--------------------------------------------------------------------------------

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------
                               Amendment No. 1 to
                                   FORM 10-KSB

/X/  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended December 31, 2004

/ /  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 small business issuer in its charter)

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

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

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

                                       N/A
                            (Former Name and Address)

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

             Securities registered under 12(g) of the Exchange Act:
                         Common Stock, par value $0.001

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

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

Issuer's revenues for its most recent fiscal year: $  58,910,532  .
                                                    --------------

The aggregate market value of 3,503,586 the voting and non-voting  common equity
held by  non-affiliates of the Registrant as of March 29, 2005 was approximately
$  17,167,571.40,  based  upon the  closing  sale  price of $ 4.90 per  share as
reported by The Over the Counter Bulletin Board on such date.

There were 71,333,586 shares of the Company's common stock outstanding on August
10, 2005.

Transitional Small Business Disclosure Format (check one): YES / / NO /X/

DOCUMENTS INCORPORATED BY REFERENCE - None


<PAGE>

                                                 EXPLANATORY NOTE

     We are filing this Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 2004 to:

          o    Describe our series of Personal Care  Products  under the section
               entitled "Current Products" under Item 1;

          o    Disclose  those  countries  from  which we obtain  sales  revenue
               accounting  for more  than 10% of our  total  revenue  under  the
               section entitled "Business  Development  Strategy - Marketing and
               Distribution;

          o    Amend our disclosure under Item 8A; and

          o    Amend  footnote 1 to the  financial  statements  to disclose  the
               accounting   treatment   of  our   reorganization   with  Tianshi
               International effective as of September 9, 2003.

Except as specifically  referenced  herein,  this Annual Report on Form 10-KSB/A
does not reflect any event  occurring  subsequent to March 31, 2005,  the filing
date of the original report.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Business Overview

Tiens Biotech Group (USA),  Inc. (the "Company" or "Tiens USA"),  formerly known
as Strategika,  Inc. ("Strategika"),  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 in February 2002.

Tiens USA conducts its main business operations through its 80% owned subsidiary
Tianjin Tianshi Biological Development Co., Ltd. ("Biological"),  which is based
in Tianjin, Peoples Republic of China (PRC). Biological primarily engages in the
research,  development,  manufacturing,  and  marketing of nutrition  supplement
products,  including  wellness  products and dietary  supplement  products,  and
personal care products.  Tiens USA derives its revenues principally from product
sales  to  affiliated  companies  in China  and  outside  of  China.  Since  its
establishment, Biological has developed and produced seven major product series,
of which six are comprised of nutrition supplement products,  and the seventh is
comprised of personal care products. Biological develops its products at its own
product  research  and  development  center,   which  employs  highly  qualified
professionals  in the  fields  of  pharmacology,  biology,  chemistry  and  fine
chemistry.  Biological has obtained all required certificates and approvals from
government regulatory agencies to manufacture its products in China, including a
Certificate  of Good  Manufacturing  Practices  (GMP)  issued by the State  Drug
Administration,  a Sanitary  Certificate  for food  manufactured  in China ("Jin
(Wuqing) Wei Shi Zheng Zi" 2004,  No.0049) for food manufacturers in China and a
Sanitary  Certification for wellness products manufacturers ("Jin Wei Jian Zheng
Zi" 2004,  No.0006)  issued by the PRC Ministry of Health.  In addition,  all of
Biological's  products have been certified by appropriate  government regulatory
agencies, including the State Food and Drug Administration (SFDA) and the Bureau
of Technical Supervision, for manufacture and sale in China.

In China,  Biological  conducts the marketing and sales of its products  through
its  affiliated  company,  Tianjin  Tianshi  Biological  Engineering  Co.,  Ltd.
("Tianshi  Engineering"),  a company  incorporated in China. Tianshi Engineering
markets  and sells  Biological's  products  in China  through  its 23  branches,
representative offices and chain stores, and nine domestic affiliated companies.
Six of  the  nine  domestic  affiliated  companies  are  51%  owned  by  Tianshi
Engineering  and 49% by Li Baolan,  the daughter of Mr. Li Jinyuan,  Tiens USA's
Chief Executive Officer and President. The other 3 affiliate companies are owned
by Ms. Li Baolan and Mr. Li' s other immediate family members. Outside of China,
Biological  sells its  products  through an extensive  direct  sales  force,  or
multi-level  marketing  sales  force,  of overseas  affiliates  and  independent


                                       2
<PAGE>

distributors  who  use the  products  themselves  and/or  resell  them to  other
distributors  or consumers.  These  affiliates are located in  approximately  90
countries,  including the United States,  India,  Malaysia,  Indonesia,  Canada,
Peru,  Brazil,  Russia,  Kazakhstan,   Mongolia,  Finland,  Lithuania,  Britain,
Germany,  France,  Romania,  Ukraine,  Portugal,  Turkey, Italy, Nigeria, Ghana,
South Africa, Australia,  etc.. Our direct sales marketing program is subject to
governmental regulation in each of these countries.

In  April  2004,  Tianshi  International  Holdings  Group  Ltd.,  a  corporation
organized   under   the   laws  of  the   British   Virgin   Islands   ("Tianshi
International"),  entered into a joint  venture  contract  with Tianjin  Tianshi
Pharmaceuticals  Co., Ltd.  ("Tianshi  Pharmaceuticals"),  a Chinese  company in
which the majority  shareholder  is Tianjin  Tianshi Group Co.,  Ltd.  ("Tianshi
Group"),  a company  organized  under the PRC laws, to establish Tiens Yihai Co.
Ltd., a Chinese-Foreign  Equity Joint Venture ("Tiens Yihai").  On September 15,
2004, the Board of Directors of Tianshi International  ratified and approved the
Tiens Yihai Joint  Venture  Project.  Tianshi  International  is a  wholly-owned
subsidiary of Tiens USA, and Tianshi Group is owned 90% by Mr. Li and 10% by Mr.
Li's  daughter,   Ms.  Li  Baolan.   Tiens  Yihai  is  99.4%  owned  by  Tianshi
International and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai, located in
Shanghai,   P.R.C.,   was  established  to  conduct  research  and  development,
production,  and  marketing of nutrition  supplement  products,  home care,  and
personal care products. As of December 31, 2004, Tiens Yihai was a developmental
stage company and had not yet conducted any operations.

Both  Biological and Tianshi  Engineering  receive  administrative  support from
Tianshi  Group.  Biological  pays  Tianshi  Group 1% of its annual  sales income
(excluding  value added taxes  "VAT") for  administrative  services  (except for
services  provided  by the  officers  of  Tianshi  Group) and the use of Tianshi
Group's administrative building.

The following is an organization and equity ownership chart of Tiens USA and its
affiliates:





                                       3
<PAGE>

GRAPHIC OMITTED

The graphic omitted shows the  organizational  chart of Tiens USA, including the
percentage ownership. The following describes the chart:

Tiens USA is owned 4.91% by public stockholders,  2.8% by officers and 92.29% by
Mr.  Li  Jinyuan.  Tiens  USA  owns  100%  of  Tianshi  International.   Tianshi
Inernational owns 80% of Biological and 99.4% of Tiens Yihai.

Tianshi  Group is owned 90% by Mr. Li Jinyuan  and 10% by his  daughter,  Ms. Li
Baolan. Tianshi Group owns 87.66% of Tianshi  Pharmaceuticals and 51% of Tianshi
Engineering.  Tianshi  Pharmaceuticals  owns 20% of Biological and 0.6% of Tiens
Yihai.

Ms.  Li  Baolan   owns  49%  of  Tianshi   Engineering   and  7.29%  of  Tianshi
Pharmaceuticals.

Tianjin Feishi Transportation Co., Ltd. owns 5.05% of Tianshi Pharmaceuticals.


Corporate History
-----------------

In August 2003,  Strategika and Tianshi  International,  LI Jinyuan, JIAO Wenjun
and  YAN  Yupeng,  all  Chinese  Nationals  who  were  stockholders  of  Tianshi
International  (the  "Tianshi  Stockholders")  entered an Agreement  and Plan of
Reorganization (the "Agreement"),  which was effective on September 9, 2003 (the
"Effective  Date").  Pursuant to the  Agreement,  Strategika  received  from the
Tianshi  Stockholders all of the issued and outstanding  common stock of Tianshi
International,  in exchange for the issuance by Strategika of 68,495,000  shares
of its common stock to the Tianshi Stockholders,  representing 95% of the issued
and outstanding  common stock of Strategika,  giving effect to the issuance.  As
additional  consideration,  Rene  Larrave,  the sole  officer  and  director  of
Strategika prior to the reorganization, contributed all of his Strategika common
stock to Strategika without additional consideration.

Tianshi  International  was  incorporated on March 24, 2003, in the territory of
the British Virgin Islands. On June 18, 2003, Tianshi International acquired 80%
of  Biological.  Biological is a  Chinese-foreign  equity joint venture  company
established  under the laws of the PRC on March 27, 1997.  Biological is subject
to the Law on Sino Foreign Equity Joint  Ventures  ("Joint  Venture  Law"),  its
implementation  regulations  and other  related  rules and  regulations  ("Joint
Venture  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 International  Development
Co., Ltd. ("Tianshi Hong Kong") incorporated in Hong Kong which owned 80% of the
joint  venture,  and  Tianshi  Engineering,  which  owned the  remaining  20% of
Biological.  Tianshi Hong Kong is owned 100% by LI Jinyuan.  Tianshi Engineering
is 49% owned by Ms. Li Baolan and 51% by Tianshi  Group.  In June 2003,  Tianshi
Engineering  transferred its 20% interest in Biological for no  consideration to
Tianshi  Pharmaceuticals  and Tianshi  International  acquired 80% of Biological
from  Tianshi  Hong Kong for no  consideration.  This  transfer  was made for no
consideration,  since LI  Jinyuan  is  president  and sole  shareholder  of both
companies.

Business and Industry Overview
------------------------------

The wide variety of vitamins  necessary  for  maintaining  a human body's normal
functions  are  contained  in  many  types  of  natural  foods.  Because  of the
inter-relationship  between nutrition and health, we believe there is developing
worldwide demand for nutrition supplement products. Biological has developed its
products to capture this increasing, yet geographically  differentiated,  market
demand for  nutrition  supplement  products.  In China,  due to its recent rapid


                                       4
<PAGE>

economic  development,  Chinese consumers have become more aware of the risks of
dietary  imbalances  and the  importance of  maintaining  appropriate  levels of
vitamins  and  minerals.  Minerals  operate  with  vitamins  and other  nutrient
elements to maintain proper PH balances and stimulate nerves and muscle systems.
Biological  believes that its product series,  containing vitamins and minerals,
will have extensive potential in markets in both China and many other developing
countries worldwide.

After China's admission into the World Trade  Organization,  markets for Chinese
products will expand internationally. Due to this, we believe that there will be
more opportunities for our enterprises to enter into international markets. Some
major components of Biological's  products,  i.e. lecithin,  ginkgo extract, and
melatonin, are gradually being recognized by international markets as beneficial
food  supplements  for the human body.  According to Global  Information  Inc.'s
vertical market research  report,  market demand for vitamins,  herbal/botanical
products, sports nutrition,  meal supplements,  minerals, and specialty products
is expected to increase over the next 5 to 8 years.

CURRENT PRODUCTS
----------------

Since its  incorporation  in 1998,  Biological  has developed and produced seven
major product series, of which six consist of nutrition supplement products, and
the seventh consists of personal care products. Biological has produced 31 types
of nutrition supplement products.  Therein, 30 types were developed and produced
by the year ended  December 31,  2004,  and one type has been  developed  and is
going to be produced and put into markets in the future.  Each of our  nutrition
supplement  products  falls  within  one of our six major  nutrition  supplement
products series,  which includes the High-Calcium Series, the Immune Enhancement
Series,  the Nutrient  Supplement  Series, the Adjustment Series, the High-Fiber
Series, and the Heart and Brain Improvement Series.

Each of our  products has been issued a Product  Standard  Code by the Bureau of
Technical  Supervision,  and each of our 24 wellness products have 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.  Furthermore,  23 out of 31 of our products
have received Halal Approval by the end of 2004. Halal Approval is issued by the
Islamic  Association  of Shandong  Province  for food  products  not  containing
substances  banned  by the  Islamic  religion.  The  issuance  of this  Approval
certified  that our  manufacturing  processes  comply with the  requirements  of
Islamic dietary law.


                                       5
<PAGE>
<TABLE>
<CAPTION>

The table below illustrates all of our nutrition supplement products categorized
by functions:
---------------------------------------------------------------------------------------------------------------------------
Product Series          Products                  Main Ingredients                          Benefits
---------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                       <C>                                       <C>
ii                      Tianshi Nutrient          Zymolytic bone calcium powder,            Help to improve bone
ii                      Calcium Powder            oligosaccharide,                          density
ii                      * #                       de-fatted milk powder,                    ii
ii                      ii                        VA, VD, VC, iron                          ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Super             Zymolytic bone calcium powder,            Help to supplement
ii                      Calcium Powder            VA, VD, VC, taurine, zinc, iron           calcium
ii                      for Children * #          ii                                        ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Super             Zymolytic bone calcium powder,            Help to regulate blood
ii                      Calcium Powder            oligosaccharide, pumpkin powder           sugar
High-Calcium Series     with Metabolic            VA, VD, VB1,VB2                           ii
ii                      Factors * #               ii                                        ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Chewable          Zymolytic bone calcium powder,            Help to replenish
ii                       Calcium Tablets *        coca powder, mannite, nondairy            calcium
ii                      ii                        creamer, dextrin, magnesium stearate,     ii
ii                      ii                        aspartame, cocoa essence, compound        ii
ii                      ii                        vitamin (A, D2 and C)                     ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Gourmet           Monosodium glutamate, 1+G                 Help to supplement
ii                      Powder with Super         Zymolytic bone calcium powder,            calcium
ii                      Calcium **                ii                                        ii
ii                      ii                        ii                                        ii
                        ---------------------------------------------------------------------------------------------------

ii                      Tianshi Super             Whole milk powder,                        Help to supplement
ii                      Calcium Milk Powder       Zymolytic bone calcium powder,            calcium
ii                      **                        non-dairy creamer, aspartame,             ii
ii                      ii                        multi-vitamins                            ii
ii                      ii                        ii                                        ii
ii                      ii                        ii                                        ii
ii                      ii                        ii                                        ii
ii                      ii                        ii                                        ii
---------------------------------------------------------------------------------------------------------------------------
ii                      Tianshi Zinc              Zinc lactate, glucose, egg protein        Help to supplement zinc
ii                      Capsules * #              powder                                    ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Chewable          Calcium carbonate, de-fatted milk         Help to supplement
Nutrient Supplement     Calcium Tablets           powder, fruit powder, gelatin,            calcium
Series                  with Multiflavor * #      magnesium stearate, VD                    ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Iron              Glucose, ferrous lactate, VC,             Iron supplement to fight
ii                      Capsules *                folic acid                                against iron-deficiency
ii                      ii                        ii                                        anemia
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Protein           Soybean separating protein,               supplement amino acid,
ii                      Powder ** #               whey protein, soybean phospholipid        and protein
---------------------------------------------------------------------------------------------------------------------------



                                       6
<PAGE>

---------------------------------------------------------------------------------------------------------------------------
Product Series          Products                  Main Ingredients                          Benefits
---------------------------------------------------------------------------------------------------------------------------
ii                      Tianshi Lipid             Herba gynostemma pentaphyllum,            Help to regulate blood
ii                      Metabolic                 folium nelumbinis, radix polygoni         lipid
ii                      Management Tea*#          mutiflori, green tea, semen cassiae       ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Bone              Calcium carbonate, soybean                Help to increase bone
ii                      Treasure Tablets           isoflavones,micro-crystal                density
ii                      * #                       cellulose, carboxymenthyl amylo-          ii
ii                      ii                        sodium, lactose, starch, magnesium        ii
ii                      ii                        stearate, casein phosphor-peptide         ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Super             Zymolytic bone calcium powder,            Help hypermnesia
ii                      Calcium Capsules          lecithin, taurine, VB1, VB12, VC          ii
ii                      with Lecithin * #         b-cyclodextrin                            ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Beauty            Radix rehmanniae, radix angelicae         Clear complexion,
ii                      Face Capsules * #         sinensis, radix paeoniae alba, flos       rejuvenate skin
Adjustment Series       ii                        carthami, semen persicae, radix           (Chloasma-removing)
ii                      ii                        bupleuri, rhizoma chuanxiong, VC,         ii
ii                      ii                        VE                                        ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Sweet             Fructus crataegi, fructus lycii, poria,   Help to improve the
ii                      Dreams Granules * #       starch, aspartame, melatonin              quality of sleep
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Throatcare        Radix ophiopogonis, Fructus               Take care of your throat
ii                      Granules *                canarli, honeysuckle, ebony, haw          ii
ii                      ii                        powder, mint, liquorice                   ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Slimming          Folium nelumbinis, semen cassiae,         Weight loss
ii                      Tea * #                   oolong tea, rhizoma alismatis,            ii
ii                      ii                        folium llicis latifoliae, radixet         ii
ii                      ii                        rhizoma rhei, pericarpium citri           ii
ii                      ii                        reticulatae                               ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi PressureCare      Folium kaki, plumula nelumbinis,          Regulate blood pressure
ii                      Tea *                     fructus gardeniae, folium apocyni         ii
ii                      ii                        veneti                                    ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Sea               Sea Buckthorn oil                         Help to improve
ii                      Buckthorn Oil             ii                                        immune system
ii                      Softgels ** #             ii                                        ii
---------------------------------------------------------------------------------------------------------------------------
ii                      Tianshi Double-           Polydextrose, haw powder,                 supplement edible cellulose
High-Fiber Series       cellulose Tablets         hydroxypropyl cellulose, maize            ii
ii                      ** #                      cellulose, gelatin, magnesium             ii
ii                      ii                        stearate aspartame (phenylalanine)        ii
---------------------------------------------------------------------------------------------------------------------------


                                       7
<PAGE>

---------------------------------------------------------------------------------------------------------------------------
Product Series          Products                  Main Ingredients                          Benefits
---------------------------------------------------------------------------------------------------------------------------
ii                      Tianshi Chitosan          Chitosan                                  Regulate immune
ii                      Capsules * #              ii                                        system
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Cordyceps         Cordyceps mycelium powder                 Help to improve
ii                      Capsules * #              ii                                        immune system
ii                      ii                        ii                                        and reduce fatigue
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Vitality          Wheat plumule oil, lecithin,              Reduce fatigue
Immune                  Softgels * #              b-carotene                                ii
                        ---------------------------------------------------------------------------------------------------
Enhancement Series      Tianshi Spirulina         Dried spirulina powder                    increase hypoxia
ii                      Capsules * #              ii                                        resistance and regulate
ii                      ii                        ii                                        cellular immune system
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Spirulina         Dried spirulina powder                    Increase hypoxa
ii                      Tablets*                  ii                                        resistance and regulate
ii                      ii                        ii                                        cellular immune system
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Pine Pollen       Natural pine pollen powder,               supplement amino acid,
ii                      Powder Capsules **#       Povidone                                  vitamins and minerals
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Garlic            Natural garlic, powder, lactose,          Help to improve
ii                      Tablets **                starch, calcium carbonate, micro-         immune system
ii                      ii                        crystal cellulose, malt dextrin,          ii
ii                      ii                        carboxymethl amylo-sodium,                ii
ii                      ii                        magnesium stearate                        ii
---------------------------------------------------------------------------------------------------------------------------
ii                      Tianshi Grape             Grape seed extract, starch                Help to support healthy
ii                      Extract Capsules*#        ii                                        blood lipid levels.
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Cell              Carrot powder, heba gynostemma            Hypoxia resistance
Heart and Brain         Rejuvenation              pentapyllum, tea polyphenol, VC           ii
Improvement Series      Capsules * #              ii                                        ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Metabolic         Radix salviae miltiorrhizae, radix        Regulate blood lipid
ii                      Balance Capsules *#       polygoni multiflori, fructus              ii
ii                      ii                        crataegi                                  ii
                        ---------------------------------------------------------------------------------------------------
ii                      Tianshi Ginkgo Leaf       Ginkgo leaves extract, lactose,           Increase hypoxia
ii                      Tablets * #               micro-crystal cellulose, starch,          resistance
ii                      ii                        carboxymethyl amylo-sodium,               ii
ii                      ii                        french white                              ii
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note:     1.   The 24 products with * are wellness products.  They should not be
               used as a substitute for any drug for therapeutic purpose.

