any operations.

Long-term prepaid expenses consists of:

                                                     December 31,   December 31,
                                                         2006           2005
                                                     ------------   ------------
Prepaid land use right                               $  3,807,540   $  3,682,800
Loan to Chinese government                              3,223,808              -
                                                     ------------   ------------
Total long term prepayment                           $  7,031,348   $  3,682,800
                                                     ============   ============

NOTE 11 - LONG TERM DEBT
------------------------

Note payable - related party
----------------------------

On September 10, 2004, Tianshi International signed a loan agreement with
Tianyuan Capital Development Corp. Ltd. ("Tianyuan Capital") to borrow $10.65
million to fund Tianshi International's contribution due to Tiens Yihai. Mr.
Jinyuan Li, the president and major shareholder of the Company, is a director of
Tiens Yihai and a director of Tianyuan Capital. Mr. Jinyuan Li owns 100% of
Tianyuan Capital. The principal of the loan will be paid in ten consecutive
semi-annual installments of $1,065,000 on the last day of June and December,
commencing June, 2006 and ending June 31, 2011. The first interest payment was
to be paid on December 31, 2004 at an annual interest rate of 5%. Interest of
$532,887 was paid for the year ended December 31, 2006, and two installment
payments had been made by the end of December, 2006. Total principal payments
for the next five years on all long-term debt are as follows:

                                                    December 31,   December 31,
                                                        2006           2005
                                                    ------------   ------------
Note payable to Tianyuan Capital
   Development Corp. Ltd., related party            $  8,527,742   $ 10,657,742
Less current portion of long term debt                (2,130,000)    (2,130,000)
                                                    ------------   ------------
Total                                               $  6,397,742   $  8,527,742
                                                    ============   ============

                                      F-18
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

           Year Ending
            December 31,            Amount
------------------------------   -------------
               2007              $   2,130,000
               2008                  2,130,000
               2009                  2,130,000
               2010                  2,130,000
               2011                      7,742

NOTE 12 - MINORITY INTEREST AND DISTRIBUTION
--------------------------------------------

The roll forward of Minority Interest in the Balance Sheet is shown below:

<TABLE>
<CAPTION>
                                                  Biological                             Yihai
                                                  Minority                              Minority
                              Biological           Owners                                Owners         Total Minority
                                 (USD)             (20%)            Yihai (USD)         (0.60%)            Interest
                            ---------------    ---------------    ---------------    ---------------    ---------------
<S>                         <C>                <C>                <C>                <C>                <C>
December 31, 2003           $    41,363,630    $     8,272,726    $             -    $             -    $     8,272,726
  Paid-in-capital                         -                  -         30,033,868            180,203            180,203
  Comprehensive income           35,067,574          7,013,515                  -                  -          7,013,515
  Dividend distribution         (24,646,935)        (4,929,387)                 -                  -         (4,929,387)
  Dividend distribution         (15,125,000)        (3,025,000)                 -                  -         (3,025,000)
                            ---------------    ---------------    ---------------    ---------------    ---------------
December 31, 2004                36,659,269          7,331,854         30,033,868            180,203          7,512,057
  Comprehensive income           36,633,220          7,326,644           (835,705)            (5,014)         7,321,630
  Dividend distribution         (14,523,235)        (2,904,647)                 -                  -         (2,904,647)
                            ---------------    ---------------    ---------------    ---------------    ---------------
December 31, 2005                58,769,254         11,753,851         29,198,163            175,189         11,929,040
  Comprehensive income           37,464,431          7,492,886          1,356,883              8,142          7,501,028
  Dividend distribution         (37,733,723)        (7,546,745)                 -                  -         (7,546,745)
                            ---------------    ---------------    ---------------    ---------------    ---------------
December 31, 2006           $    58,499,962    $    11,699,992    $    30,555,046    $       183,331    $    11,883,323
                            ===============    ===============    ===============    ===============    ===============
</TABLE>

Dividends declared are split pro rata between the shareholders according to
their ownership interest. The payment of the dividends may occur at different
times to the shareholders resulting in distributions which do not appear to be
reflective of the minority ownership percentages. In 2006 and 2005, minority
shareholders owned approximately 20% of the Company's subsidiaries. The table
below shows the allocation of dividends between Tianshi International and the
minority shareholder and dividends outstanding.