          2.   The 7 products with ** are dietary supplement products.  They are
               not prescribed medicine.

          3.   The 23 products with # have received Halal Approval.

     We have over 100 products in our personal  care  product  series.  We group
these products into four main categories. They are:

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

          2.   Medical  Equipment,   which  includes  Magnetolelectric  Acupoint
               Treasure Apparatus.

          3.   Commodity - Personal  Washing  Products,  which includes  Tianshi
               Child Care Body Wash and Tianshi  Spirulina Body Wash (Refreshing
               and Nourishing).

          4.   Commodity  -  Home  Cleaning  Products,  which  includes  Tianshi
               Ceramic Surface Maintenance Cleanser and Tianshi Detergent.

                                       8
<PAGE>

Our products have received significant recognition for quality:

2004
At the 4th International Healthcare Festival of China, Tianshi Metabolic Balance
Capsules was assessed as one of the Top 10 Nutrition Supplement Products.

2003
Biological's  wellness products series were recommended by the Chinese Committee
for  Evaluation  and  Recommendation  of Famous  Quality  Products for Women and
Children as one of the Popular Famous Quality Brands.

2002
Tianshi Sea  Buckthorn  Oil  Softgels,  Tianshi  Cordyceps  Capsules and Tianshi
Spirulina  Capsules  were  jointly  recommended  to the  European  market by the
Council for the Promotion of International  Trade of China and the Committee for
Quality Assurance and Assessment of Science and Technology Products of France.

Tianshi Chitosan  Capsules were  recommended as high-quality  products by the US
Council of International Quality Authentication.

Tianshi   Chitosan   Capsules  were  proved  to  be  Recommended   Products  For
International Trade by U.S. Asia Economic Trade Cooperation Committee.

Manufacturing
-------------

Biological has put a great emphasis on product  quality  assurance.  In 2002, it
was  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.

The manufacturing processes of our nutrition supplement products are categorized
into six types  depending on the different forms of the finished  products.  All
six types of processes are illustrated in the flow charts below:

1. Powder


GRAPHIC OMITTED


This graphic shows the process suitable for manufacturing Nutrient Super Calcium
Powder,  Nutrient  Super  Calcium  Powder for  Children,  etc. Raw materials are
confected,  sifted and mixed, resulting in a semi-finished product which is then
subject to inner and outer packing, resulting in a finished product.


                                       9
<PAGE>

2. Tea


GRAPHIC OMITTED


This  graphic  shows  the  process  suitable  for  manufacturing  Slimming  Tea,
PressureCare Tea. Raw materials are rid of impurities,  rinsed, dried, confected
and mixed,  resulting in a semi-finished product, which is then subject to inner
and outer packing, resulting in a finished product.

3. Capsule


GRAPHIC OMITTED

This graphic shows two processes for  manufacturing  capsules.  Process A of the
graphic is suitable for  manufacturing  Zinc  Supplement  Capsules,  Beauty Face
Capsules,   etc.  Raw  materials  are  confected  and  mixed,   resulting  in  a
semi-finished   product,   which  is  then  sifted,  filled  and  polished.  The
semi-finished  product is then subject to inner and outer packing,  resulting in
the finished  product.  Process B of the graphic is suitable  for  manufacturing
Cordyceps  Capsules  and  Chitosan  Capsules.   Raw  materials  are  sifted  and
confected,  resulting  in a  semi-finished  product  which  is then  filled  and
polished,  and subjected to inner and outer  packing,  resulting in the finished
product.



4. Tablet


GRAPHIC OMITTED


                                       10
<PAGE>

These  graphics  show the process for  maufacturing  tablets.  Raw materials are
sifted, confected, and mixed resulting in a semi-finished product, which is then
granulated and mixed resulting in tablets.

Process A of the  graphic is suitable  for  manufacturing  Ginkgo Leaf  Tablets,
Calcium Chewable  Tablets,  which are film coated and then subject to innner and
outer  packing,  resulting  in a finished  product.  Process B of the graphic is
suitable for manufacturing  Double-Cellulose  Tablets,  Chewable Calcium Tablets
with multiflavor,  etc., which are subject to inner and outer packing, resulting
in a finished  product.  Raw materials  are  confected and mixed  resulting in a
semi-finished product, which is then granulated,  dried, griddled and subject to
inner and outer packing resulting in a finished product.



5. Granule


GRAPHIC OMITTED


This graphic shows the process suitable for manufacturing Sweat Dreams Granules.
Raw  materials are confected  and mixed  resulting in a  semi-finished  product,
which is then granulated, dried, griddled and subject to inner and outer packing
resulting in a finished product.


6.    Soft gel Capsule


GRAPHIC OMITTED

This graphic shows the process suitable for manufacturing  Vitality Softgels and
Sea Buckthorn Oil Softgels. Raw materials are confected collocated, and injected
into  gelatinized  soft gels,  then  palletized,  resulting  in a  semi-finished
product.  The semi-finished  product is then rinsed,  dried and subject to inner
and outer packing resulting in the finished product.

All of our  manufacturing  processes  above  comply with the  product  standards
approved  by the  Bureau of  Technical  Supervision.  In  addition,  most of our
manufacturing  equipment  was newly  purchased or replaced  after the year 2000.
Therefore,  we do not  anticipate  having  a large  expense  for the  repair  or
replacement of manufacturing equipment during 2005.

Trademarks and Patents
----------------------

o We have  registered  our  products  under  the logo  "Tiens"  with  the  State
Administration of Industry and Commerce.


                                       11
<PAGE>

o Under the High-Calcium series, Biological has conducted extensive research and
developed  Tianshi Super Calcium Powder with Metabolic Factors and Tianshi Super
Calcium  Powder  for  Children,  which  have been  awarded  patents  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,
which commenced on January 13, 2001.

Suppliers
---------

At present,  Biological has established long-term stable relationships with most
of its  suppliers.  The raw materials  required for  manufacturing  Biological's
products are relatively easy to find and alternative suppliers are convenient to
locate.

Our current major suppliers are:
o    Ox backbone supplier:
     Hebei Fucheng Wufeng Food Co., Ltd.

o    Cordyceps mycelium powder supplier:
     Tianjin Baiao Biotech Company

o    Milk powder suppliers:
     Beijing Shuangwa Dairy Industry Company Ltd.
     Beijing Yinhelu Economic Trading Company Ltd.

o    Chinese Herbs supplier:
     Hebei Anguo Jinmu Chinese Herbs Co., Ltd.

Research and Development
------------------------

Currently,  Biological has several additional products under development that we
expect to launch in 2005. They are:

1. Tiens Eye  Protection  capsules  to  alleviate  vision  fatigue  and  improve
eyesight.

2.  Vitamin and Mineral  Supplement  Tablets to  supplement  daily  vitamins and
minerals intake to maintain equilibrium in the human body.

3. Tiens Womka  Capsules to rapidly  improve the female  physiology  function so
that women can adequately enjoy their sexual lives.

4. Tiens Manka  Capsules to  effectively  activate the male vitality so that men
can adequately enjoy their sexual lives.

5. Drunken Alleviate Capsules to relieve symptoms caused by over drinking and to
care for the liver.


                                       12
<PAGE>

Besides the products  listed above, 2 groups of products are also under research
and  development.  One is Polly Peptide Products Group, a group of products with
multiple diversified  functions.  Another one consists of wellness products with
natural  resources  from Tibet,  which is also a group of products with multiple
diversified functions.

All of the products and product groups listed above are still under research and
development.  Therefore,  we do not warrant  that these  products  will have the
stated effects when development is completed.

R&D  expense  displayed  below is  accounted  for  through  a  related  party of
Biological. Biological will take over all R&D functions starting in 2005.

2001- US $1,270,000
2002- US $  993,000
2003- US $2,167,000
2004- US $6,529,000

We anticipate spending at a minimum, an additional US$10,164,000 to complete our
current research and development.

Currently,  we employ  65 staff  members  in R&D,  and we  anticipate  hiring an
additional 35 employees in R&D by the end of 2005.

Business Development Strategy - Marketing and Distribution
----------------------------------------------------------

One of Tiens USA's  overseas  marketing  strategies has been to develop a strong
direct  sales force and  Internet  distribution  networks  through its  overseas
affiliated companies.  Domestically,  Tiens is aiming to develop strong Internet
distribution networks,  and expand its market share through the branches,  chain
stores,  and domestic  affiliated  companies of Tianshi  Engineering.  In China,
Biological   sells  all  of  its  products  to  Tianshi   Engineering.   Tianshi
Engineering,  in turn, sells the products to end-users  through its chain stores
and domestic affiliated companies.  Biological has a sales contract with Tianshi
Engineering.  According to this contract,  Tianshi Engineering  accepted that it
would   purchase   all  of   Biological's   products   to  be  sold  in   China.
Internationally, Biological sells its products through an extensive direct sales
force  of its  overseas  affiliates  and  independent  distributors  who use the
products  themselves and/or resell them to other distributors or consumers.  Due
to common ownership among Biological and the otheroverseas  affiliated entities,
there are no formal sales or administrative  agreements among them. The business
operations  among  these  related   entities  are  regulated   through  internal
ordinances.

Biological sells products to Tianshi  Engineering at a price equal to 25% of the
domestic  market  price for the  products.  Tianshi  Engineering  then,  through
individual distributors in its 23 representative offices or 9 affiliates,  sells
the  products to  purchasers.  Through this  process,  the  commission  to those
individual  distributors  is  52%  of  the  domestic  market  price;  while  the
representative  offices or affiliates incur 3-6% of the domestic market price as


                                       13
<PAGE>

their operation expenses and Tianshi  Engineering retains 17-20% as expenses and
profits. This is summarized as follows:




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


Our  distribution  network  enables our  products  to reach about 170  countries
worldwide.  The Company  believes  that direct sales  business  has  significant
potential for growth over the next 10 years.  Based on a study conducted by Mary
Kay Inc. (a direct sales company),  by the year of 2007,  worldwide direct sales
will total US$200 billion,  and direct sales  distributors will reach 60 million
people. For those heavily populated countries,  such as, China, Russia and South
American countries, direct sales distribution is developing at increasing speed.
Within the past four years,  direct sales distributors for a variety of products
have increased from 14 million  people to 31 million  people  worldwide,  and on
average  300,000 people join the business every month.  The advantages of direct
sales  are:  (1) the  direct  sales  concept  has been  generally  accepted  and
supported in many countries;  (2) Internet  provides good growth  potentials for
direct  sales  networks;  (3)  direct  sales  provides  distributors  with  more
flexibility;  and (4)  distributors  can control  sales  activities  themselves.
Currently, Biological and its affiliates are planning to set up an online system
among  thirty-one  (31)  provinces  in  China.   This  system  will  generate  a
multi-channeled distribution network for the sales of Biological's products.

Since 2003,  Tiens USA's business  development plan has been to focus on further
market expansion internationally. Tiens USA has targeted developing countries in
Southeast  Asia,  Africa,  and Northeast  Europe,  giving  consideration  to its
overall  market  capabilities  and  targeted  consumer  groups.  To achieve this
international  expansion,  the Company  will focus on its product  research  and
development,  online direct sales system, and quality assurance of its products.
At  present,  the Company has  already  sold its  products in China,  the United
States, South Korea, Japan, India, Thailand, Malaysia,  Indonesia, Canada, Peru,
Brazil, Russia, Kazakhstan,  Belarus,  Mongolia,  Finland,  Lithuania,  Britain,
Germany,  France,  Romania,  Ukraine,  Portugal,  Turkey, Italy, Nigeria, Ghana,
South Africa and Australia etc.

Internationally,  we sell our products to approximately 90 affiliated  companies
located in Eastern and Western Europe, the Middle East, North, South and Central


                                       14
<PAGE>
<TABLE>
<CAPTION>

America, Asia and the Pacific Rim, Southeast Asia and Africa. For the year ended
December 31, 2004,  sales revenue  generated from three countries  accounted for
more than 10% of  Biological's  revenues.  Those  countries  were Greater China,
which contributed approximately 49.55%, Nigeria, which contributed approximately
11.93%,  and Russia,  which contributed  approximately  10.57%.  The total sales
revenue from those  countries  represented  approximately  72.05% of the overall
sales revenue of Biological  for the year ended December 31, 2004. The following
chart sets forth,  as of December 31, 2004,  the countries  where our affiliated
companies  are located and the year in which we  commenced  operations  in those
countries.  The majority of these companies are owned by Mr. LI Jinyuan,  except
in jurisdictions in which foreign ownership is not permitted.


No.           Country                    Overseas Affiliates                            Incorp. Date
<S>           <C>                        <C>                                            <C>
Russia Area

1             Russia                     Tianshi Group Yatai Science and                2002.05.16
                                          Technology Development Ltd. Co.

2             Russia                     Tianshi Ltd. Co.                               2002.05.16

3             Russia                     Shengshi Ltd. Co.                              2001.07.12

4             Russia                     Huamao Ltd. Co.                                2001.07.10

5             Russia                     Tian Dihe Ltd. Co.                             2001.07.16

6             Russia                     Huafeng Travel Ltd. Co.                        2001.05.04

7             Russia                     Baofeng Ltd. Co.                               2003.04.11

8             Russia                     Tianshi Health Foods (Russia) Co., Ltd.        1999.03.06

9             Russia                     Tianshi Ural Trading Co., Ltd.                 2000.01.31

10            Russia                     Tianshi (New Siberia) Co., Ltd.                2000.02.24

11            Russia                     Tianshi Co., Ltd.                              2000.03.20

12            Russia                     Tianshi CaliningCo., Ltd.                      2000.06.07

13            Russia                     BiermuBaolan Co., Ltd.                         2001.02.01

14            Russia                     Tianshi LiShi Ltd. Co.                         2001.04.28

15            Russia                     Huayuan Trading (Russia) Co., Ltd.             2001.06.09


                                       15
<PAGE>

16            Russia                     Nanfang Ltd. Co.                               2002.01.14

17            Russia                     Bao Yuan Co., Ltd.                             2003.06.04

18            Russia                     Tianshi Volgograd Co., Ltd.                    2003.12.09

19            Russia                     Irkutsk Dongfang Co., Ltd.                     2003.04

No.           Country                    Overseas Affiliate                             Incorp. Date

20            Russia                     Tianshi Kazan Co., Ltd.                        2003.02.27

21            White Russia               Tianshi White Russia Co., Ltd.                 2000.06.23

Ukraine Area

1             Ukraine                    Company "Hua Yuan"                             2001.01

2             Ukraine                    Tianshi Company                                2002.12

3             Ukraine                    Huaerkev Hua Mao Co., Ltd.                     2002.12.16

4             Moldova                    "Tianshi-Grup" S.R.L.                          2001.05

5             Poland                     Tianshi Poland Sp                              2000.11.01

6             Turkey                     China Tianshi Group Import/Export              2000.11.16
                                         Co., Ltd.

Eastern Europe

1             Latvia                     Tianshi (Latvia) Group Co., Ltd.               2000.05.02

2             Hungary                    Tiens KFT                                      2000.08.23

3             Czech                      Tianshi CZ. S.R.O.                             2000.12.01

4             Romania                    Tianshi Grup Co., S.R.L                        2000.12.08

5             Esthonia                   Tianshi Esthonia Co., Ltd.                     2000.12.22


                                       16
<PAGE>

6             Lithuania                  Tianshi (Lithuania) Co. Ltd.                   2001.11.18

7             Slovakia                   Tiens Slovakia S.R.O.                          2002.07.11

8             Bulgaria                   Balkan Tianshi                                 2003.05

9             Croatia                    TIENS D.O.O.ZAGREB                             2004.05.26

10            Greece                     Tiens Hellas A.E.                              2002.06.19

No.           Country                    Overseas Affiliate                             Incorp. Date

11            Austria                    Tianshi Health Products GmbH Co.,Ltd.          2002.08

Western Europe

1             UK                         Tiens UK PLC                                   2001.07.16

2             Spain                      Tianshi Spain, S.L.                            1999.12.29

3             Germany                    Tianshi Gmbh                                   2000.12.01

4             Germany                    Tiens BmbH                                     2003.11.06

5             Portugal                   Tianshi Millenium-Comercio                     2001.11.26
                                         De Produtos Biologicos,  Unipessoal

6             Denmark                    Tianshi Danmark Sundhedsprodukter              2001.01.30
                                          Aps

7             Finland                    Tianshi Finland Healthproduct Co., Ltd.        2002.01.13

8             France                     Tiens France SARL                              2002.02.26

9             Belgium                    Tiens Belaique S.P.R.L                         2000.12

10            Holland                    Tianshi Israel Co., Ltd.                       2004.05.10

11            Sweden                     Tiens sverige AB                               2003.07.01

12            Israel                     Tianshi Israel Co., Ltd.                       2000.07


                                       17
<PAGE>

Middle Asia

1             Kazakhstan                 Tianshi Kazakhstan Co., Limited                2000.09.02

2             Kazakhstan                 Aztanai Bao Lan Company                        2003.05.13

3             Azerbaijan                 Azerbaijan Baolan Company                      2003.06.25

4             Armenia                    LLC"Tianshi"                                   2003.05.20

5             Mongolia                   Tianshi Mongolia Co., Ltd.                     2001.10.02

6             Uzbekistan                 Tianshi Invest                                 2004.06.25

7             Kirghizstan                Tianshi Lishi Ltd. Co.                         2003.05.20

North America

1             Canada                     Tianshi (Canada) Health Products, Inc.         1997.12.31

2             USA                        Tianshi Health Products, Inc.                  1998.02.12

3             Mexico                     Tianshi Health Products de Mexico,             2000.01.30
                                         S.A. de C.V.

4             Mexico                     Tiens imports and exports de Mexico,           2002.11.25
                                         S.A. de C.V.

5             Mexico                     Tiens Human Services Civil Society S.C.        2002.11.25

Central & South America

1             Brazil                     Tianshi Brazil Co., Ltd.                       2002.08.01

2             Brazil                     Tiends Brasil                                  2004.08

3             Peru                       Tianshi Peru S.A.C.                            2000.11

4             Argentina                  Tianshi Argentina Co., Ltd.                    2004.03


                                       18
<PAGE>

5             Chile                      Tianshi Chile Co., Ltd.                        2004.03.25

6             Venezuela                  Tianshi Venezuela Co., Ltd.                    2004.04.23

7             Ecuador                    Tianshi Ecuador Co., Ltd.                      2004.04.02

Southeast Asia

1             Hong Kong                  Tianshi International Development Co.,
                                         Ltd.                                           1996.11.07

2             Hong Kong                  Tianshi Development Co., Ltd.                  2001.02.27

3             Hong Kong                  Jinyuan Development Co., Ltd.                  2002.04.16

4             Hong Kong                  Tianshi International Holdings Group           2002.05.13
                                         Co., Ltd.

5             Hong Kong                  Tianshi Communication Co., Ltd.                2003.03.24

6             Australia                  Tiens Australia Pty Ltd.                       2002.08.05

7             New Zealand                Tianshi Canada Health Products                 2001.01
                                         (New Zealand) Ltd.

8             India                      Tianjin Tianshi Biological Development         2000.02.17
                                         Co., Ltd.

9             India                      Tianjin Tianshi (India) Private Ltd.           2002.04.29

10            Philippines                Tianshi Philippine Inc                         2001.07.01

11            Lao                        Tianshi Lao Co., Ltd.                          2001.06.21

12            Malaysia                   Tiens Health Development (Malaysia)            2002.02.26
                                         SDN. BHD

13            Bangladesh                 Tianshi (Bangladesh) Co., Ltd.                 2004.01


                                       19
<PAGE>

14            Brunei                     TIEN-SHI SDN BHD                               2004.06.03

15            Indonesia                  Pt. Singa Langit Jaya                          2000.09.11

16            Indonesia                  Snga Langit                                    2003.06.25

17            Indonesia                  PT. Tianshi Bandung Jaya                       2003.07.01

18            Indonesia                  PT. Singa Langit Utama Medan                   2003.09.08

19            Indonesia                  PT. Tianshi Semarang Co., Ltd.                 2003.08.14

20            Indonesia                  PT.Tianshi Palembang Indonesia                 2003.05.01

21            Indonesia                  PT. Tianshi Surabaya                           2004.06.29

22            Indonesia                  PT. KALIMAN TIANSHI                            2003.09.24

23            Taiwan                     Tianshi Health Products Inc.,                  2001.05.20
                                         Taiwan Branch

24            Pakistan                   Tianshi International Pakistan Co., (Pvt)      2002.09.01

25            Vietnam                    Jinyun Trading & Services Co., Ltd.            2004.06

26            Cambodia                   Tianshi Group (Camboia) Co., Ltd.              2004.04.26

27            Singapore                  Tianshi (Singapore) Pte.Ltd.                   2003.03.12

Africa & Middle East

1             Nigera                     Tianshi Health Enterprise Development          2004.02.10
                                         Co., ltd.

2             Nigera                     Tianshi Health IND.&ENT. Nigeria Ltd.          2003.12

3             Nigeria                    Tianshi Health Products Company                2000.10.23
                                          (NIG) LTD

4             South Africa               Tianshi (S.A)(Pty) Ltd                         1998.12.02


                                       20
<PAGE>

5             Ghana                      Tianshi Health Industries and                  2000.06.29
                                         Enterprises Ghana Ltd.

6             Swaziland                  Tianshi (Swaziland)(Pty.) Ltd.                 2000.07

7             Botswana                   Tianshi (Botswana) Pty. Ltd.                   2000.08.23

8             Zambia                     Tianshi (Zambia)(Pty.) Ltd.                    2000.12.08

9             Cote D'ivoire              Tianshi Health Ind.& Ent. Cote D'ivoire        2002.06.28
                                          Ltd.

10            Cameroon                   Tianshi Health Products Cameroon Ltd.          2003.09.29

11            Kenya                      Tianshi Health Products Co.                    2002.12
                                          (Kenya) Ltd.

12            Uganda                     Tianshi Health Products Co.                    2003.06.05
                                         (Uganda) Ltd.

13            Egypt                      Tianshi Health IND.&ENT. (Egypt) Ltd.          2003.02.17

14            Sierra Leone               Tianshi Health IND.&ENT.                       2003.09
                                         (Sierra Leone) Ltd.

15            Benin                      Tianshi Health IND.&ENT.                       2003.01
                                         BENIN SARL

16            U.A.E.                     Tiens Enirates LLC                             2003.03.26

17            Nambia                     Tianshi Health Products C.C.                   2003.08.01

18            Zinbabwe                   TIANSHI (ZINBABWE)                             2000.10
                                         (PRIVATE) LIMITED Company
</TABLE>


As operation  costs vary from country to country,  international  market  prices
vary  accordingly.  Biological sells the products to overseas  affiliates at the
FOB  (destination  port) price,  which  consists of 35% of the  domestic  retail
price,   including  customs  duty,   value-added  tax  and  other  miscellaneous
transportation cost. The individual distributors of overseas affiliates sell the


                                       21
<PAGE>

products to purchasers for commissions equal to 52.5% of the respective domestic
retail  prices.  The  overseas   affiliates  charge  their  expenses  to  ensure
approximately 10% profits for themselves.  In average,  the international prices
comprise of the following components:


Biological (Costs, expenses and profit)        35% of Domestic Market Price
Representative Offices or Affiliates          4-9% of International Market Price
Individual Distributors' Commission          52.5% of International Market Price
--------------------------------------------------------------------------------
International Market Price                    100%


Competition
-----------

For our international  marketing and sales outside of China, we have adopted the
approach of  multi-leveled  direct  sales  networks.  Our main  competitors  for
recruiting   distributors  from  other  multi-level   marketing   organizations,
including  those  that  market  products  similar  to  ours,  are  some  of  the
world-renowned direct sales companies,  such as, Amway, Avon, Mary Kay, Nu Skin,
Herbalife,  SunRider,  Unicity Network, FLP and Morinda. Some of our competitors
are substantially  larger than we are, and have available  considerably  greater
financial resources than we have.

We believe  that our  competitive  strengths  will enable us to benefit from the
increasing demand for nutrition supplement products. Our strengths include:

o    Quality and size of manufacturing facilities;
o    Customer orientated business operation and market driven response system;
o    Products quality assurance system;
o    Worldwide information technology system; and
o    Extensive product research and development efforts.

Regulatory Framework
--------------------

Product Regulation
------------------

The central  governing  authority in the PRC for wellness  products is the State
Food and Drug  Administration  ("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.


                                       22
<PAGE>

Sales and Marketing Regulation
------------------------------

In most  countries,  sales of our  products  are  usually  considered  under the
categories of general  commodities,  which does not require specific permits and
is not subject to the strict  regulations  applied to drugs and medicine.  Since
the Company outsources the sale of its products to its affiliated companies, the
local approval issues with respect to sales and  distribution  are dealt with by
the Company's local affiliates.

In some countries,  direct sales (or multi-level  marketing) is highly regulated
or  prohibited.  The direct  sales  operation  with  respect to our  products is
conducted by overseas affiliated companies.  All of the Company and Biological's
affiliated  companies  overseas are legally  registered in countries that do not
prohibit  direct sales. In China,it is anticipated  that the Chinese  government
will lift the  restriction on direct sales business in 2005. The Company expects
a  favorable  impact  on its  business  development  in  China  due  to the  new
regulation.

Government Approval Process for New Products
--------------------------------------------

The Company  develops and  manufactures  products that are mainly  classified as
nutrition  supplement  products,  which includes  wellness  products and dietary
supplement  products.  The governmental  approval process in the PRC for a newly
developed wellness product is as follows:

1)   An application for a product certificate is filed with SFDA;
2)   SFDA gives a notice to the  applicant  requiring  the applicant to send the
     product samples to one of the government appointed research institutes;
3)   The appointed research  institute conducts clinic trials,  stability tests,
     function  tests and toxical tests on the product,  makes a report and sends
     the report back to SFDA within 6 months;
4)   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 the PRC.
The whole process generally takes 9 to 12 months.

Environmental Compliance
------------------------

Biological operates from facilities that are located in the PRC.

We are subject to the PRC's  National  Environmental  Protection  Law, which was
enacted on December  26, 1989,  as well as a number of other  national and local
laws and  regulations  regulating  air,  water and noise  pollution  and setting
pollutant  discharge  standards.  Violation of such laws and  regulations  could


                                       23
<PAGE>

result  in  warnings,  fines,  orders  to cease  operations,  and even  criminal
penalties, depending on the circumstances of such violation. We believe that all
our manufacturing operations are in compliance with all applicable environmental
laws.

PRC Laws and Regulations on Sino-Foreign Equity Joint Ventures
--------------------------------------------------------------

The following sets forth the approval process and governmental  requirements for
our joint ventures, Biological and Tiens Yihai.

1.   Overview

Joint Ventures in PRC between Chinese and foreign parties take two forms: equity
joint  ventures and  co-operative  joint  ventures.  Equity  joint  ventures are
governed by the Law of the  People's  Republic of China on  Sino-Foreign  Equity
Joint  Ventures,  and its  Implementation  Regulations  and other related rules,
regulations  and  administrative  orders and  co-operative  joint  ventures  are
governed  by the  Law of the  People's  Republic  of  China  on  Chinese-Foreign
Co-operative Joint Ventures and its Implementation Regulations.

To  establish a  Chinese-foreign  joint  venture,  the parties must submit their
contract and other required documents to the Ministry of Commerce of PRC ("MOC")
or its local  counterpart in the applicable  province or city for approval.  The
required documents include a letter of application,  feasibility study, articles
of association,  and a list of board members. A joint venture must also obtain a
business license from the State  Administration for industry and Commerce or its
local offices before commencement of its operation.

2.   Chinese-Foreign Equity Joint Ventures

     (a)  Legal Structure

     An equity joint venture in the PRC is an independent entity having the form
of a limited liability  company,  similar to a regular  corporation with limited
liability  organized  under state laws in the United States of America.  It is a
"legal  person"  under PRC laws and has the  right to own,  use and  dispose  of
property rights. The parties to the equity joint venture agree to share profits,
risks  and  losses  in  the  same   proportion  as  their   respective   capital
contributions  to the equity  joint  venture.  The  operations  of equity  joint
ventures are subject to an extensive body of laws and regulations governing such
matters as registration,  capital  contribution,  profit distribution,  board of
directors, accounting, taxation, foreign exchange and labor management.


                                       24
<PAGE>

     (b)  Capital Contribution

     The  liability  of a joint  venture  party to the equity  joint  venture is
limited to the amount of registered  capital it has agreed to  contribute  under
the joint venture contract. The registered capital must be paid within a certain
time frame;  for  example,  each party must make 15% payment of its share of the
contribution  into the  registered  capital  within 3 months upon  issuance of a
business license for the equity joint venture by the Administration for Industry
and  Commerce.  The  contribution  may take the form of cash,  land-use  rights,
equipment,  technology  or other  contribution  in kind.  The  proportion of the
registered  capital  subscribed  for by the  foreign  party to an  equity  joint
venture must not be less than 25%.

     In the required  documents,  an equity  joint  venture must specify a total
investment,  which limits the scale of its development,  and registered  capital
which must be contributed by the parties to the equity joint venture.  The Joint
Venture Law prescribes  the ratio between the amount of the  registered  capital
and the  amount of total  investment.  For  example,  where the  amount of total
investment is US$3 million or below,  the  registered  capital shall not be less
than 70% of the total  investment  and where the  total  investment  is  between
US$10-30  million,  the  registered  capital  shall not be less  than  40%.  The
difference  between the registered  capital and total investment may be obtained
through outside financing or other legal mechanisms.

     (c)  Board of Directors

     The  board  of  directors  exercises  authority  over all  major  corporate
decisions of an equity joint  venture,  including the  appointment  of managers,
strategic   planning  and   budgeting,   employee   compensation   and  welfare,
distribution  of  after  tax  profits  and  dissolution.  The  board  may not be
comprised  of less than three  persons and such persons must be appointed by the
parties  according  to the  proportion  of  their  capital  contribution  to the
registered capital of the equity joint venture.  Therefore,  Directors appointed
by a party  are  expected  to  represent  the  interests  of that  party  in the
operation of the business of the equity joint venture.  The daily  management of
an equity joint  venture is conducted by a management  group headed by a general
manager,  who is required to act in accordance  with the directions and guidance
of the board of directors. The Joint Venture Law stipulates that certain matters
(such as amendment to the articles of  association,  termination and dissolution
of the equity joint venture,  increase and transfer of the  registered  capital,
merger) must have the  unanimous  approval of the  directors  present in a board
meeting. Quorum for a board meeting is set at two-thirds of all board members.

     (d)  Profit Distribution

     The Joint Venture Law provides that after payment of taxes, an equity joint
venture must allocate three funds, namely, a reserve fund, an expansion fund and
a fund for employee  welfare and bonuses,  before  profits may be distributed to
the joint  venture  parties.  The amount of after tax profits  allocated  to the


                                       25
<PAGE>

three funds is  determined  at the  discretion  of the board of directors of the
equity joint venture. Profits of an equity joint venture, when distributed, must
be  distributed  to the  joint  venture  parties  according  to the ratio of the
amounts of the registered capital to which they subscribed respectively.

     (e)  Termination

     Pursuant  to  the  Joint  Venture  Law,  an  equity  joint  venture  may be
liquidated or terminated in certain  circumstances,  including expiration of the
joint  venture  term,  inability  of the equity  joint  venture  to conduct  its
business due to heavy  losses,  a breach by or insolvency of one of its parties,
etc.  Upon  termination,  the board of  directors  is  required  to  establish a
liquidation committee to dissolve the equity joint venture, which dissolution is
subject to the review and approval by MOC.

3.   Taxation

The major PRC taxes  applicable on the net income of an equity joint venture are
summarized as follows:

Income Tax for Equity Joint Ventures

     The standard  income tax rate for an equity joint venture is 33% comprising
     a national  income tax of 30% and a local  surtax of 3 %. All equity  joint
     ventures  established  in the  special  economic  zones are  entitled  to a
     reduced  national income tax rate of 15%. Reduced income tax rates are also
     available to, among others, equity joint ventures of a manufacturing nature
     and located in one of the designated  "open economic  zones" in the coastal
     regions of the PRC or "economic and technological  development  zones". The
     3% local  surtax may be reduced  or waived by the local  government  of the
     place where the equity joint venture is located.

     Equity joint ventures of a  manufacturing  nature with terms of at least 10
     years are exempt  from income tax for the first 2  profit-making  years and
     are entitled to a 50% reduction of the otherwise applicable income tax rate
     during the next 3 years.  The 50% tax  reduction is extended  further for a
     manufacturing  nature if they employ  advanced  technology or export 70% or
     more of their products.

U.S. Tax Impact

     Because Biological is 80% owned by Tianshi  International,  which is wholly
     owned  by  Tiens  USA,  Tianshi   International  is  a  controlled  foreign
     corporation;  therefore,  for U.S.  federal income tax purposes,  we may be
     required to include in our gross income for U.S. tax purposes:


                                       26
<PAGE>

o    The Company's "Subpart F" income, which includes certain passive income and
     income from certain transactions with related persons,  whether or not this
     income is distributed to it; and

o    Increases in the Company's earnings invested in certain U.S. property.

Based on the current and expected income, assets, and operations of our company,
we  believe  that  it  will  not  have   significant  U.S.  federal  income  tax
consequences under the controlled foreign corporation rules.

Currency Conversion and Exchange

The   currency  in  China  is   designated   as  the   Renminbi.   Although  the
Renminbi/United  States dollar exchange rate has been  relatively  stable in the
past several  years,  there can be no assurance  that the exchange rate will not
become volatile or that the Renminbi will not be officially devalued against the
United States dollar by direction of the Chinese government.

Exchange  rate  fluctuations  may  adversely  affect our  financial  performance
because of our foreign  currency  denominated  assets and  liabilities,  and may
reduce the value,  translated  or converted,  as  applicable  into United States
dollars, of our net fixed assets, our earnings and our declared dividends. We do
not engage in any hedging activities in order to minimize the effect of exchange
rate risks.

Employees

The Company,  including Biological and Tiens Yihai,  currently has 683 full-time
employees,   which   includes   approximately   300  staff  members   performing
administrative and management functions.

                                  RISKS FACTORS

Forward-Looking  Statements:  The discussion of the business and industry of the
Company  contains  various  forward-looking  statements  within  the  meaning of
applicable  federal  securities  laws and are based upon the  Company's  current
expectations and assumptions  concerning  future events,  which are subject to a
number of risks and  uncertainties  that could  cause  actual  results to differ
materially from those anticipated.

Risks Related to our Business

We may incur material product liability  claims,  which could increase our costs
and  adversely  affect our  reputation,  revenues  and  operating  income.  As a
manufacturer  of  products  designed  for human  consumption,  we are subject to
product  liability  claims that use of our products have results in injury.  Our


                                       27
<PAGE>

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.

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 invest  in  extensive
market research on 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 earning.

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;


                                       28
<PAGE>

     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 make sufficient investments in research and pay close attention to
consumer  needs 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.

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 Mr.  Li  Jinyuan,  our CEO 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.

Biological  began  operating  in July 1998,  and  incurred  losses  until  2002.
Although  we were  profitable  in 2003 and  2004,  due to  increases  in  sales,
especially  internationally,  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.

Due to the  inter-related  ownership and business  dealings among Biological and
its  affiliates,  there are  conflict of  interest  and  self-dealing  risks and
increased  potential  for  manipulation  of financial  results.  Biological  has
affiliated  companies or business  entities that are owned by Mr. LI Jinyuan and
his immediate  family members (mostly his daughter Ms. LI Baolan).  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.

Biological sells all of its products for resale in China to Tianshi Engineering.
As both Biological and Tianshi Engineering are majority owned by Mr. LI Jinyuan,
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.


                                       29
<PAGE>

Tiens USA is establishing a system to ensure the  independence of its 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,  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 or manufacturing due to military or terrorist acts.

Risks Related to Government Regulations

We are required to follow various  government  regulations,  particularly in the
areas of  nutrition  supplement  products  and  direct  marketing,  which  could
increase our costs or prevent us, from or delay us in selling our products.

Internationally

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
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.

In China

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   substantially   increases  the  cost  of   developing,
manufacturing and selling our products.


                                       30
<PAGE>

The uncertainty of 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%  of our  revenues  derive  from  our
operations in China.  Accordingly,  our operations are subject, to a significant
degree, to PRC law. As stated under "Business Development Strategy",  one of our
overseas marketing  strategies has been to develop strong direct sales force and
Internet  distribution  networks  through  its  overseas  affiliated  companies.
Domestically,  Tiens is aiming to develop strong Internet distribution networks,
and expand its market share  through the branches,  chain  stores,  and domestic
affiliated  companies of its affiliated company,  Tianshi  Engineering.  Chinese
government is now in the process of developing new direct  selling  regulations.
Publication of the new regulations has been delayed.  There is no assurance that
such new regulations  will be enacted in the foreseeable  future.  Uncertainties
and delays with  respect to the new direct  selling  regulations  may  adversely
affect our ability to increase sales growth in China by  incorporating  a direct
sales marketing program there.