                                      F-19
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

<TABLE>
<CAPTION>
                                          TIANSHI             MINORITY
Date                                   INTERNATIONAL        SHAREHOLDER             Totals
---------------------------------   ------------------   ------------------   ------------------
<S>                                 <C>                  <C>                  <C>
Dividends outstanding,
 December 31, 2004 Balance          US$      9,743,635   US$              -   US$      9,743,635
Dividends declared                          11,618,588            2,904,647           14,523,235
Dividends paid                              (6,204,800)          (2,904,647)          (9,109,447)
Accumulated Other Comprehensive
 Income (loss)                                 728,420                    -              728,420
                                    ------------------   ------------------   ------------------
Dividends outstanding,
 December 31, 2005 Balance          US$     15,885,843                    -           15,885,843
Dividends declared                          30,186,978            7,546,745           37,733,723
Dividends paid                              (1,557,742)          (7,308,434)          (8,866,176)
Accumulated Other Comprehensive
 Income (loss)                               1,463,775                    -            1,463,775
                                    ------------------   ------------------   ------------------
Dividends outstanding,
 December 31, 2006 Balance          US$     45,978,854              238,311           46,217,165
                                    ==================   ==================   ==================
</TABLE>

NOTE 13 - INCOME TAXES
----------------------

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

The Company's subsidiaries, Biological and Tiens Yihai, are Sino-Foreign Joint
Ventures incorporated in the PRC. Pursuant to the income tax laws of the PRC
concerning Foreign Investment Enterprises and foreign Enterprises and various
local income tax laws (the "Income Tax Law"), Sino-foreign joint venture
enterprises generally are subject to income tax at an effective rate of 33% (30%
state income taxes plus 3% local income taxes) on income as reported in their
statutory financial statements unless the enterprise is located in
specially-designated regions or cities for which more favorable effective rates
apply.

Biological is located in a Special Economic Zone and is subject to the special
reduced income tax rate of 15%. Pursuant to the approval of the relevant PRC tax
authorities, Biological is fully exempt from PRC income taxes for two years
starting from the year profits are first made, followed by a 7.5% reduced tax
rate for the next three years.

Prior to the year ended December 31, 2002, Biological suffered operating losses.
Biological started generating taxable profits in the year ended December 31,
2003. Effective January 1, 2005, the two-year 100% exemption for income taxes
expired for Biological and it became subject to income tax at a reduced rate of
7.5%.

Tiens Yihai is located in a Special Industry Zone and is subject to the special
reduced income tax rate of 15%. Pursuant to the approval of the relevant local
Chinese tax authorities, Tiens Yihai is fully exempt from PRC income taxes for
two years starting from the first year profits are made, followed by a 7.5%
reduced tax rate for the next three years. In addition, in order to encourage
Tiens Yihai doing business in the Special Industry Zone, the local Chinese tax
authorities agreed to refund 50% of the total income tax after the five-year tax
break. As of December 31, 2006, Tiens Yihai is in the developmental stage of its
organization and did not have any operating income.

                                      F-20
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

Provision for income taxes for the years ending December, 2006, 2005 and 2004
were $2,823,899, $2,984,302 and $0, respectively.

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

                                                 2006               2005
                                           ---------------    ---------------
U.S. Statutory rate                                   34.0%              34.0%
Foreign income not recognized in USA                 (34.0)             (34.0)
China income taxes                                    33.0               33.0
China income taxes savings                           (25.5)             (25.5)
                                           ---------------    ---------------
Total provision for income taxes                       7.5%               7.5%
                                           ===============    ===============

The estimated tax savings due to the reduced tax rate for the years ending
December 31, 2006, 2005 and 2004 amounted to $9,601,257, $10,146,627 and
$11,369,098, respectively. The net effect on earnings per share if the income
tax had been applied would decrease earnings per share for the years ended
December 31, 2006, 2005 and 2004 by $0.11, $0.11 and $0.13, respectively

NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME
------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    Tianshi
                                             Biological             Yihai        International          Total
                                           ---------------    ---------------    ---------------   ---------------
<S>                                        <C>                <C>                <C>               <C>
Balance as of December 31, 2005            $     1,088,433    $       732,331    $       413,449   $     2,234,213
Increase during the year                         1,020,641            995,361          1,464,773         3,480,775
                                           ---------------    ---------------    ---------------   ---------------
Balance as of December 31, 2006            $     2,109,074    $     1,727,692    $     1,878,222   $     5,714,988
                                           ===============    ===============    ===============   ===============
</TABLE>

Accumulated Other Comprehensive Income incurred in Biological and Tiens Yihai
due to the balance sheets translation. Accumulated Other Comprehensive Income
incurred in Tianshi International due to the effect of foreign exchange rate on
dividend receivable from Biological. Since this income is not realized, it was
included in Accumulated other comprehensive income.