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  planed
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.

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  Biological's  ability  to  promote,  sell  and
distribute products.  In addition,  in terms of our marketing approach,  MLM may
also be  prohibited  in some  countries.  As such,  growth  in our  sales may be
adversely affected if such approval cannot be obtained in certain jurisdictions.



                                       31
<PAGE>

Risks Related to Manufacturing

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.


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 OTC Bulletin Board under the symbol
"TBGU.OB". 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 on the OTC Bulletin Board 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.

Our  president  and chief  executive  officer  controls a majority of our common
stock. Mr. LI Jinyuan  beneficially  owns  approximately  92% of our outstanding
common stocks. 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


                                       32
<PAGE>

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.

Shares  available  for  future  sale.  A  significant  number of our  shares are
eligible  for sale and their sale could  depress the market  price of our stock.
Sales of a significant number of shares of our common stock in the public market
following the merger and related transactions could harm the market price of our
common  stock.  Moreover,  as  additional  shares  of our  common  stock  become
available for resale in the public market  pursuant to the  registration  of the
sale of the shares, and otherwise, the supply of our common stock will increase,
which could decrease its price. 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.

Our certificate of incorporation and Delaware Law contain certain  anti-takeover
provisions  that may  inhibit a  takeover,  and we may adopt  other  measures to
discourage a takeover.  Delaware Law and the  provisions we intend to add to our
certificate  of  incorporation  relating to a classified  board of directors may
have the effect not only of discouraging  attempts by others to buy us, but also


                                       33
<PAGE>

of making it more  difficult or  impossible  for existing  stockholders  to make
management  changes.  A classified board,  which is made up of directors elected
for  staggered  terms,  while  promoting   stability  in  board  membership  and
management,  also  moderates  the pace of any  change in control of our board of
directors  by  extending  the time  required  to elect a  majority,  effectively
requiring  action in at least two annual  meetings.  Our board may  consider and
adopt  additional  measures  that  would  prevent  us form  being  subject  to a
takeover.

After the reorganization,  the Company was managed by a new management team that
is not familiar with the capital market and the processes by which a U.S. public
company  should be managed and  operated.  The  management  is currently  making
efforts to familiarize  itself with the relevant laws, rules and regulations and
market practice. However, there can be no assurance that the new management team
can master the relevant  knowledge and skills and set up the required  system in
time to prevent  breaches and to meet the expectations of its  shareholders.  In
terms of financial  control,  the Company is making major  adjustments to comply
with the reporting  obligations  and new securities law  requirements.  However,
there can be no assurance  that the  financial  control  system will be improved
effectively to ensure smooth operations.

Item 2. Description of Property

We conduct our main business  activities  through  Biological  in Tianjin,  PRC.
Biological's  manufacturing  workshops  are  located at No. 6.,  Yuanquan  Road,
Wuqing New-tech Industrial Park, Tianjin, PRC, and include:

(1)  We have three management buildings and one research building.
(2)  We have five production plants, and their total area is 5879.4 m2.
(3)  We have six warehouses.
(4)  We have three production lines.
(5)  We have  approximately  170 sets of  equipment  each of which is worth more
     than RMB30,000.

According to the PRC laws, the government owns the land and only authorizes land
use rights to  individuals or  enterprises.  The land on which our workshops are
built,  is  identified  as Lot  W-30-35-2 of the District with the total area of
28,425.5  square  meters.  According  to the  State-owned  Land Use Right  Grant
Contract  signed  between the  Tianjin  Wuqing Land  Management  Commission  and
Qinghai  Aluminum  Factory  Wuqing  Trading  Company  ("Qinghai  Aluminum",   an
independent  party) on June 15, 1995, Qinghai Aluminum has been granted the land
use right of 30,000  square meters of land  (including  Lot  W-30-35-2)  located
inside the District under Land Use Right Certificate No. 95026, for a total land
use price of RMB  4,230,000  (RMB 141 per  square  meter).  The term for the use


                                       34
<PAGE>

right of the land is 50 years  (starting  retrospectively  from June 1, 1993 and
expiring on May 31, 2043).  Under an agreement  signed between Qinghai  Aluminum
and Tianshi Group on May 22, 1997,  Qinghai Aluminum agreed to transfer the said
land use  right,  together  with the  factories,  offices  and other  facilities
constructed  thereon to Tianshi Group for a total price of  RMB7,750,000.  A new
Land Use Right  Certificate  No.  97070 has been granted in  replacement  of the
previous  certificate of No. 95026. On January 10, 2001,  Tianshi Group passed a
Board of Director's resolution to divide the said land use right into two parts:
(i) land use right of 28,425.5 square meters of the land was legally transferred
to Biological  without  consideration,  and such transfer was legally registered
with the relevant  government  agency in China;  (ii) 1,574.5 square meters land
use right was retained by Tianshi  Group.  In this way,  Biological  has legally
obtained land use right in the Lot W-30-35-2 of the District with the total area
of 28,425.5 square meters.

In 1999,  prior to  obtaining  the land use right of the said land from  Tianshi
Group,  Biological  had obtained  governmental  approvals and proceeded to build
five buildings on the premises as its manufacturing factories.  Some of them are
still under construction in progress now. In 2004, Biological proceeded to build
one warehouse in Hankou,  one  conference  center and one  exhibition  center in
Tianjin,  PRC. As of December 31, 2004, the total  investment made by Biological
in constructing  these factories and buildings has reached  approximately RMB 43
million.  The  construction  of  the  exhibition  center  was  completed  at the
beginning of 2005. In August 2004,  Biological entered an Agreement with Tianjin
Wuqing  Development  Co., Ltd..  According to the Agreement,  Biological has the
right to use 6660 square  meters of the land for 50 years,  commencing on August
2004, by paying RMB1,307,050. The said land is in the Wuqing New-tech Industrial
Park and has been used to build the conference center mentioned above.

In  addition,  we lease a  portion  of our  office  building  and  manufacturing
facilities from Tianshi Group, a related party through common ownership. On June
30, 2003, the Company  entered into a written lease agreement with Tianshi Group
to pay annual rent at 1% of total gross revenues.  The term of this agreement is
for five  years  commencing  on January 1, 2003.  In  addition,  the  Company is
obligated  to pay  insurance,  maintenance  and other  expenses  related  to the
premises. The amount of the expense paid in 2004 amounted to $595,494.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

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

On November 17, 2004,  the annual  meeting of  stockholders  of the Company (the


                                       35
<PAGE>

"Annual  Meeting") was held at the Company's  Tianjin  offices for the following
purposes:

1.Elect  following  persons to the Board of Directors:  Jinyuan Li, Wenjun Jiao,
Yupeng  Yan,  Ping Bai,  Gilbert D.  Raker,  Howard R.  Balloch,  and Socorro M.
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 2004.

In this Annual Meeting,  there were accordingly  present, in person or by proxy,
an aggregate of 69,710,176  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:


                                                                        Withheld
    Directors           No. of Shares For   No. of Shares Against      Authority
    ---------           -----------------   ---------------------      ---------
Jinyuan Li                 69,690,910              7,916                  11,350

Wenjun Jiao                69,698,410                416                  11,350

Yupeng Yan                 69,698,410                416                  11,350

Ping Bai                   69,697,810              1,016                  11,350

Socorro M. Quintero        69,698,110                716                  11,350

Howard R. Balloch          69,698,110                716                  11,350

Gilbert D. Raker           69,698,110                716                  11,350

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

                69,700,978 shares voted in favor of the proposal
                ----------

                   5,268   shares voted against the proposal
                ----------

                   3,930   shares abstained.
                ----------


                                       36
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common  stock is listed on the Over the  Counter  Bulletin  Board  under the
symbol  "TBGU".  The  following  table  sets forth the range of high and low bid
prices  reported by the OTCBB in each  fiscal  quarter  from  January 1, 2003 to
December 31, 2004. The quotations reflect  inter-dealer  prices,  without retail
mark-up,  mark-down or commission,  and may not represent  actual  transactions.
Information  presented  for dates  prior to  September  9,  2004,  relate to the
Company prior to the share exchange transaction described elsewhere in this Form
10-KSB,

---------------------------------------------------- -------------- ------------
                                                          High           Low
                                                     -------------- ------------
---------------------------------------------------- -------------- ------------
Fiscal 2003
-----------
---------------------------------------------------- -------------- ------------
Quarter Ended March 31, 2003                              $0.02         $0.02
---------------------------------------------------- -------------- ------------
Quarter Ended June 30, 2003                               $0.15         $0.03
---------------------------------------------------- -------------- ------------
July 1, 2003 - September 9, 2003                          $0.05         $0.03
---------------------------------------------------- -------------- ------------
September 9, 2003 - September 30, 2003*                   $3.80         $0.03
---------------------------------------------------- -------------- ------------
Quarter Ended December 31, 2003                          $12.75         $0.03
---------------------------------------------------- -------------- ------------
Fiscal 2004
-----------
---------------------------------------------------- -------------- ------------
Quarter Ended March 31, 2004                             $13.00         $5.00
---------------------------------------------------- -------------- ------------
Quarter Ended June 30, 2004                               $9.20         $5.15
---------------------------------------------------- -------------- ------------
Quarter Ended September 30, 2004                          $6.50         $3.26
---------------------------------------------------- -------------- ------------
October 1, 2004 - October 27, 2004                        $5.75         $3.85
---------------------------------------------------- -------------- ------------
October 28, 2004 - December 31, 2004                      $7.95         $5.51
---------------------------------------------------- -------------- ------------
Fiscal 2005
-----------
---------------------------------------------------- -------------- ------------
January 1, 2005 - March 24, 2005**                        $7.00         $4.88
---------------------------------------------------- -------------- ------------


*Represents stock performance for periods after the share exchange transaction.
** Reflects partial period


Holders. As of December 31, 2004, there were a total of 71,333,586 shares of our
common stock outstanding, held by approximately 1,000 stockholders of record.

Dividends.  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.

Sales  of  Unregistered  Securities.  We did not sell  any  unregistered  equity
securities during the year ended December 31, 2004.


                                       37
<PAGE>

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

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation

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  following  discussion  contains   forward-looking
statements.  Tiens  Biotech  Group (USA),  Inc. is referred to herein as "we" or
"our." 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; and (d) whether
we are able to successfully  fulfill our primary requirements for cash which are
explained below under "Liquidity and Capital  Resources.  Statements made herein
are as of the date of the filing of this Form  10-KSB  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.

OVERVIEW

Tiens Biotech Group (USA),  Inc. (the "Company" or "Tiens USA"),  formerly known
as Strategika,  Inc. ("Strategika"),  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 in February 2002.

Tiens USA conducts its main business  operations  through its subsidiary Tianjin
Tianshi  Biological  Development  Co.,  Ltd.  ("Biological"),  which is based in
Tianjin,  Peoples Republic of China (PRC).  Biological  primarily engages in the


                                       38
<PAGE>

research,  development,  manufacturing,  and  marketing of nutrition  supplement
products,  including  wellness  products and dietary  supplement  products,  and
personal care products.  Tiens USA derives its revenues principally from product
sales  to  affiliated  companies  in China  and  outside  of  China.  Since  its
establishment, Biological has developed and produced seven major product series,
of which six are comprised of nutrition supplement products,  and the seventh is
comprised of personal care products. Biological develops its products at its own
product  research  and  development  center,   which  employs  highly  qualified
professionals  in the  fields  of  pharmacology,  biology,  chemistry  and  fine
chemistry.  Biological has obtained all required certificates and approvals from
government regulatory agencies to manufacture its products in China, including a
Certificate  of Good  Manufacturing  Practices  (GMP)  issued by the State  Drug
Administration  and a Sanitary  Certificate for food maufacturers in China ("Jin
(Wuqing)  Wei Shi Zheng Zi" 2004,  No.0049)  and a  Sanitary  Certification  for
wellness products  manufacturers  ("Jin Wei Jian Zheng Zi" 2004, No.0006) issued
by the PRC Ministry of Health.  In addition,  all of Biological's  products have
been  certified by appropriate  government  regulatory  agencies,  including the
State  Food  and  Drug  Administration   (SFDA)  and  the  Bureau  of  Technical
Supervision, for manufacture and sale in China.

In China,  Biological  conducts the marketing and sales of its products  through
its  affiliated  company,  Tianjin  Tianshi  Biological  Engineering  Co.,  Ltd.
("Tianshi  Engineering"),  a company  incorporated in China. Tianshi Engineering
markets  and sells  Biological's  products  in China  through  its  twenty-three
branches,  representative offices and chain stores, and nine domestic affiliated
companies.  Six of the  nine  domestic  affiliated  companies  are 51%  owned by
Tianshi Engineering and 49% by Li Baolan, the daughter of Mr. Li Jinyuan,  Tiens
USA's Chief Executive Officer and President. The other three affiliate companies
are owned by Ms. Li Baolan and Mr. Li' s other immediate family members. Outside
of China, Biological sells its products through an extensive direct sales force,
or multi-level  marketing  sales force,  of overseas  affiliates and independent
distributors  who  use the  products  themselves  and/or  resell  them to  other
distributors  or consumers.  These  affiliates are located in  approximately  90
countries,  including the United States,  India,  Malaysia,  Indonesia,  Canada,
Peru,  Brazil,  Russia,  Kazakhstan,   Mongolia,  Finland,  Lithuania,  Britain,
Germany,  France,  Romania,  Ukraine,  Portugal,  Turkey, Italy, Nigeria, Ghana,
South  Africa and  Australia.  Our direct sales  marketing  scheme is subject to
governmental regulation in each of these countries.

In  April  2004,  Tianshi  International  Holdings  Group  Ltd.,  a  corporation
organized   under   the   laws  of  the   British   Virgin   Islands   ("Tianshi
International"),  entered into a joint  venture  contract  with Tianjin  Tianshi
Pharmaceuticals  Co., Ltd.  ("Tianshi  Pharmaceuticals"),  a Chinese  company in
which the majority  shareholder  is Tianjin  Tianshi Group Co.,  Ltd.  ("Tianshi
Group"),  a company  organized  under the PRC laws, to establish Tiens Yihai Co.
Ltd.,  a   Chinese-Foreign   Equity  Joint  Venture  ("Tiens  Yihai").   Tianshi
International is a wholly-owned subsidiary of Tiens USA and Tianshi Group is 90%
owned by Mr. Li and 10% owned by Mr. Li's daughter,  Ms. Li Baolan. On September


                                       39
<PAGE>

15, 2004, the Board of Directors of Tianshi International ratified, and approved
the Tiens Yihai  Joint  Venture  Project.  Tiens Yihai is 99.4% owned by Tianshi
International and 0.6% owned by Tianshi Pharmaceuticals. Tiens Yihai, located in
Shanghai,   P.R.C.,   was  established  to  conduct  research  and  development,
production  and  marketing  of  nutrition  supplement  products,  home  care and
personal care products. As of December 31, 2004, Tiens Yihai was a developmental
stage company and had not yet conducted any operations.

Both  Biological and Tianshi  Engineering  receive  administrative  support from
Tianshi  Group.  Biological  pays  Tianshi  Group 1% of its annual  sales income
(excluding  value added taxes  "VAT") for  administrative  services  (except for
services  provided  by the  officers  of  Tianshi  Group) and the use of Tianshi
Group's administrative building.

     The following is an organization and equity ownership chart of of Tiens USA
and its affiliates.


GRAPHIC OMITTED

The graphic omitted shows the  organizational  chart of Tiens USA, including the
percentage ownership. The following describes the chart:

Tiens USA is owned 4.91% by public stockholders,  2.8% by officers and 92.29% by
Mr.  Li  Jinyuan  .  Tiens  USA  owns  100% of  Tianshi  International.  Tianshi
Inernational owns 80% of Biological and 99.4% of Tiens Yihai.

Tianshi  Group is owned 90% by Mr. Li Jinyuan  and 10% by his  daughter,  Ms. Li
Baolan. Tianshi Group owns 87.66% of Tianshi  Pharmaceuticals and 51% of Tianshi
Engineering.  Tianshi  Pharmaceuticals  owns 20% of Biological and 0.6% of Tiens
Yihai.

Ms.  Li  Baolan   owns  49%  of  Tianshi   Engineering   and  7.29%  of  Tianshi
Pharmaceuticals.

Tianjin Feishi Transportation Co., Ltd. owns 5.05% of Tianshi Pharmaceuticals.

CRITICAL ACCOUNTING POLICIES

Management's  discussion and analysis of its financial  condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The Company's  financial  statements reflect the selection
and  application  of  accounting  policies  which  require  management  to  make


                                       40
<PAGE>

significant  estimates and judgments.  See note 1 to the Company's  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.  The
Company  believes  that  the  following  reflect  the more  critical  accounting
policies that currently affect the Company's  financial condition and results of
operations.

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 cleared 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 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.

In 2004, Tianshi Engineering,  a related company, owned all of the related party
distributors which sell the Company's products domestically in China.

Bad debts
---------

The Company's  business  operations  are  conducted in the People's  Republic of
China.  During the normal  course of  business,  the Company  extends  unsecured
credit to its customers. Management reviews its accounts receivable on a regular
basis to  determine  if the bad debt  allowance  is adequate  at each  year-end.
However,  the Company  records a provision for accounts  receivable  trade which
ranges  from 0.3% to 0.5% of the  outstanding  accounts  receivable  balance  in
accordance with generally accepted accounting principles in the PRC.

Inventories
-----------

The Company  reviews its inventory  annually for possible  obsolete  goods or to
determine  if any reserves  are  necessary  for  potential  obsolescence.  As of
December 31, 2004, the Company has determined  that no reserves are necessary at
year end.


                                       41
<PAGE>
<TABLE>
<CAPTION>

RESULTS OF OPERATIONS

2004 Compared to 2003

During the year ended December 31, 2004,  the Company  continued its strong 2003
performance,  increasing  sales by 53%. As of December 31, 2004, the Company had
retained  earnings  of  $42,200,940,  cash of  $39,243,872  and  reported  total
shareholders' equity of $60,522,899.  For the year ending December 31, 2004, the
Company had  revenue of  $58,910,532  and  selling,  general and  administrative
expenses of $7,363,248.



The year ending December 31,                         2004                2003              Change
-------------------------------------------  -------------------   ----------------   -----------------
<S>                                          <C>                   <C>                <C>
Revenue                                      $    58,910,532       $  38,392,208           53.44%

COGS                                         $    17,483,739       $  12,725,161      $   4,758,578

Gross Profit                                 $    41,426,793       $  25,667,047      $   15,759,746

Gross Profit margin                                  70.32%              66.85%

Selling and administrative expenses          $     7,363,248       $   3,171,338      $   4,191,910

Selling and administrative expenses as a
percentage of sales                                  12.50%              8.26%

Net income                                   $    27,438,296       $  17,053,822            60.89%
</TABLE>

(1) SALES.  Compared  to the year  2003,  sales  increased  by  $20,518,324,  or
approximately   53.44%,  for  the  year  ended  December  31,  2004,   including
international  sales which  increased by  $16,330,594  and domestic  sales which
increased by $4,187,730.  The growth in reported sales was primarily due to: (1)
continued and successful marketing of our products internationally since the end
of 2002;  (2) increased  networking  sales forces in China during 2003 and 2004;
and (3) continued growth in worldwide  demand for our products.  During the year
2004, the Company experienced a significant sales growth in overseas markets and
a solid sales growth in China. Please see the table below for details.