NOTE 15 - RETIREMENT PLAN
-------------------------

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

                                      F-21
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

Biological is required to make contributions to the state retirement plan at 20%
of the employees' monthly salary. Employees are required to contribute 8% of
their salary to the plan. Total pension expense incurred by the Company amounted
to $475,331, $434,363 and $89,593 for the years ended December 31, 2006, 2005
and 2004, respectively.

The Company also has an unemployment insurance plan for its employees. The plan
requires each employee to contribute 1% of salary to the plan. The Company
matches the contributions in an amount equal to two times the contribution of
each participant. The Company made contributions to the unemployment insurance
plan of $45,871, $41,860 and $9,677 for the years ended December 31, 2006, 2005
and 2004, respectively. All contributions are paid to a PRC insurance company,
which in turn, is responsible for the liability. On January 1, 2002, the Company
introduced a basic medical insurance plan for its employees. Pursuant to the new
medical insurance plan, the Company is required to pay an amount equal to 10% of
its employees' salary to a PRC insurance company, which amounted to $259,315,
$181,597 and $42,849 for the years ended December 31, 2006, 2005 and 2004,
respectively.

NOTE 16 - STATUTORY RESERVES
----------------------------

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

Statutory reserve fund
----------------------

The Company is required to transfer 10% of its net income, as determined in
accordance with the PRC accounting rules and regulations, to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company's registered
capital. As of December 31, 2005, the Company's statutory reserve fund had
reached 50% of the Company's registered capital, therefore, no statutory reserve
is required thereafter.

The transfer to this reserve must be made before distribution of any dividend to
shareholders. For the years ended December 31, 2006, 2005 and 2004, the Company
transferred $0, $0 and $2,845,324, respectively.

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

                                      F-22
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

Common welfare fund
-------------------

The Company is required to transfer 5% to 10% of its net income, as determined
in accordance with the PRC accounting rules and regulations, to the statutory
common welfare fund. This fund can only be utilized on capital items for the
collective benefit of the Company's employees, such as construction of
dormitories, cafeteria facilities, and other staff welfare facilities. This fund
is non-distributable other than upon liquidation. The transfer to this fund must
be made before distribution of any dividend to shareholders. For the years ended
December 31, 2006, 2005 and 2004, the directors authorized, subject to
shareholders' approval, the transfer of $0, $0 and $1,422,661, respectively.

Enterprise fund
---------------

The enterprise fund may be used to acquire fixed assets or to increase the
working capital to expend on production and operation of the business. No
minimum contribution is required. For the years ended December 31, 2006, 2005
and 2004, the board of directors authorized, subject to shareholders' approval,
the transfer of $0, $0 and $1,422,661, respectively.

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

NOTE 17 - RELATED PARTY TRANSACTIONS

Transactions with Tianshi Engineering
-------------------------------------

The Company sells products to Tianshi Engineering, a related party through
common ownership. The related party distributors in turn market and sell the
Company's products to independent distributors or end users of the products. The
related party distributors are solely responsible for all marketing and payments
of sales commissions to independent distributors.

Total sales to the related party amounted to $27,074,979, $38,181,090 and
$29,210,167 for the years ended December 31, 2006, 2005 and 2004. This
represents 100% of total sales in China for the years then ended. Historically,
Tianshi Engineering remitted payment to the Company upon sales to third party
customers. However, in order to support Tianshi Engineering's marketing efforts
in anticipation of receiving a direct selling license in China, the Company has
agreed to allow Tianshi Engineering to retain those collections. Balances not
remitted to the Company within 90 days are converted to other receivables -
related parties. Beginning on January 1, 2007, the other receivables - related
parties become interest bearing. The stated interest rate is the interest rate
for the same level of loan stipulated by the People's Bank of China. As of
December 31, 2006, the interest rate was 6.30%.