Domestic and Overseas Sales Revenue (04 vs. 03)
--------------------------------------------------------------------------------
Sales Revenue               Year 2004          Year 2003          Increase in %
--------------------------------------------------------------------------------
Domestic                   $29,210,167        $25,022,437             16.74%
--------------------------------------------------------------------------------
Overseas                   $29,700,365        $13,369,771            122.15%
--------------------------------------------------------------------------------


                                       42
<PAGE>
<TABLE>
<CAPTION>

(2) GROSS PROFIT.  Consolidated  gross profit  increased by $15,759,746  for the
year 2004 in comparison  with the year 2003. In the mean time,  the gross profit
margin was increased to 70.32% for the year ended December 31, 2004, from 66.85%
for the year ended  December 31, 2003.  The increase in gross profit  margin was
primarily due to sales growth both in the domestic and overseas  markets and the
decrease  in  production  cost,  which  was  a  result  of  continuing  stronger
management control over (1) cost of raw material  purchases;  (2) utilization of
raw material and production cost efficiency;  (3) product quality  control;  (4)
improvement of manufacturing technology; and (5) economy of scale.

(3) SELLING AND ADMINISTRATIVE  EXPENSES.  Selling and  administrative  expenses
increased by $4,191,910 in the year 2004, compared to the year 2003. The selling
and administrative  expenses as a percentage of sales increased to 12.50% in for
the year 2004. The increase was principally  due to the significant  increase in
advertising expenditures, and continued sales growth and market expansion.

(4) NET INCOME.  Net income for the year ended  December 31, 2004,  increased by
60.89%,  compared to the year ended  December  31, 2003 due  primarily to steady
growth  in  worldwide  sales.   Continued   decrease  in  production  cost  also
contributed to the Company's net income growth.

2003 Compared to 2002

As of December 31,  2003,  the Company had of retained  earningsof  $20,453,290,
cash of $12,725,043 and reported total shareholders' equity of $33,086,192.  For
the year ending  December 31, 2003, we had revenues of $38,392,208  and general,
administrative and sales expenses of $3,171,338.

The year ending December 31,                                 2003                2002              Change
---------------------------------------------------  -------------------   ----------------   -----------------
<S>                                                  <C>                   <C>                <C>
Revenue                                              $    38,392,208       $  14,096,726           172.35%

COGS                                                 $    12,725,161       $   8,297,845      $    4,427,316

Gross Profit                                         $    25,667,047       $   5,798,881      $   19,868,166

Gross Profit margin                                         66.85%               41.14%

Selling and Administrative Expenses                  $     3,171,338       $   3,193,190      $      (21,852)

Selling and ad. Expenses as a percentage of sales            8.26%               22.65%

Net income                                           $    17,053,822       $   1,995,865           754.46%
</TABLE>


                                       43
<PAGE>

(1) SALES.  Sales  increased by  $24,295,482,  or  approximately  172.35%,  from
$14,096,726  for the year ended  December 31, 2002 to  $38,392,208  for the year
ended  December  31,  2003.  The  172.35%  increase  was the result of  directly
marketing our products  internationally  at the end of 2002. By the end of 2003,
we sold our products to  approximately 90 countries.  In addition,  we increased
our domestic  networking  sales forces during 2003.  Domestic sales increased by
$13,335,295 and overseas sales  increased by  $10,960,187.  Please see the table
below for details.

Domestic and Overseas Sales Revenue (03 vs. 02)
--------------------------------------------------------------------------------
Sales Revenue          Year 2003           Year 2002            Increase in %
--------------------------------------------------------------------------------
Domestic              $25,022,437         $11,687,142              114.10%
--------------------------------------------------------------------------------
Overseas              $13,369,771         $ 2,409,584              454.86%
--------------------------------------------------------------------------------


(2) GROSS  PROFIT.  Consolidated  gross profit  increased by  $19,868,166,  from
$5,798,881  for the year ended  December 31, 2002 to $  25,667,047  for the year
ended  December 31, 2003.  Gross  profit as a percentage  of sales  increased to
66.85%  for the year  ended  December  31,  2003 from  41.14% for the year ended
December 31, 2002.  This  increase in gross profit as a percentage  of sales was
the result of  increasing  sales both  domestically  and  worldwide and stronger
management control on production cost.

(3) SELLING AND ADMINISTRATIVE  EXPENSES.  Selling and  administrative  expenses
decreased by $21,852  from  $3,193,190  for the year ended  December 31, 2002 to
$3,171,338 for the year ended December 31, 2003. The selling and  administrative
expenses as a percentage of sales decreased to 8.26% for the year ended December
31, 2003 from  22.65% for the year ended  December  31,  2002.  The  decrease in
selling  and  administrative  expenses  was due to the  decrease  in the cost of
selling  expenses and related  selling  administrative  expenses.  At the end of
2002, in order to monitor our production's  manufacturing and selling functions,
our  management  decided to divide  all the sales  divisions  to our  affiliated
company. As a result, all the expenses related to sales reduced tremendously for
the year ended of 2003 compared to the same period ended 2002.

(4)  NET  INCOME.   Consolidated  net  income   increased  by  $15,057,957,   or
approximately  754.46%,  from $1,995,865 for the year ended December 31, 2002 to
$17,053,822 for the year ended December 31, 2003. The increase was mainly due to
increase in sales and decrease in production cost and selling and administrative
expenses.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


The  Company  markets  most  of  its  products   through  various  domestic  and
international  business  entities that are related to Biological  through common


                                       44
<PAGE>

ownership. Related party sales amounted to 100% of total sales. Internationally,
Biological sells its products  directly to its overseas  affiliates.  Due to the
common ownership,  there are no formal sales or  administrative  agreement among
Biological and those overseas  related  parties.  The business  operations among
these  related  entities are  regulated  through  internal  ordinances.  For the
domestic market,  Biological  sells all of its products to Tianshi  Engineering,
which in turn sells them  through  its 23  representative  offices,  and 9 other
affiliated  companies in China.  Biological  has a sales  contract  with Tianshi
Engineering.  According to this contract,  Tianshi Engineering  accepted that it
would purchase all of  Biological's  products to be sold in China.  All of those
Tianshi  Engineering's  domestic  affiliated  companies are owned in whole or in
part by Li Jinyuan's  immediate  family members.  Please see the table under the
Section "Business  Development  Strategy-Marketing  and Distribution" in Part I,
Item 1,  "Description  of Business" for a list of the  international  affiliated
companies owned by Mr. Li Jinyuan.

Other receivables and note receivable

The Company  through its Chinese joint venture,  Biological,  is owed additional
amounts classified as other receivables from related parties totaling $8,144,740
and  $26,831,339  as  of  December  31,  2004  and  2003,  respectively.   These
receivables  are  generated  from the Company  making  various cash advances and
short-term loans and the allocation of various expenses to related parties.  The
following is the detail of those transactions.

On March 26, 2004,  Biological  entered into an  agreement  with Tianjin  Juchao
Commercial  and Trading  Co.,  Ltd.  ("Juchao")  to convert  various  receivable
amounts into a note receivable in the amount of  RMB200,000,000 or approximately
USD$24,200,000. The note was paid off during 2004 in four quarterly installments
of RMB50,000,000 beginning March 31, 2004 and ending December 31, 2004. Interest
in the amount of $914,760 was paid on this note during the year ending  December
31, 2004 beginning January 1, 2004 at an annual interest rate of 6.048%.

The  receivable was secured by the personal  guarantee of Li Jinyuan,  President
and major  shareholder of Tiens, and the pledge of 20% of his stock ownership in
Tiens or 13,167,000  shares.  These shares are  restricted  stock (as defined in
Rule 144 of the  Securities  Act of 1933, as amended) and cannot be traded until
September 10, 2004.

During the year ended  December  31,  2004,  Biological  advanced  approximately
US$3,532,504 to Tianjin Tianshi Group Co., Ltd. ("Tianshi Group").  In addition,
Biological advanced  approximately  US$1,710,446 to Tianshi  Engineering.  These
transactions are recurring in nature and the Company does not charge interest on
these receivables.

As of December 31, 2004,  the Company had an amount of $2,590,630  classified as
other  receivables  from  Tianshi  Pharmaceuticals.  The company does not charge
interest on this receivable.


                                       45
<PAGE>

Accounts payable

Accounts  payable due to related parties amounted to $209,199 and $758,570 as of
December 31, 2004 and 2003, respectively.  These amounts were generated from the
purchases of raw materials, rent expense and the Company's transportation costs.

Other payables

The  Company  also has  amounts  classified  as other  payables  due to  related
parties,  which amounted to  $945,274and  $1,312,288 as of December 31, 2004 and
2003, respectively.  These amounts arose from cash advances from related parties
such  as   management   service   fees  due  to  related   parties  and  various
non-operational transactions incurred with related parties.

On March 25, 2205 Tianshi  International  entered into a loan  agreement  with a
company  owned by Mr.  Li,  Jinyuan,  pursuant  to which  Tianshi  International
borrowed $300,000. The loan is non-interest bearing and is due on June 25, 2005.

Note Payable

On September 10, 2004, in order to fund their capital  contribution due to Tiens
Yihai Co.,  Ltd.  ("Tiens  Yihai"),  Tianshi  International  entered into a loan
agreement  with  Tianyuan  Capital  Development  Corp.  Ltd.  (i(degree)Tianyuan
Capital") to borrow  $10.65  million.  Mr. Li Jinyuan,  the  president and major
shareholder  of the  Company,  is a director  of Tiens  Yihai and a director  of
Tianyuan Capital.

The  principal  of  the  loan  will  be  paid  in  ten  consecutive   semiannual
installments  of each US  $1,065,000  on the  last  day of each  June,  December
commencing on December 31, 2006 and ending June 30, 2011.  The interest  payment
will be paid on the  outstanding and unpaid  principal  amount of the loan at an
annual  interest  rate of 5% on the last  business day of each June and December
commencing  on December  31,  2004.  The  interest  expense of $163,516 has been
accrued on December 31,2004 on this note.

Rent expense

As of January 1, 2003, the Company had a verbal agreement with Tianshi Group, to
lease a portion of its office building and manufacturing facilities. On June 30,
2003, the Company  entered into a written lease  agreement with Tianshi Group to
pay annual rent on these  facilities at 1% of total gross revenues.  The term of
this agreement is for five years commencing on January 1, 2003. In addition, the
Company is obligated to pay insurance, maintenance and other expenses related to
the  premises.  The total  amount paid on this lease  amounted  to $595,494  and
$375,645 in the years 2004 and 2003, respectively.


                                       46
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2004, net cash provided by operating  activities
was $32,937,516,  net cash used in investing activities was $3,713,214,  and net
cash used in financing activities was $2,697,234.

For the year ended December 31, 2003, net cash provided by operating  activities
was $5,561,449,  net cash provided by investing  activities was $8,291,361,  and
net cash used in financing activities was $1,430,741.

Net  cash  provided  by  operating   activities   increased  by  $27,376,067  to
$32,731,213  for the year ended December 31, 2004,  representing  an increase of
approximately  492.25%  compared to  $5,561,449  net cash  provided by operating
activities  for the  year  2003.  The  increase  in  cash  flow  from  operating
activities  primarily  reflects  an  increase  in  revenues  for the year  ended
December  31,  2004.  This  increase  was also due to better  management  of the
collection of other receivables from our related parties during the year 2004.

Net cash used in investing activities was $3,713,234 for the year ended December
31, 2004.  For the year ended  December 31, 2003,  the net cash  provided by the
investing  activities was $8,291,361.  The increase in the use of cash is due to
the purchase of fixed assets, i.e. equipment and automobiles,  for the Company's
subsidiaries and no collections on loans receivables due from related parties.

Net cash used in financing  activities increased by $1,266,493 to $2,697,234 for
the year ended December 31, 2004,  representing a 88.52%  increase,  compared to
$1,430,741  net cash used in financing  activities  for the same period of 2003.
The  increase in cash used in  financing  activities  was  primarily  due to the
payments to short term notes payable and minority interest shareholders.

Going forward,  our primary  requirements for cash consist of: (1) the continued
production  of existing  products  and general  overhead and  personnel  related
expenses to support  these  activities;  (2)  continued  promotion of networking
sales activities pertaining to our attempt to increase related revenues; and (3)
the development costs of new products; (4) construction and development of Tiens
Yihai.  We anticipate  that our current  operating  activities will enable us to
meet the anticipated cash requirements for the 2005 fiscal year.

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 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


                                       47
<PAGE>

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 it, or at all.


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 FLUCTUATION IN FOREIGN EXCHANGE RATES

Our  operating  subsidiaries  are located in China.  This  Company  buys all raw
materials in China and sells 50% of our products in China using Chinese Renminbi
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.  During the past several  years of  operation,
there  were no  significant  changes  in  exchange  rates;  however,  unforeseen
developments may cause a significant change in exchange rates.


ITEM 7. FINANCIAL STATEMENTS

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

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the  Exchange  Act, as of the end of the period
ended by this report,  we carried out an evaluation of the  effectiveness of the
design and operation of our disclosure controls and procedures.  This evaluation
was  carried  out  under  the  supervision  and  with the  participation  of our
management.  The Company is in the process of  reviewing  its  internal  control
systems in order to be compliant with Section 404 of the Sarbanes Oxley Act. The


                                       48
<PAGE>

Company  anticipates that the review and any changes required to implement to be
in  compliance  with Section 404 will be completed on or prior to the year ended
December 31, 2006. However at this time the Company makes no representation that
the  Company's  systems of  internal  control  comply  with  Section  404 of the
Sarbanes Oxley Act.

Disclosure  controls and procedures are controls and other  procedures  that are
designed to ensure that  information  required  to be  disclosed  in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported,  within the time  periods  specified  in the  Securities  and Exchange
Commission's  rules and  forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required  to be  disclosed  in our  reports  filed  under  the  Exchange  Act is
accumulated and communicated to management,  to allow timely decisions regarding
required disclosure.

Item 8B.  OTHER INFORMATION

None









                                       49
<PAGE>

PART III

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

Set forth  below  are the names of the  directors,  executive  officers  and key
employees  of the Company as of December  31,  2004.  With the  exception of Mr.
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                  46         Chairman,  Chief Executive Officer,
                                       Presidentand Director

Wenjun Jiao                 40         Chief Financial Officer and Director

Yupeng Yan                  41         Executive Vice President and Director

Ping Bai                    34         Executive   Assistant  to  the  President
                                       and Director

Socorro M. Quintero         52         Director

Howard R. Balloch           53         Director

Gilbert D. Raker            61         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.

Business Experience

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.  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 Great China Area;
one of the Ten Most  Popular  Personages,  by China  Economic  Forum  Among  the
High-Ranking;  Excellent  Entrepreneur,  by the  Organization  Committee  of the


                                       50
<PAGE>

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 the
reorganization in September 2003. Prior to the  reorganization,  Mr. Jiao served
as the Chief  Financial  Officer of Tianjin Tianshi  Biological  Development Co.
Ltd.  ("Biological")  from May 2001 through August 2003, and as Chief Accountant
at Xincheng  Accounting  Firm from 2000 until  2001.  Mr. Jiao holds a Doctorate
Degree in  Accounting  from Tianjin  University  of Finance and  Economics and a
Master Degree of Business Administration from Oklahoma University. Mr. Jiao is a
Certified Public Accountant in China.

Yupeng Yan

Mr.  Yan has  served  as  Executive  Vice-President  of the  Company  since  the
reorganization in September 2003. Prior to the reorganization, Mr. Yan served as
Vice-President  of Tianshi Group Co.,  Ltd.  from March 1997 to May 2004.  Since
June 2004, Mr. Yan has also served as CEO of Tianshi  Marketing  Group.  Mr. Yan
currently  holds a number of  leadership  positions  including,  CEO of  Tianshi
International  Marketing  Group,  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.

Ping Bai

Ms. Bai has served as the  Executive  Assistant to the  President of the Company
since the  reorganization  in September  2003. She held a similar  position with
Biological  prior to the  reorganization  from May 2001.  Ms.  Bai served as the
Regional  Sales Manager for the North China Region in Sinar Mas Group from March
1998 until April 2001.  Ms. Bai has rich  experiences  in  international  public
relationship, management of modern enterprises and strategic management of human
resources.

Socorro M. 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


                                       51
<PAGE>

while working for Atlantic Steel Company, Abbott Laboratories and Levi Strauss &
Co. She received a Bachelor of Science in Physics  degree from the University of
the Philippines,  a Master of Science in Industrial  Engineering degree from the
Georgia  Institute  of  Technology,  and a Doctorate  degree in Finance from the
University of Texas at Austin.

Gilbert D. 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  (NASDAQ:
SEMX) since 1988. SEMX Corporation manufactures materials and components used in
the   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 the Chief
Financial  Officer of 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
degree in Production Management from Syracuse University.

Howard R. 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 (AMEX:  GML),  Zi  Corporation  (NASDAQ:  ZICA),  Oztime Media,  a
wholly-owned subsidiary of Zi Corporation,  Ivanhoe Energy (NASDAQ: IVAN), 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.

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 the fiscal year ended December 31, 2004.

BOARD AND COMMITTEE MEETINGS

Our  Board of  Directors  has  responsibility  for  establishing  the  Company's
corporate policies and overseeing the Company's overall performance, although it
is not  involved in  day-to-day  operating  details.  The Board meets  regularly


                                       52
<PAGE>

throughout the year,  including at its annual organization meeting following the
annual meeting of stockholders, to review significant developments affecting the
Company and to act upon matters requiring Board approval.  It also holds special
meetings as required from time to time when  important  matters arise  requiring
Board action  between  scheduled  meetings.  Due to the change in control of the
Company in 2003, the current  members of the Board of Directors did not hold any
meetings during 2003. The Board of Directors held three meetings during 2004. No
director  attended  fewer than 75% of the meetings of the Board of Directors and
the total  number of meetings  held by all  committees  of the Board on which he
served.


The Board of  Directors  has  determined  that  directors  Socorro M.  Quintero,
Gilbert D Raker and Howard R.  Balloch are all  considered  "independent"  under
Section 121(A) of the listing  standards of the American Stock Exchange ("AMEX")
and the  requirements  of the Securities and Exchange  Commission  ("SEC").  The
remaining  four  members  of  the  Board  of  Directors  do  not  satisfy  these
"independence" definitions. Accordingly, the Board of Directors is not comprised
of a majority  of  independent  directors  as would be  required  under the AMEX
listing  standards.  This is permissible under applicable AMEX listing standards
because Mr.  Jinyuan Li, our President and Chief  Executive  Officer,  owns more
than 50% of the voting power of our stock  (specifically,  92.29% as of December
31, 2004). As a "controlled company" within the meaning of relevant AMEX listing
standards (Rule 801(a)),  we are not required to comply with certain  provisions
that would require us to have a majority of "independent"  directors  serving on
our Board,  or standing  nominating and  compensation  committees,  all of whose
members must be "independent" under AMEX standards.  In creating this exception,
AMEX  has  recognized  that  majority  shareholders,  have the  right to  select
directors  and  control  certain  key  decisions,   such  as  executive  officer
compensation,  by virtue of their stock ownership rights. To summarize,  because
we are a controlled  company,  we are exempt from the  requirements  of the AMEX
listing standards relating to having:

(1) a majority of  independent  directors on the Board;  as noted,  the Board of
Directors  had  determined  that  only  three of the  Board's  7  directors  are
"independent"  under  applicable AMEX and SEC  requirements;  and

(2) a standing Board  nominating  committee  composed  entirely of "independent"
directors. As we explain below, our entire Board performs this function; and

Although as a controlled company we are exempt from the requirements of having a
standing compensation committee composed entirely of "independent"  directors as
defined by the AMEX listing  standards,  we formed a  Compensation  Committee in
2004, as discussed below.