On October 1, 2005, Biological loaned Tianshi Engineering RMB 200,000,000
($25,640,000). The loan was non-interest bearing, matured on December 31, 2005
and was repaid upon maturity. The purpose of the loans was to enable Tianshi
Engineering to strengthen its sales network in China. On January 1, 2006, this
amount was loaned to Tianshi Engineering again, with a maturity date of December
31, 2006. In order to continue support of Tianshi Engineering's efforts in
China, on December 22, 2006, the loan was extended to June 30, 2007 and was
converted to an interest-bearing loan. The interest rate for the loan is the
current interest rate stipulated by the People's Bank of China for a loan of the
same amount. All receivables from Tianshi Engineering will be settled by cash
payment.

                                      F-23
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

As of December 31, 2006 and 2005, amounts due from Tianshi Engineering were as
follows:

<TABLE>
<CAPTION>
                                                     2006              2005
                                                ---------------   ---------------
<S>                                             <C>               <C>
Accounts receivable - related parties           $     7,827,372   $       204,275
Other receivable - related parties                    5,592,772                 -
Loan receivable - related parties                    25,640,000                 -
                                                ---------------   ---------------
Total receivables from Tianshi Engineering      $    39,060,144   $       204,275
                                                ===============   ===============
</TABLE>

Transactions with Tianshi Group
-------------------------------

On June 30, 2003, the Company entered into an office and facilities lease
agreement with Tianshi Group, a company owned 90% by Jinyuan Li and 10% by
Baolan Li. Under the terms of the 5 year agreement, the Company's annual rent is
equal to 1% of gross revenues. In addition, the Company is obligated to pay
insurance, maintenance and other expenses related to the premises. Rent expense
totaled $662,082, $667,990 and $595,494 for the years ended December 31, 2006,
2005 and 2004, respectively.

                                      F-24
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

On October 15, 2005 the Company made a loan of $2.4 million to Tianjin Juchao
Commercial and Trading Co., Ltd ("Juchao"), a Chinese company owned 40% by
Jinyuan Li and 60% by Baolan Li, his daughter, with no interest. Subsequently,
during the second quarter of 2006, the owners began dissolving Juchao and the
related $2.4 million other receivable obligation was transferred to and assumed
by Tianshi Group.

On November 10, 2006, Tiens International signed an agreement with Shanghai Zhu
Jia Jiao Industrial Park Economic Development Ltd (see note 10). Tianshi Group
has also agreed to provide a guarantee on behalf of the local government for a
loan from a commercial bank of RMB50,000,000.

In February 2006, the Company transferred an amount of $440,366 from
construction in progress to other receivables-related parties. This pertained to
the transfer of certain assets to Tianshi Group that were no longer necessary
for the Company's operations.

As of December 31, 2006 and 2005, amounts due from Tianshi Group were $2,650,232
and $148,380, respectively and were included in Other receivable - related
parties.

Transaction with international related party distributors
---------------------------------------------------------

The Company sells products to international distributors. The Company's CEO
Jinyuan Li, is one of the owners of these distributors. The distributors market
and sell the Company's products to independent distributors or end users of the
products. Total sales to these related parties international distributors were
$39,715,487, $30,507,579 and $29,700,365 for the years ended December 31, 2006,
2005 and 2004. Total accounts receivable as of December 31, 2006 and 2005 were
$5,099,298 and $1,961,683, respectively.

                                      F-25
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2006

NOTE 18 - ADDITIONAL PRODUCT SALES INFORMATION

The Company has a single operating segment. 99.9% of the Company's revenues were
generated from related parties. Summarized enterprise-wide financial information
concerning the Company's revenues based on geographic area and product groups is
shown in the following tables:

Revenue by Geographic Area:

Revenue                      2006             2005               2004
--------------------   ---------------   ---------------   ---------------
China                  $    27,074,979   $    38,181,090   $    29,210,167
International               39,715,487        30,507,579        29,700,365
                       ---------------   ---------------   ---------------
Total                  $    66,790,466   $    68,688,669   $    58,910,532
                       ===============   ===============   ===============

Revenue by Product Group:

<TABLE>
<CAPTION>
                   Revenue                       2006              2005               2004
----------------------------------------   ---------------    ---------------    ---------------
<S>                                        <C>                <C>                <C>
Wellness products                          $    58,845,597    $    58,884,556    $    53,103,810
Dietary supplement products                      5,255,277          4,360,795          2,543,765
Personal care products                           2,689,592          5,443,318          3,262,957
                                           ---------------    ---------------    ---------------
Total                                      $    66,790,466    $    68,688,669    $    58,910,532
                                           ===============    ===============    ===============
</TABLE>

                                      F-26