The Board of Directors has an Audit  Committee,  a Compensation  Committee and a
Governance  Committee.  The  Board  of  Directors  does  not  have a  Nominating
Committee.  The entire  Board of  Directors  assumes  the  duties  that would be


                                       53
<PAGE>

delegated  to a  Nominating  Committee.  The Company does not have a policy with
regard to Board members'  attendance at annual meetings of  stockholders.  Since
September  9, 2003,  when the  Company  consummated  the  Agreement  and Plan of
Reorganization  and new directors were  appointed to the Board,  the Company has
held an annual meeting of stockholders on November 17, 2004. All seven directors
attended that annual meeting.

Nominating Committee

The Board of Directors does not have a standing Nominating Committee. The entire
Board of Directors  fulfills the role of a  Nominating  Committee.  The Board of
Directors  does not have a charter  governing  its  duties  with  respect to the
nomination process. The Board of Directors has three members who are independent
as defined in the American Stock Exchange listing standards currently in effect.

Audit Committee

The Audit  Committee  operates  under a formal  charter in  accordance  with all
applicable  laws.  The  charter  has been  approved  and adopted by the Board of
Directors and is reviewed and reassessed  annually by the Audit  Committee.  The
charter sets forth the  responsibilities,  authority and specific  duties of the
Audit Committee.  The charter  specifies,  among other things, the structure and
membership  requirements of the Audit Committee,  as well as the relationship of
the Audit Committee to the Company's independent auditors and management.

The Board of Directors has  established  an audit  committee in accordance  with
Rule 10A-3 of the  Securities  Exchange  Act of 1934.  The  members of the Audit
Committee are Ms. Socorro Maria Quintero,  and Messrs. Howard R. Balloch and Mr.
Gilbert D. 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 Ms. Socorro Maria Quintero, Chairman
of the Audit committefe and Mr. Gilbert D. Raker each qualify as an "audit
committee financial expert" under the Securities and Exchanges Commission's
definition.

     Audit Committee Report

     The  responsibilities  of the Audit  Committee of this newly listed Company
are set forth in the Audit Committee  Charter.  The Audit Committee  assists the
Full Board in  fulfilling  its  oversight  responsibilities  with respect to the
integrity of financial  statements and other financial  information.  Management
prepares  the  financial  statements  and  establishes  the  system of  internal
control.


                                       54
<PAGE>

     As part of its oversight  responsibility,  the Audit Committee reviewed and
discussed the financial statements with Management and the Company's Independent
Auditor,  Moore Stephens Wurth Frazer and Torbet,  including a discussion  about
the  quality  and  appropriateness,   not  just  acceptability,   of  accounting
principles applied in the company's financial statement. The Independent Auditor
has the responsibility for expressing an opinion on the conformity of the annual
financial  statements  with US  GAAP  and  disclosure  requirements.  The  Audit
Committee  reviewed  with the  Independent  Auditor  their  judgments  as to the
acceptability  of the  Company's  financial  statements  with  US  GAAP  and SEC
disclosure requirements;  and also other matters as are required to be discussed
under US generally accepted accounting  standards.  The Audit Committee met with
the  Independent  Auditor,  including an executive  session  without  Management
present,  to discuss the results of their audit,  quality of financial reporting
and audit experience with the Company.

     The Audit  Committee  discussed  with the Moore  Stephens  Wurth Frazer and
Torbet its  independence  from  management and the Company.  The Audit Committee
received a letter and written disclosure,  as required by Independence  Standard
Board Standard No.1, from Moore Stephens Wurth Frazer and Torbet  confirming its
independence from Management and the Company.

     An engagement  letter was submitted to and approved by the Audit  Committee
outlining the scope and plan of the annual audit.

     Relying on the reviews and  discussions  noted above,  the Audit  Committee
recommends  to the Full Board that the  financial  statements be included in the
Company's  Annual Report on the Form 10-KSB for the year ended December 31, 2004
for filing with the US SEC. The Audit Committee also  recommends  Moore Stephens
Wurth Frazer and Torbet as the Company's Independent Auditor for 2005.

The Audit Committee

     Socorro Maria Quintero, Chairman
     Howard R. Balloch
     Gilbert D. Raker

     March 2005


                                       55
<PAGE>

Compensation Committee

The Board of  Directors  formed a  Compensation  Committee  in early  2004.  The
members of the Compensation  Committee are Messrs. Gilbert D. Raker, Wenjun Jiao
and Yupeng Yan, and Ms. Ping Bai. The  Compensation  Committee  did not hold any
meetings in 2004 and has not yet adopted a formal  charter  pursuant to which it
shall be governed.

Governance Committee

The Board of Directors formed a Governance Committee in August 2004. The members
of the Compensation  Committee are Messrs. Howard R. Balloch and Yupeng Yan, and
Ms. Ping Bai. The  Governance  Committee has  constructed  a Code of Ethics,  by
which the  Company's  officers  and its  senior  executives  are  governed.  The
Governance  Committee has not yet held any meetings since its  establishment  in
2004.

Code of Ethics

The Board of Directors has adopted a Code of Ethics to promote its commitment to
the legal and ethical conduct of the Company's  business.  A copy of our Code of
Ethics is filed as Exhibit 14 to this Form 10-KSB.  The Chief Executive Officer,
Chief Financial Officer,  and other senior officers are required to abide by the
Code of Ethics,  which provides the foundation for compliance with all corporate
policies  and  procedures,   and  best  business  practices.  The  policies  and
procedures  address  a  wide  array  of  professional  conduct,   including  the
establishment of sound employment  policies,  methods for avoiding and resolving
conflicts   of  interest,   safeguarding   intellectual   property,   protecting
confidential  information,  and a strict  adherence to all laws and  regulations
applicable  to the conduct of the  Company's  business.  The Company  intends to
satisfy  its  obligations,  imposed  under the  Sarbanes-Oxley  Act, to disclose
promptly on the Company's  website  amendments  to, or waivers from, the Code of
Ethics, if any.

ITEM 10. Executive Compensation.

The following table sets forth the compensation paid or accrued,  for the fiscal
years ended December 31, 2004,  2003 and 2002.for the Company's  Chief Executive
Officer.  There are no other  executive  officers whose salary and bonus were in
excess of $100,000.


                                       56
<PAGE>

------------------------------ ------- -----------------------------------------

                                                     Annual Compensation
                                                     -------------------
------------------------------ ------- ------------------------ ----------------

Name and                                                        Other Annual
Principal Position             Year    Salary                   Compensation
------------------             ----    ------                   ------------
------------------------------ ------- ------------------------ ----------------

Jinyuan Li                     2004    USD$145,455.00           -0-
Chief Executive Officer and    2003    USD$48,326.10(1)         -0-
President                      2002    N/A                      N/A

------------------------------ ------- ------------------------ ----------------

(1)  On September  9, 2003,  Mr. Li was  appointed as CEO. The salary  disclosed
     here  represents  the  compensation  paid to Mr. Li from  September 9, 2003
     through December 31, 2003.

Option Grants in Last Fiscal Year

None.

Aggregate Option Exercises In Last Fiscal Year

None.

Equity Compensation Plan Information

None.

Directors' Compensation

The Company pays its  non-employee  Directors  USD$30,000 per year in connection
with  their  activities  on behalf  of the  Company,  plus  travel  expenses  in
connection with the Board of Directors meetings.

Employment   Contracts,   Termination   of  Employment  and  Change  in  Control
Arrangements

On July 31, 2004, the board of directors  accepted the  resignation of Mr. Percy
Kong Kei Chin from the board of  directors.  Mr.  Chin  advised  Tiens  that his
resignation was due to personal  reasons.  Mr. Chin submitted his resignation on
July 15, 2004. Tiens is in the process of evaluating  candidates for the purpose
of  filling  the  resulting  vacancy  in its board of  directors.  In  addition,
pursuant to an agreement  with the Company,  Mr. Chin's 665,000 shares of common
stock of the  Company  owned by Mr.  Chin were  returned to the Company and were
cancelled on September 14, 2004.


                                       57
<PAGE>

Item 11.  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 December  31,  2004:  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             Number of Shares              Percent
------------------------------------ ----------------------------- -------------
Jinyuan Li                           65,835,000 (1)                92.29%
------------------------------------ ----------------------------- -------------
Wenjun Jiao                             665,000                    *
------------------------------------ ----------------------------- -------------
Yupeng Yan                              665,000                    *
------------------------------------ ----------------------------- -------------
Ping Bai                                665,000 (2)                *
------------------------------------ ----------------------------- -------------
Socorro Maria Quintero               0                             0
------------------------------------ ----------------------------- -------------
Howard R. Balloch                    0                             0
------------------------------------ ----------------------------- -------------
Gilbert D. Raker                     0                             0
------------------------------------ ----------------------------- -------------
All Directors and Executive          67,830,000                    95.09%
Officers as a Group
------------------------------------ ----------------------------- -------------

--------------------

*  Less than one percent

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.

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.

     (1)  Includes 2,633,400 shares owned by family members and 658,350 owned by
          Tian Jin Mei Jing International Love and Affection Foundation Limited,
          over which Mr. Li has sole voting and investment power.

     (2)  Includes  6,650 shares owned by Tian Jin Mei Jing  International  Love
          and Affection  Foundation Limited,  over which Ms. Bai has sole voting
          and investment power.


                                       58
<PAGE>

Equity Compensation Table

None.

Item 12. Certain Relationships and Related Transactions.

The  Company  markets  all  of  its  products   through  various   domestic  and
international business entities that are related to the Company's main operating
subsidiary,  Biological,  through common ownership. Related party sales amounted
to 100% of the Company's total consolidated sales.  Internationally,  Biological
sells  its  product  directly  to its  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.  For the
domestic market,  Biological  sells all of its products to Tianshi  Engineering,
which sells them through its 23 representative  offices,  and 9 other affiliated
companies in China.  Biological has a sales  contract with Tianshi  Engineering.
According to this contract,  Tianshi Engineering  accepted the it would purchase
all of Biological's  products to be sold in China. All of Tianshi  Engineering's
domestic affiliated  companies are owned in whole or in part by Mr. Li Jinyuan's
immediate  family  members.  Please see the table  under the  Section  "Business
Development Strategy-Marketing and Distribution" in Part I, Item 1, "Description
of Business" for a list of the international  affiliated  companies owned by Mr.
Li Jinyuan.

The  following  table  is  provided  to  facilitate  your  understanding  of the
relationships  between  related  parties and us and their  transactions  with us
during the fiscal year of 2004 and 2003.

--------------------------------------------------------------------------------
                                                     2004           2003
--------------------------------------------------------------------------------
Revenue ---related party                             $58,910,532    $38,392,208
--------------------------------------------------------------------------------
                                                     December 31,   December 31,
                                                     2004           2003
--------------------------------------------------------------------------------
Accounts receivable, trade - related party, net of
allowance for doubtful accounts of $30,442 and $0    $6,058,021     $8,533
as of December 31, 2004 and 2003, respectively
--------------------------------------------------------------------------------
Other receivables - related party                    $8,144,740     $26,831,339
--------------------------------------------------------------------------------
Accounts payable - related party                     $209,199       $758,570
--------------------------------------------------------------------------------
Other payable - related party                        $945,274       $1,312,288
--------------------------------------------------------------------------------


Related party sales amounted to $58,910,532  and $38,392,208 for the year ending
December 31, 2004 and 2003,  which represent 100% of total Company sales for the
periods then ended. Related party accounts receivable amounted to $6,058,021 and
$8,533 as of December 31, 2004 and 2003,  respectively,  net of an allowance for
doubtful accounts of $ 30,442 and $0, respectively.


                                       59
<PAGE>

Other Receivables
-----------------

The Company is owed  additional  amounts  classified as other  receivables  from
related parties totaling  $8,144,740 and $26,831,339 as of December 31, 2004 and
2003,  respectively.  These  receivables  are generated  from the Company making
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 March 26, 2004,  Biological  entered into an  agreement  with Tianjin  Juchao
Commercial  and Trading  Co.,  Ltd.  ("Juchao")  to convert  various  receivable
amounts into a note receivable in the amount of RMB200, 000,000 or approximately
USD $24,200,000.  The note was to be paid off in four quarterly  installments of
RMB50,  000,000 beginning March 31, 2004 and ending December 31, 2004.  Interest
was charged beginning January 1, 2004 at an annual interest rate of 6.048%.  The
receivable  is secured by the personal  guarantee of LI Jinyuan,  President  and
major  stockholder  of Tiens,  and the pledge of 20% of his stock  ownership  in
Tiens or 13,167,000  shares.  These shares are  restricted  stock (as defined in
Rule 144 of the  Securities  Act of 1933, as amended) and cannot be traded until
September  10,  2004.  The note was paid off during the year ended  December 31,
2004 and interest income of $914,760 was paid on this note.

Accounts Payable
----------------

Accounts  payable due to related  parties  amounted to $209,199  and $758,570 at
December 31, 2004 and 2003, respectively.  These amounts were generated from the
related parties paying expenses on behalf of the Company.

Other Payables
--------------

The Company has amounts  classified  as other  payables  due to related  parties
which  amounted to $945,274  and  $1,312,288  as of December  31, 2004 and 2003,
respectively.  These  amounts  arose from cash  advances  from related  parties,
management fees due to related parties and various non-operational  transactions

On March 25, 2205 Tianshi  International  entered into a loan  agreement  with a
company  owned by Mr.  Li,  Jinyuan,  pursuant  to which  Tianshi  International
borrowed $300,000. The loan is non-interest bearing and is due on June 25, 2005.

incurred with related parties.

Loan Agreement
--------------

On  April  20,  2004,  our  wholly-owned   subsidiary,   Tianshi  International,
consummated a joint venture contract (the "Joint Venture  Project") with Tianshi
Pharmaceutical.  Pursuant to the terms of the  contract,  the parties  agreed to
establish Tiens Yihai, a Chinese-Foreign  Equity Joint Venture. On September 15,
2004, the Board of Directors of Tianshi  International  ratified,  confirmed and
approved in all respects,  Tianshi  International's  authority to enter into the
Joint Venture Project. Tiens Yihai, located in Shanghai, PRC, is in the business
of research and  development,  production and marketing of nutrition  supplement
products,  home care and personal care products. Mr. Jinyuan Li who is the Chief


                                       60
<PAGE>

Executive  Officer,  President and one of the Board  Directors,  is the majority
shareholder of Tianshi Pharmaceutical.

On September 10, 2004, Tianshi International, entered into a term loan agreement
with Tianyuan Capital  Development  Corp. Ltd.  ("Tianyuan"),  pursuant to which
Tianyuan  agreed  to  loan  USD$10.65   million  in  the  aggregate  to  Tianshi
International,  at an interest rate of 5% per year. Tianshi  International shall
pay the  principal of the loan in ten  consecutive  semiannual  installments  of
USD$1,065,000 on the last day of each June and December  commencing December 31,
2006 and ending  June 30,  2011.  The loan  proceeds  were  advanced  to Tianshi
International  to  establish  and  invest in Tiens  Yihai Co.,  Ltd.,  the joint
venture with Tianshi Pharmaceutical.  Mr. Jinyuan Li, a director of the Company,
is a director of Tianyuan.

Rent expense

As of January 1, 2003,  the Company has a verbal  agreement  with Tianshi Group,
which is a related  party  through  ownership,  to lease a portion of its office
building and manufacturing facilities. The Company has agreed to pay for certain
expenses of the Tianshi Group in lieu of a lease payment.  On June 30, 2003, the
Company  entered into a written lease agreement with Tianshi Group to pay annual
rent on  these  facilities  at 1% of  total  gross  revenues.  The  term of this
agreement is for five years  commencing  on January 1, 2003.  In  addition,  the
Company is obligated to pay insurance, maintenance and other expenses related to
the  premises.  Rent  expense  under this  agreement  amounted to  $595,494  and
$375,645 in 2004 and 2003.

ITEM 13. EXHIBITS AND REPORTS

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 (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)
-------------- -----------------------------------------------------------------


                                 61
<PAGE>

-------------- -----------------------------------------------------------------
14             Code of Ethics (1)
-------------- -----------------------------------------------------------------

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 pursuant to Section
               906 of the Sarbanes-Oxley Act of 2002
-------------- -----------------------------------------------------------------

32.2*          Certification of the 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 10SB filed with the Securities
and Exchange Commission on March 7, 2002.

Item 14. Principal Accountant Fees and Services

AUDIT FEES

Total  annual  audit fees  billed for  professional  services  rendered by Moore
Stephens Wurth Frazer and Torbet,  LLP during the 2003 and 2004 fiscal years for
the audit of our annual  financial  statements  and the review of the  financial
statements  included in our quarterly  reports on Form 10-QSB,  or 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, totaled $150,000 and $215,000, respectively.

AUDIT RELATED FEES
------------------

Other than the fees  described  under the  caption  "Audit  Fees"  above,  Moore
Stephens  Wurth  Frazer  and  Torbet,  LLP did not bill  any  fees for  services
rendered  to us during the fiscal  years  ended  December  31, 2003 and 2004 for
assurance  and related  services in  connection  with the audit or review of our
financial statements.

TAX FEES

The  total  fees  billed  during  the 2003 and  2004 for  professional  services
rendered  by Moore  Stephens  Wurth  Frazer and Torbet,  LLP for tax  compliance


                                       62
<PAGE>

services were $10,000 and $10,000,  respectively.  Specifically,  these services
involved preparation of the consolidated tax returns.

ALL OTHER  FEES
---------------

No other fees were billed by Moore  Stephens Wurth Frazer and Torbet LLC for the
years ended  December 31, 2003. In 2004,  Moore Stephens Wurth Frazer and Torbet
LLC billed $5,500 for providing  professional advice on the Company's compliance
with Section 404 of the Sarbanes Oxley Act and performing research and preparing
memo regarding FASB FIN 46R.

PRE-APPROVAL OF SERVICES
------------------------

The  Audit  Committee  pre-approves  all  services,  including  both  audit  and
non-audit services,  provided by our independent  auditors.  For audit services,
each year the  independent  auditor  will  provide 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 will also submit
an audit  services  fee  proposal,  which  also  must be  approved  by the Audit
Committee before the audit commences.











                                       63
<PAGE>


                         TIENS BIOTECH GROUP (USA), INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm                      F-1

Consolidated Balance Sheets                                                  F-2

Consolidated Statements of Income and Other Comprehensive
         Income (Loss)                                                       F-3

Consolidated Statements of Shareholders' Equity                              F-4

Consolidated Statements of Cash Flows                                        F-5

Notes to Consolidated Financial Statements                                   F-6
















<PAGE>

Report of Independent Registered Public Accounting Firm

The Board of Directors
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, 2004 and 2003,  and the
related  consolidated  statements of operations and other  comprehensive  income
(loss),  shareholders'  equity and cash flows for the years  then  ended.  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 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
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, 2004 and 2003, and the results
of their  operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.




/s/ Moore Stephens Wurth Frazer and Torbet, LLP


February 26, 2005

Walnut, California



                                       F-1
<PAGE>
<TABLE>
<CAPTION>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2004 AND 2003

                                     ASSETS
                                     ------

                                                                 2004            2003
                                                             ------------    ------------
<S>                                                          <C>             <C>
CURRENT ASSETS:
    Cash                                                     $ 39,243,872    $ 12,725,043
    Accounts receivable, trade - related parties, net of
       allowance for doubtful accounts of $30,442 and $0
       as of December 31, 2004 and 2003, respectively           6,058,021           8,533
    Other receivables                                             529,036         139,820
    Other receivables - related parties                         8,144,740      26,831,339
    Inventories                                                 4,567,418       4,004,216
                                                             ------------    ------------
       Total current assets                                    58,543,087      43,708,951
                                                             ------------    ------------

PLANT AND EQUIPMENT, net                                       20,200,806      11,156,268
                                                             ------------    ------------

OTHER ASSETS:
    Intangible assets, net                                        469,765         363,330
    Employee advances                                              75,212         821,536
    Deposits                                                    4,230,063       1,051,557
                                                             ------------    ------------
       Total other assets                                       4,775,040       2,236,423
                                                             ------------    ------------

          Total assets                                       $ 83,518,933    $ 57,101,642
                                                             ============    ============

                      LIABILITIES AND SHARE HOLDERS' EQUITY
                      -------------------------------------

CURRENT LIABILITIES:
    Accounts payable                                         $  1,791,019    $  2,531,829
    Accounts payable - related party                              209,199         758,570
    Advances from customers - related parties                     673,349       5,141,661
    Wages and benefits payable                                    165,370          25,447
    Other taxes payable                                           623,113         206,723
    Other payables                                                263,469          27,251
    Other payables - related parties                              945,274       1,312,288
    Short term notes payable                                         --         5,324,000
    Current portion of long term debt                             155,442         259,364
                                                             ------------    ------------
       Total current liabilities                                4,826,235      15,587,133

LONG TERM DEBT, net of current portion                         10,657,742         155,591
                                                             ------------    ------------

       Total liabilities                                       15,483,977      15,742,724
                                                             ------------    ------------

MINORITY INTEREST                                               7,512,057       8,272,726
                                                             ------------    ------------

SHAREHOLDERS' EQUITY:
    Common stock, $0.001 par value, 260,000,000
       shares authorized, 71,333,586 and 71,998,586
       shares issued and outstanding, respectively                  6,851           6,851
    Paid-in-capital                                             8,906,492       8,906,492
    Statutory reserves                                          9,420,783       3,730,137
    Retained earnings                                          42,200,940      20,453,290
    Stock receivable                                                 --            (6,650)
    Accumulated other comprehensive income (loss)                 (12,167)         (3,928)
                                                             ------------    ------------
       Total shareholders' equity                              60,522,899      33,086,192
                                                             ------------    ------------
          Total liabilities and shareholders' equity         $ 83,518,933    $ 57,101,642
                                                             ============    ============
</TABLE>


The accompanying notes are an integral part of this statement.


                                       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, 2004 AND 2003




                                                       2004            2003
                                                   ------------    ------------
REVENUE - RELATED PARTIES                          $ 58,910,532    $ 38,392,208

COST OF SALES                                        17,483,739      12,725,161
                                                   ------------    ------------

GROSS PROFIT                                         41,426,793      25,667,047

SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES         7,363,248       3,171,338
                                                   ------------    ------------

INCOME FROM OPERATIONS                               34,063,545      22,495,709

OTHER INCOME (EXPENSE), net of other expense            388,266      (1,178,389)
                                                   ------------    ------------

INCOME BEFORE MINORITY INTEREST                      34,451,811      21,317,320

MINORITY INTEREST                                     7,013,515       4,263,498
                                                   ------------    ------------

NET INCOME                                           27,438,296      17,053,822

OTHER COMPREHENSIVE INCOME (LOSS):
    Foreign currency translation adjustment              (8,239)           --
                                                   ------------    ------------

COMPREHENSIVE INCOME                               $ 27,430,057    $ 17,053,822
                                                   ============    ============

EARNINGS PER SHARE, BASIC AND DILUTED              $       0.38    $       0.38
                                                   ============    ============

WEIGHTED AVERAGE NUMBER OF SHARES                    71,801,819      44,730,609
                                                   ============    ============


The accompanying notes are an integral part of this statement.


                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



                                                     Number           Common          Paid-in         Statutory
                                                   of shares          stock           capital         reserves
                                                 -------------    -------------    -------------    -------------
<S>                                              <C>              <C>              <C>              <C>
BALANCE, January 1, 2003                             5,000,508    $           1    $   8,906,492    $     399,173
  Tianshi stock issued to Tianshi shareholders            --              6,850             --               --
  6.5 for one shares forward split                  27,503,078             --               --               --
  Issuance of common stock to Tianshi
       shareholders due to reorganization           68,495,000             --               --               --
  Cancellation of common stock held by
       Rene Larrave                                (29,000,000)            --               --               --
  Net income                                              --               --               --               --
  Adjustment to statutory reserve                         --               --               --          3,330,964
                                                 -------------    -------------    -------------    -------------
BALANCE, December 31, 2003                          71,998,586            6,851        8,906,492        3,730,137
  Cancellation of common stock                        (665,000)            --               --               --
  Receipt of stock receivable                             --               --               --               --
  Net Income                                              --               --               --               --
  Foreign currency translation loss                       --               --               --               --
  Adjustment to statutory reserve                         --               --               --          5,690,646
                                                 -------------    -------------    -------------    -------------
BALANCE, December 31, 2004                          71,333,586    $       6,851    $   8,906,492    $   9,420,783
                                                 =============    =============    =============    =============


                                                                                    Accumulated
                                                                                       other
                                                    Retained          Stock        comprehensive
                                                    earnings        receivable     income (loss)       Totals
                                                 -------------    -------------    -------------    -------------
BALANCE, January 1, 2003                         $   6,730,432    $        --      $      (3,928)   $  16,032,170
  Tianshi stock issued to Tianshi shareholders            --             (6,650)            --                200
  6.5 for one shares forward split                        --               --               --               --
  Issuance of common stock to Tianshi
       shareholders due to reorganization                 --               --               --               --
  Cancellation of common stock held by
       Rene Larrave                                       --               --               --               --
  Net income                                        17,053,822             --               --         17,053,822
  Adjustment to statutory reserve                   (3,330,964)            --               --               --
                                                 -------------    -------------    -------------    -------------
BALANCE, December 31, 2003                          20,453,290           (6,650)          (3,928)      33,086,192
  Cancellation of common stock                            --               --               --               --
  Receipt of stock receivable                             --              6,650             --              6,650
  Net Income                                        27,438,296             --               --         27,438,296
  Foreign currency translation loss                       --               --             (8,239)          (8,239)
  Adjustment to statutory reserve                   (5,690,646)            --               --               --
                                                 -------------    -------------    -------------    -------------
BALANCE, December 31, 2004                       $  42,200,940    $        --      $     (12,167)   $  60,522,899
                                                 =============    =============    =============    =============
</TABLE>





The accompanying notes are an integral part of this statement.


                                       F-4
<PAGE>
<TABLE>
<CAPTION>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                      2004            2003
                                                                  ------------    ------------
<S>                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                    $ 27,438,296    $ 17,053,822
    Adjustments to reconcile net income to cash
       provided by (used in) operating activities:
         Minority interest                                           7,013,515       4,263,498
         Depreciation                                                1,303,433         991,138
         Amortization                                                   51,718          47,764
         (Gain) loss on sale of assets                                 124,536         (18,587)
       (Increase) decrease in assets:
         Accounts receivable - related parties                      (6,049,488)      2,554,124
         Other receivables                                            (389,216)        188,671
         Other receivables - related parties                        11,773,082     (26,831,339)
         Inventories                                                  (563,202)         43,457
         Employee advances                                             746,324        (267,504)
         Deposits                                                   (3,178,506)        882,879
       Increase (decrease) in liabilities:
         Accounts payable                                             (740,810)        569,761
         Accounts payable - related party                             (549,371)         (4,124)
         Advances from customers                                    (4,468,312)      5,081,222
         Wages and benefits payable                                    139,923        (140,489)
         Other taxes payable                                           416,390          (4,065)
         Other payables                                                236,218      (1,103,318)
         Other payables - related parties                             (367,014)      2,254,539
                                                                  ------------    ------------
           Net cash provided by (used in) operating activities      32,937,516       5,561,449
                                                                  ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Decrease in loans receivable - related party                          --        10,899,102
    Increase in intangible assets                                     (158,153)           --
    Proceeds from sales of plant and equipment                         713,036          66,549
    Purchase of equipment and automobiles                           (4,268,097)     (2,674,290)
                                                                  ------------    ------------
           Net cash provided by (used in) investing activities      (3,713,214)      8,291,361
                                                                  ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments, net of borrowings on short term notes payable         (5,324,000)     (1,136,190)
    Payments on long term debt                                        (259,513)       (294,751)
    Payments to minority interest shareholder                       (7,778,113)              0
    Proceeds from long term debt                                    10,657,742               0
    Proceeds of stock receivable                                         6,650             200
                                                                  ------------    ------------
           Net cash provided by (used in)  financing activities     (2,697,234)     (1,430,741)
                                                                  ------------    ------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                 (8,239)           --
                                                                  ------------    ------------

INCREASE IN CASH                                                    26,518,829      12,422,069

CASH, beginning of year                                             12,725,043         302,974
                                                                  ------------    ------------

CASH, end of year                                                 $ 39,243,872    $ 12,725,043
                                                                  ============    ============
</TABLE>


The accompanying notes are an integral part of this statement.


                                       F-5
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Background

Background
----------

Tiens Biotech Group (USA),  Inc. (the "Company" or "Tiens "),  formerly known as
Strategika,  Inc.  ("Strategika"),  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 in February 2002.

In August 2003,  Strategika and Tianshi  International,  LI Jinyuan, JIAO Wenjun
and  YAN  Yupeng,  all  Chinese  Nationals  who  were  stockholders  of  Tianshi
International  (the  "Tianshi  Stockholders")  entered an Agreement  and Plan of
Reorganization  (the  "Agreement"),  which was effective  September 9, 2003 (the
"Effective  Date").  Pursuant to the  Agreement,  Strategika  received  from the
Tianshi  Stockholders all of the issued and outstanding  common stock of Tianshi
International,  in exchange for the issuance by Strategika of 68,495,000  shares
of its common stock to the Tianshi Stockholders,  representing 95% of the issued
and outstanding  common stock of Strategika,  giving effect to the issuance.  As
additional  consideration,  Rene  Larrave,  the sole  officer  and  director  of
Strategika prior to the reorganization, contributed all of his Strategika common
stock to Strategika without additional consideration.

The  purchase of Tianshi  International  and the issuance of  Strategika  common
stock  has  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 on 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"). Biological is
a Chinese-foreign equity joint venture company established under the laws of the
PRC on March 27, 1997.  Biological is subject to the Law on Sino Foreign  Equity
Joint Ventures ("Joint Venture Law"), its  implementation  regulations and other
related rules and regulations  ("Joint Venture  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 International Development Co., Ltd. ("Tianshi Hong Kong") incorporated
in Hong Kong which  owned 80% of the joint  venture,  and  Tianshi  Engineering,
which owned the remaining 20% of Biological.  Tianshi Hong Kong is owned 100% by
LI Jinyuan. Tianshi Engineering is 49% owned by Ms. Li Baolan and 51% by Tianshi
Group.  In June  2003,  Tianshi  Engineering  transferred  its 20%  interest  in
Biological  for  no  consideration  to  Tianshi   Pharmaceuticals   and  Tianshi
International  acquired  80%  of  Biological  from  Tianshi  Hong  Kong  for  no
consideration. This transfer was made for no consideration,  since LI Jinyuan is
president and sole shareholder of both companies.






See report of independent registered public accounting firm.


                                       F-6
<PAGE>
<TABLE>
<CAPTION>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Background (continued)

As result of the above transactions, Tianshi International is now a wholly owned
subsidiary of the Company and Biological  remained as an 80% owned subsidiary of
Tianshi  International.  The  following  diagram is an  organization  and equity
ownership chart of the Company and its affiliates:


                                [GRAPHIC OMITTED]


The graphic omitted shows the  organizational  chart of Tiens USA, including the
percentage ownership. The following describes the chart:

Tiens USA is owned 4.91% by public stockholders,  2.8% by officers and 92.29% by
Mr.  Li  Jinyuan  .  Tiens  USA  owns  100% of  Tianshi  International.  Tianshi
Inernational owns 80% of Biological and 99.4% of Tiens Yihai.

Tianshi  Group is owned 90% by Mr. Li Jinyuan  and 10% by his  daughter,  Ms. Li
Baolan. Tianshi Group owns 87.66% of Tianshi  Pharmaceuticals and 51% of Tianshi
Engineering.  Tianshi  Pharmaceuticals  owns 20% of Biological and 0.6% of Tiens
Yihai.

Ms.  Li  Baolan   owns  49%  of  Tianshi   Engineering   and  7.29%  of  Tianshi
Pharmaceuticals.

Tianjin Feishi Transportation Co., Ltd. owns 5.05% of Tianshi Pharmaceuticals.


Note 2 - Summary of significant accounting policies

The reporting entity
--------------------

The financial  statements in the Strategika  filings became those of Tiens.  The
consolidated  financial  statements  of  Tiens  reflect  the  activities  of the
following Company subsidiaries:

                                                                             Percentage
                         Subsidiary                                         Of 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>







Tianshi  International is a corporation  organized under the laws of the British
Virgin  Islands.  Tianshi  International  is a  holding  company  for  Tiens 80%
investment  in  Biological  and its 99.4%  investment  in Tiens Yihai Co.,  Ltd.
("Tiens Yihai").


See report of independent registered public accounting firm.

                                       F-7
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

The reporting entity (continued)
--------------------------------

Biological is a foreign investment joint venture which is incorporated under the
laws of PRC.  Biological is classified as a Foreign Investment  Enterprise (FIE)
in the PRC and is  subject to the FIE laws of the PRC.  Biological  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  provides for a 50 year
term beginning on March 27, 1998 with registered capital of $10,000,000.

Tiens Yihai Co. Ltd. (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  provides  for a 50  year  term  beginning  on  May  27,  2004  with
registered capital of $200,000,000.

Tianshi  International  owns 80% of its  subsidiary  Biological and 99.4% of its
subsidiary  Tiens Yihai.  The remaining 20% and 0.6%  respectively  are owned by
Tianshi Pharmaceuticals whose majority shareholder is Tianshi Group.

Nature of operations
--------------------

The Company through its subsidiaries is primarily  engaged in the  manufacturing
and marketing of wellness products,  nutrition  supplement products and personal
care  products.  The  Company  sells its  products  to a sales  force of related
distributors  who in turn sell to  independent  distributors  and  managers  who
resell them to other  distributors or public consumers.  The Company markets its
products in China, South Korea, Japan,  India,  Thailand,  Malaysia,  Indonesia,
Canada, Peru, Brazil, Russia, Kazakhstan, Belarus, Mongolia, Finland, Lithuania,
Britain,  Germany, France, Romania, Ukraine,  Portugal,  Turkey, Italy, Nigeria,
Ghana, South Africa and Australia.

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 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.

See report of independent registered public accounting firm.

                                       F-8

<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Revenue recognition (continued)
-------------------------------

In 2004 and  2003,  Tianshi  Engineering,  a related  company,  owned all of the
related party  distributors  which sell the Company's  products  domestically in
China.

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 their  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.

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.

Translation  adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and amounted to $(8,238)  and $(3,928)  December 31, 2004 and December 31, 2003,
respectively.

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.

Income taxes
------------

The Company has adopted  Statement of Financial  Accounting  Standards  No. 109,
"Accounting  for Income Taxes" (SFAS 109).  SFAS 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.

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.

See report of independent registered public accounting firm.


                                       F-9
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Income taxes (continued)
------------------------

The Company's  subsidiaries,  Biological and Tiens Yihai, are Sino-Foreign Joint
Ventures  incorporated in the People's Republic of China. 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 10% 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
will expire for Biological and it will become subject to income tax at a reduced
rate of 10%.

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 year  profits  are first  made,  followed by a 15%
reduced tax rate for the next three years. In addition, 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.

Tiens  Yihai  was  established  for the  purposes  of being in the  business  of
research and development,  production and marketing of healthcare, home care and
personal  care  products.  As of  December  31,  2004,  Tiens  Yihai  is in  the
developmental stage of its organization and did not have any operating income.

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.  Depreciation  expense for the years ended  December
31, 2004 and 2003 amounted to $1,303,433 and $991,138, respectively.

Estimated useful lives of the assets are as follows:

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




See report of independent registered public accounting firm.

                                       F-10
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies (continued)

Plant and equipment, net (continued)

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
capitalization of interest  associated with the cost in construction in progress
is discussed in note 2, Capitalized interest.

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 operations.  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  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of useful lives. As of December 31, 2004, the Company expects these assets to be
fully recoverable.

Plant and equipment consist of the following at December 31:

                                                           2004          2003
                                                       -----------   -----------
Buildings and improvements                             $ 7,962,799   $ 1,453,913
Office facilities                                          162,522       461,526
Computer equipment and software                            782,846       763,661
Equipment                                                6,514,151     6,126,161
Vehicles                                                 2,771,364     1,455,991
Construction in progress                                 6,023,223     4,455,309
                                                       -----------   -----------
              Total                                     24,216,905    14,716,561
Less accumulated depreciation                            4,016,099     3,560,293
                                                       -----------   -----------
              Total                                    $20,200,806   $11,156,268
                                                       ===========   ===========


Use of estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  of the United States of America  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.

See report of independent registered public accounting firm.


                                       F-11
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Recently issued accounting pronouncements
-----------------------------------------

In  March  2004,   the  FASB  issued  EITF  Issue  No.  03-1,   The  Meaning  of
Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF
03-1 includes new guidance for  evaluating  and recording  impairment  losses on
debt  and  equity  investments,  as  well  as new  disclosure  requirements  for
investments that are deemed to be temporarily  impaired.  In September 2004, the
FASB issued Staff  Position EITF 03-1-1,  which delays the effective  date until
additional  guidance  is  issued  for the  application  of the  recognition  and
measurement  provisions  of EITF  03-1 to  investments  in  securities  that are
impaired;  however, the disclosure requirements are effective for annual periods
ending after June 15, 2004.  Although the Company will  continue to evaluate the
application of EITF 03-1,  management does not currently  believe  adoption will
have a  material  impact on the  Company's  financial  position  or  results  of
operations.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of
ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43, Chapter
4, Inventory  Pricing,  to clarify the  accounting for abnormal  amounts of idle
facility  expense,  freight,  handling costs,  and wasted  material  (spoilage).
Paragraph 5 of ARB No. 43,  Chapter 4,  previously  stated that  "...under  some
circumstances,  items such as idle facility expense,  excessive spoilage, double
freight,  and  rehandling  costs may be so abnormal as to require  treatment  as
current period  charges..." SFAS No. 151 requires that those items be recognized
as current-period  charges  regardless of whether they meet the criterion of "so
abnormal."  In addition,  this  requires  that  allocation  of fixed  production
overhead  to the costs of  conversion  be based on the  normal  capacity  of the
production facilities.

The provisions of SFAS 151 shall be applied  prospectively and are effective for
inventory costs incurred during fiscal years beginning after June 15, 2005, with
earlier  application  permitted for inventory costs incurred during fiscal years
beginning  after the date this Statement was issued.  The Company's  adoption of
SFAS  No.  151 is not  currently  expected  to  have a  material  impact  on the
Company's financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123(R) (revised  2004),  "Share-Based
Payment",  which amends FASB  Statement No. 123 and will be effective for public
companies  for interim or annual  periods  beginning  after June 15,  2005.  The
revised  standard  requires,  among  other  things  that  compensation  cost for
employee  stock  options be measured at fair value on the grant date and charged
to expense over the employee's  requisite service period for the option.  Due to
the absence of observable market prices for employee stock options, the standard
indicates that the fair value of most stock options will be determined  using an
option-pricing model. The Company's adoption of SFAS No. 123(R) is not currently
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
an  amendment  of APB  Opinion  No.  29. The  guidance  in APB  Opinion  No. 29,
Accounting  for  Nonmonetary  Transactions,  is  based  on  the  principle  that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
assets  exchanged.  The  guidance in that  Opinion,  however,  included  certain
exceptions to that principle.

See report of independent registered public accounting firm.

                                       F-12
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Recently issued accounting pronouncements (continued)
-----------------------------------------------------

This  Statement  amends  Opinion 29 to eliminate the  exception for  nonmonetary
exchanges of similar productive assets that do not have commercial substance.  A
nonmonetary  exchange has  commercial  substance if the future cash flows of the
entity are expected to change  significantly  as a result of the exchange.  SFAS
No. 153 is effective  for  nonmonetary  exchanges  occurring  in fiscal  periods
beginning  after June 15, 2005.  The  Company's  adoption of SFAS No. 153 is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

Cash and concentration of risk
------------------------------

Cash  includes  cash on hand and demand  deposits  in accounts  maintained  with
state-owned  banks  within  the  People's  Republic  of  China.  Total  cash  in
state-owned  banks at December  31, 2004 and 2003  amounted to  $39,826,675  and
$12,725,043,  respectively  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 risks on its cash in bank accounts.

Accounts receivable - related parties
-------------------------------------

The Company's trade accounts  receivables  are 100% due from related  companies.
Management believes that the accounts are fully collectible as these amounts are
being collected  throughout the year.  However,  the Company records a provision
for accounts  receivable trade which ranges from 0.3% to 0.5% of the outstanding
accounts  receivable  balance in accordance with generally  accepted  accounting
principles in the PRC.

The allowance for doubtful accounts as at December 31, 2004 and 2003 amounted to
$30,442 and none, respectively.

Other receivables
-----------------

Other receivables consist of various cash advances to the Company's  independent
sales  representatives,  unrelated  companies and individuals that have business
relationships  with the  Company.  These  amounts  are  unsecured,  non-interest
bearing and generally short term.

Inventories

Inventories  are  stated  at the  lower of cost or  market  using  the  first-in
first-out basis and consist of the following at December 31:

                                                            2004         2003
                                                         ----------   ----------
Raw material                                             $2,246,493   $1,673,405
Work-in-progress                                            284,458      342,252
Finished goods                                            2,036,467    1,988,559
                                                         ----------   ----------
      Total                                              $4,567,418   $4,004,216
                                                         ==========   ==========


See report of independent registered public accounting firm.


                                       F-13
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Inventories (continued)
-----------------------

The Company  reviews its inventory  annually for possible  obsolete  goods or to
determine  if any reserves  are  necessary  for  potential  obsolescence.  As of
December  31, 2004 and 2003,  the Company has  determined  that no reserves  are
necessary at year end.

Intangible assets
-----------------

All  land  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" (the 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 $645,818 in
total.  The costs of the rights are being  amortized  over ten years,  using the
straight-line method.

At December 31, 2004 and 2003, accumulated amortization amounted to $176,053 and
$124,335,  respectively,  and amortization  expense for the years ended December
31, 2004 and 2003 amounted to $51,718 and $47,764, respectively.

Deposits
--------

The  Company has  deposited  $3.59  million  with a local  government  agency to
acquire  the land use right for land in Shanghai  in  connection  with its joint
venture  project  described  in note 13.  The land use right is for a term of 50
years and as of December  31,  2004,  the Company has not legally  acquired  the
right from the government. The deposit is non refundable.

Capitalized interest
--------------------

The Company has  capitalized  a portion of its interest  costs as a component of
building  construction  costs. Total interest expense for the years December 31,
2004 and 2003 net of  capitalized  interest  amounted to $320,565 and  $464,916,
respectively.  Total interest  expense  capitalized as part of the  construction
costs for the years ended  December  31,  2004 and 2003  amounted to $16,029 and
$34,459, respectively.

Fair value of financial instruments
-----------------------------------

The Company's  financial  instruments consist primarily of cash, trade and notes
receivable,  trade payables,  advances, other receivables, and debt instruments.
The  carrying  values of these  financial  instruments  approximate  their  fair
values.  The estimated fair values have been determined using appropriate market
information and valuation methodologies.

Earnings per share
------------------

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings per Share" (SFAS 128). SFAS 128 requires the  presentation of earnings
per share (EPS) as Basic EPS and Diluted EPS. There are no  differences  between
Basic and Diluted EPS for the years ended December 31, 2004 and 2003.

See report of independent registered public accounting firm.

                                       F-14
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 2 - Summary of significant accounting policies (continued)

Earnings per share (continued)
------------------------------

The weighted  average  number of shares used  calculate EPS reflect the 6.5 to 1
share split retroactively starting January 1, 2002.

The weighted  average  number of shares used to calculate EPS for the year ended
December 31, 2004  (71,801,819)  and 2003  (44,730,609)  reflect only the shares
outstanding for those periods.

On July 31, 2004, the board of directors of the Company accepted the resignation
of one of the members of the Board. The resigning  director's  665,000 shares of
common  stock of the Company  were  returned to the  Company  and  cancelled  on
September 14, 2004.

Note 3 - Short term notes payable

Short term notes payable  represent  amounts due to various banks and are due on
demand or normally  within one year.  These loans  generally can be renewed with
the banks. Short term notes payable at December 31, consisted of the following:

                                                            2004         2003
                                                         ----------   ----------
Loan  rom Industrial Commerical Bank, due July 17, 2004
  and August 5, 2002, respectively. Monthly interest
  payment only at 6.372% per annum, secured by
  properties and guaranteed by Tianshi Group             $     --     $2,057,000


Loan from Country Credit Union, due on various dates
  Monthly interest only payments at 7.965%
  per annum, secured by properties                             --      3,267,000
                                                         ----------   ----------
                     Totals                              $     --     $5,324,000
                                                         ==========   ==========



Note 4 - 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. Li
Jin Yuan, the president and major  shareholder of the Company,  is a director of
Tiens Yihai and a director of Tianyuan Capital.

The  principal  of  the  loan  will  be  paid  in  ten  consecutive   semiannual
installments of US $1,065,000  commencing  December 31, 2006. The first interest
payment  will be paid on  December  31, 2004 at an annual  interest  rate of 5%.
Interest expense of $163,516 has been accrued at December 31, 2004 on this note.


See report of independent registered public accounting firm.


                                       F-15
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 4 - Long term debt (continued)

Notes payable (continued)
-------------------------

                                                          2004          2003
                                                       -----------   -----------
Note payable due to Tianyuan Capital Development
   Corp. Ltd., related party                           $10,657,742   $      --
Loan from Agricultural Bank of China, due on various
   dates in 2005. Monthly interest and principal
   payment at 6.588% per annum, secured by
   properties                                              155,442       414,955
                                                       -----------   -----------
           Total                                        10,813,184       414,955
Less current portion of long term debt                     155,442       259,364
                                                       -----------   -----------
           Total                                       $10,657,742   $   155,591
                                                       ===========   ===========


Total  principal  payments for the next five years on all long-term  debt are as
follows:

        Year
       Ending
    December 31,                     Amount
---------------------            -------------
        2005                     $    155,442
        2006                        1,065,000
        2007                        2,130,000
        2008                        2,130,000
        2009                        2,130,000
     Thereafter                     3,202,742



Total  interest  expense for the years ended December 31, 2004 and 2003 amounted
to $336,594 and $464,916, respectively.

Note 5 - Supplemental disclosure of cash flow information

No income  taxes  were  paid for the years  ended  December  31,  2004 and 2003,
respectively.  Interest  paid  amounted to $173,078  and  $464,916 for the years
ended December 31, 2004 and 2003,  respectively.  During the year ended December
31,  2004,  the Company  sold  equipment  for a total sale price of $709,107 and
received cash of $65,129 and a non-interest bearing receivable of $643,978 which
is disclosed as related party  transaction under other receivable in Note 7. The
sale resulted in a loss of $124,536.


See report of independent registered public accounting firm.

                                       F-16
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 5 - Supplemental disclosure of cash flow information (continued)

During the year ended  December 31, 2004,  the Company  purchased  various fixed
assets from a related party by canceling $6,913,517 of other receivables. During
the year ended December 31, 2003, the Company sold various fixed assets with net
book  value of  $3,238,210  to a  related  party  (through  a  cancellation  of)
$3,238,210 of other payables. The sale resulted in a gain of $1,791.

Note 6 - Accounts receivable and credit risk

The Company's  business  operations  are conducted  domestically  in the PRC and
internationally.  During the normal  course of  business,  the  Company  extends
unsecured credit to its customers. Management reviews its accounts receivable on
a regular basis to determine if the allowance for doubtful  accounts is adequate
at each year-end.

Note 7 - Related party transactions

The  following  is a  description  of  the  various  individuals  and  companies
discussed in the footnotes and their relationship to the Company.

Tianshi  International  Holdings  Group Limited - British  Virgin Island Company
        owned 100% by Tiens Biotech Group (USA), Inc.

Li Jinyuan - individual - President and majority shareholder

Li Baolan - individual - daughter of Li Jinyuan

Tianjin Tianshi  Biological  Development  Co., LTD - Chinese joint venture which
        Tianshi International Holdings Group Limited owns 80%

Tianshi Hong Kong  International  Development  Co.,  Limited - Hong Kong Company
        owned 100% by Li Jinyuan

Tianjin Tianshi  Biological  Engineering Co., LTD - Chinese company owned 49% by
        Li Baolan and 51% by Tianjing Tianshi Group Co., Ltd.

Tianjin  Tianshi  Pharmaceuticals  Co., LTD - a Chinese company and the majority
        shareholder is Tianjin Tianshi Group Co., Ltd.

Tianjin Tianshi Group Co., Ltd. - owned 90% by Li Jinyuan and 10% by Li Baolan

Sales
-----

The  Company  sells  products  to  distributors  that are related to the Company
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.

See report of independent registered public accounting firm.


                                       F-17
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 7 - Related party transactions (continued)

Sales (continued)

Related party sales amounted to $58,910,532 and $38,392,208 for the years ending
December  31, 2004 and 2003,  which  represent  100% of total sales for the year
ended  December  31,  2004  and  2003,  respectively.   Related  party  accounts
receivable  from these sales  amounted to $6,058,021  and $8,533 at December 31,
2004 and 2003, respectively,  net of allowances for doubtful accounts of $30,442
and $0, respectively.

Other receivables

The Company  through its  Chinese  joint  venture,  Tianjin  Tianshi  Biological
Development  Co.,  Ltd.,  is  owed  additional   amounts   classified  as  other
receivables from various related parties totaling  $8,144,740 and $26,831,339 as
of December 31, 2004 and 2003, respectively. Detail of other receivables-related
parties are as follows:


                                                           2004          2003
                                                       -----------   -----------
Tianjin Juchao Commercial and Trading Co., Ltd         $   311,160   $26,831,339
Tianjin Tianshi Biological Engineering Co., LTD          1,710,446          --
Tianjin Tianshi Pharmaceuticals Co., LTD                 2,590,630          --
Tianjin Tianshi Group Co., Ltd                           3,532,504          --
                                                       -----------   -----------
            Total                                      $ 8,144,740   $26,831,339
                                                       ===========   ===========


These  receivables are generated by the Company making various cash advances and
short term loans and the  allocation  of various  expenses  to related  parties.
These are recurring transactions.  The Company does not charge interest on these
receivables.

On March 26, 2004,  Biological had entered into an agreement with Tianjin Juchao
Commercial  and Trading  Co.,  Ltd.  ("Juchao")  to convert  various  receivable
amounts into a note receivable in the amount of  RMB200,000,000 or approximately
USD$24,200,000.   The  note  was  paid  in  four   quarterly   installments   of
RMB50,000,000  beginning March 31, 2004.  Interest in the amount of $914,760 was
charged beginning January 1, 2004 at an annual rate of 6.048%.

The  receivable was secured by the personal  guarantee of Li Jinyuan,  President
and major  shareholder of Tiens, and the pledge of 20% of his stock ownership in
Tiens or 13,167,000  shares.  These shares are  restricted  stock (as defined in
Rule 144 of the  Securities Act of 1933, as amended) and can not be traded until
September 10, 2004.

Accounts payable
----------------

Accounts  payable due to related  parties  amounted to $209,199  and $758,570 at
December 31, 2004 and 2003, respectively.  These amounts were generated from the
related parties' paying expenses on behalf of the Company.



See report of independent registered public accounting firm.


                                       F-18
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 7 - Related party transactions (continued)

Other payables
--------------

The Company also has amounts classified as other payables due to related parties
which  amounted to $945,274  and  $1,312,288  as of December  31, 2004 and 2003,
respectively.  These  amounts  arose from cash  advances  from related  parties,
management fees due to related parties, and various non-operational transactions
incurred with related parties.

Rent expense
------------

As of January 1, 2003,  the Company had a verbal  agreement  with Tianshi Group,
which is a related  party  through  ownership,  to lease a portion of its office
building and manufacturing facilities. The Company had agreed to pay for certain
expenses of the Tianshi Group in lieu of a lease payment.  On June 30, 2003, the
Company  entered into a written lease agreement with Tianshi Group to pay annual
rent on  these  facilities  at 1% of  total  gross  revenues.  The  term of this
agreement is for five years  commencing  on January 1, 2003.  In  addition,  the
Company is obligated to pay insurance, maintenance and other expenses related to
the  premises.  Rent  expense  under this  agreement  amounted to  $595,494  and
$375,645 in 2004 and 2003, respectively.

Note 8 - Employee advances

Employee  advances  represent cash advances to various employees of the Company.
In the  People's  Republic of China,  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 $75,212 and $821,536 at December
31, 2004 and 2003, respectively.

Note 9 - Deposits - non current

The  Company  as of  December  31,  2004 and 2003 had  outstanding  deposits  of
$4,436,366 and $1,051,557,  respectively.  These amounts represent deposits with
vendors for purchases of equipment and construction in progress.

Note 10 - Retirement plan

Regulations in the People's  Republic of China require the Company to contribute
to a defined contribution  retirement plan for all employees.  All Joint Venture
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.

The Joint Venture is required to make contributions to the state retirement plan
at 20% of the employees' monthly salary.

Employees  are  required to  contribute  7% of their  salary to the plan.  Total
pension expense  incurred by the Company amounted to $89,593 and $68,717 for the
years ended December 31, 2004 and 2003, respectively.


See report of independent registered public accounting firm.

                                       F-19
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 10 - Retirement plan (continued)

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  $9,677  and  $5,420  for the years  ended  December  31,  2004 and 2003
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 $42,849 and $28,488 for the years ended
December 31, 2004 and 2003, respectively.

Note 11-  Distribution  of income,  statutory  reserves and restricted  retained
          earnings

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  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.

The transfer to this reserve must be made before distribution of any dividend to
shareholders.For  the year ended  December  31,  2004,  the Company  transferred
$2,845,324,  representing 10% of the year's net income  determined in accordance
with PRC accounting rules and regulations,  to this reserve. 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  shareholding  or by increasing  the par value of the shares
currently held by them,  provided that the remaining  reserve balance after such
issue is not less than 25% of the registered capital.

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 year ended
December 31, 2004, the directors authorized,  subject to shareholders' approval,
the transfer of  $1,422,661,  which amounted to 5% of current year's net income,
to the statutory reserve fund.


See report of independent registered public accounting firm.

                                       F-20
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 11 - Distribution  of income,  statutory  reserves and restricted  retained
          earnings (continued)


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 year ended  December 31, 2004,  the
board of directors authorized,  subject to shareholders'  approval, the transfer
of  $1,422,661,  which  amounted  to 5% of  current  year's net  income,  to the
enterprise fund.

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 12 - Minority interest distributions

Minority  interest  represents  the  outside   shareholders'  20%  ownership  of
Biological  and 0.6%  ownership  of Tiens  Yihai.  The  board  of  directors  of
Biological has authorized the following  distributions to their  shareholders in
direct proportion to their ownership percentages.


                                   TIANSHI          MINORITY
           Date                 INTERNATIONAL      SHAREHOLDER          Totals
                                ------------      ------------      ------------

March 22, 2004             RMB    82,430,670  RMB   20,607,668  RMB  103,038,338
June 30, 2004                     80,525,905        20,131,476       100,657,381
December 31, 2004                100,000,000        25,000,000       125,000,000
                                ------------      ------------      ------------

Total                      RMB   262,956,575  RMB   65,739,144  RMB  328,695,719
                                ============      ============      ============

Total                       US  $ 31,817,746  US  $  7,954,436   US $ 39,772,182
                                ============      ============      ============


The amounts  paid to Tianshi  International  have been used to invest in its new
Shanghai investment  described in note 13. As of December 31, 2004, the minority
shareholder of Biological has been fully paid.

Note 13 - Investment in Tiens Yihai Co. Ltd.

On April 20, 2004, Tianshi  International  entered a joint venture contract (the
"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. Tiens Yihai is located in Shanghai, P.R.C., and is in
the  business  of  research  and   development,   production  and  marketing  of
healthcare, home care and personal care products.


See report of independent registered public accounting firm.

                                       F-21
<PAGE>

                TIENS BIOTECH GROUP (USA), INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13 - Investment in Tiens Yihai Co. Ltd. (continued)

In the footnotes of the  Company's  financial  statements  for the quarter ended
June 30, 2004, we described  this  investment as Tiens Ocean Going Co., Ltd. Due
to the translation from Chinese to English, the Company has officially confirmed
that the English name is Tiens Yihai Co., Ltd.

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  within
three  years of the  issuance of the  business  license or May 27,  2004.  As of
December  31,  2004,  Tianshi   International  has  made  its  required  capital
contribution in the amount of US $29,861,853.






See report of independent registered public accounting firm.



                                       F-22


<PAGE>

                                   SIGNATURES

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


                                        TIENS BIOTECH GROUP (USA), INC.


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

Date:  August 11, 2004


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

Date:  August 11, 2004