UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007

                                       OR

( )  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 - None

                              TIAN'AN PHARMACEUTICAL CO., LTD.

        Nevada                                             None
---------------------------               ------------------------------------
State or other jurisdiction               (I.R.S.) Employer Identification No.
of incorporation

                      Level 11, International Trade Centre,
                           No. 196 Xiaozhai East Road
                                  Xi'an, China
                       ---------------------------------
                     Address of principal executive offices

                                0086-29-85381586
                         -----------------------------
               Registrant's telephone number, including area code

                                       N/A
                     -------------------------------------
                  Former address of principal executive offices

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


            Yes        X                              No         __
                  ------------                              ------------

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

            Yes                                             No    X
                  ------------------                           -------

     As of July 31, 2007 the Company had 13,994,850 outstanding shares of common
stock.


<PAGE>





                        TIAN'AN PHARMACEUTICAL CO., LTD.
                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     SIX MONTHS ENDED JUNE 30, 2007 AND 2006






<PAGE>




                          INDEX TO FINANCIAL STATEMENTS

                                                                        Page(s)

Condensed Consolidated Balance Sheet as of June 30, 2007 (Unaudited)       1

Condensed Consolidated Statements of Income and Accumulated Other
   Comprehensive Income for the Six and Three Months Ended
   June 30, 2007 and 2006 (Unaudited)                                      2

Condensed Consolidated Statements of Changes in Stockholders'
  Equity for the Years Ended December 31, 2006 and 2005 and
  Six Months Ended June 30, 2007 (Unaudited)                               3

Condensed Consolidated Statements of Cash Flows for the Six Months
 Ended June 30, 2007 and 2006 (Unaudited)                                  4

Notes to Condensed Consolidated Financial Statements                     5-23









<PAGE>


                        TIAN' AN PHARMACEUTICAL CO., LTD.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                            JUNE 30, 2007 (UNAUDITED)
                                    (IN US$)

                                     ASSETS
                                     ------

      Current Assets:
        Cash and cash equivalents                            $   6,616,242
        Accounts receivable, net                                 2,337,552
        Inventories                                                628,000
        Other receivables                                        1,049,872
        Prepaid expenses and other current assets                   57,941
                                                              -------------
          Total Current Assets                                  10,689,607
                                                              -------------

        Fixed assets, net of depreciation                        1,215,717
                                                              -------------

      Other Assets:
        Intangible assets, net                                   1,300,037
                                                              -------------

          Total Other Assets                                     1,300,037
                                                              -------------

      TOTAL ASSETS                                            $ 13,205,361
                                                              =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

      LIABILITIES
      Current Liabilities:
        Accounts payable and accrued expenses                 $    450,649
        Accrued taxes                                              156,361
                                                              -------------

            Total Current Liabilities                              607,010
                                                              -------------

            Total Liabilities                                      607,010
                                                              -------------

      Minority interest                                             98,918
                                                              -------------

      STOCKHOLDERS' EQUITY
        Preferred stock, $.001 Par Value; 20,000,000
         shares authorized and 0 shares issued and
         outstanding                                                     -
        Common stock, $.001 Par Value; 50,000,000 shares
         authorized and 13,994,850 shares issued and
         outstanding, respectively                                  13,995
        Additional paid-in capital                               7,287,451
        Statutory reserves                                         380,632
        Retained earnings                                        4,105,078
        Accumulated other comprehensive income                     712,277
                                                              -------------
            Total Stockholders' Equity                          12,499,433
                                                              -------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 13,205,361
                                                              =============


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

                                      1

<PAGE>



                        TIAN' AN PHARMACEUTICAL CO., LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
                     ACCUMULATED OTHER COMPREHENSIVE INCOME
      FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)
                                    (IN US $)
<TABLE>
<S>                                        <C>           <C>          <C>           <C>

                                            SIX MONTHS ENDED          THREE MONTHS ENDED
                                                JUNE 30,                    JUNE 30,
                                           2007          2006         2007         2006
                                        ---------     ---------    ----------    ---------


OPERATING REVENUES                    $ 5,134,958   $ 3,461,039   $ 2,737,270   $ 1,778,759
                                      ------------  ------------  ------------  ------------

COST OF SALES
 Inventory, beginning of period           608,490       473,294       639,289       355,733
 Depreciation and amortization expense    230,264       179,823       115,935        90,147
 Purchases                              1,471,362     1,057,602       763,118       663,081
 Inventory, end of period                (628,000)     (480,472)     (628,000)     (480,472)
                                      ------------  ------------  ------------  ------------
       Total Cost of Sales
                                        1,682,116     1,230,247       890,342       628,489
                                      ------------  ------------  ------------  ------------
GROSS PROFIT                            3,452,842     2,230,792     1,846,928     1,150,270
                                      ------------  ------------  ------------  ------------
OPERATING EXPENSES
   Selling and promotion                1,233,181     1,158,705       685,511       594,213
   General and administrative fees        201,829       269,906       100,181       190,183
   Loss on disposal of fixed assets             -         1,671             -         1,671
   Depreciation, amortization and
    impairment                             14,473         6,047         7,284         3,277
                                      ------------  ------------  ------------  ------------
       Total Operating Expenses         1,449,483     1,436,329       792,976       789,344
                                      ------------  ------------  ------------  ------------
INCOME BEFORE OTHER INCOME              2,003,359       794,463     1,053,952       360,926

OTHER INCOME
   Rental income                           31,451        19,237        20,818        10,458
   Interest income                         20,195        13,794        10,780         7,436
                                      ------------  ------------  ------------  ------------
       Total Other Income                  51,646        33,031        31,598        17,894
                                      ------------  ------------  ------------  ------------

NET INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST             2,055,005       827,494     1,085,550       378,820
Minority interest                            (164)          268         4,194            57
                                      ------------  ------------  ------------  ------------

NET INCOME BEFORE PROVISION FOR
INCOME TAXES                            2,054,841       827,762     1,089,744       378,877
Provision for Income Taxes               (241,806)     (141,753)      (97,396)      (69,310)
                                      ------------  ------------  ------------  ------------
NET INCOME APPLICABLE TO COMMON
SHARES                                $ 1,813,035   $   686,009   $   992,348   $   309,567
                                      ============  ============  ============  ============

NET INCOME PER BASIC AND DILUTED
SHARES                                $      0.13   $      0.05   $      0.07   $      0.02
                                      ============  ============  ============  ============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                     13,994,850    13,994,850    13,994,851     3,994,850
                                      ============  ============  ============  ============
COMPREHENSIVE INCOME
 Net income                           $ 1,813,035   $   686,009   $   992,348   $   309,567
 Other comprehensive income
  Currency translation adjustments        285,738        89,989       173,805        27,605
                                      ------------  ------------  ------------  ------------
Comprehensive income                  $ 2,098,773   $   775,998   $ 1,166,153       337,172
                                      ============  ============  ============  ============

</TABLE>

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

                                       2

<PAGE>


                        TIAN' AN PHARMACEUTICAL CO., LTD.
            CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) AND
                       FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
                                    (IN US $)

<TABLE>
<S>                                     <C>            <C>        <C>         <C>        <C>         <C>           <C>       <C>

                                                                                                 Accumulated
                                                               Additional                          Other
                                            Common Stock        Paid-in    Statutory  Retained  Comprehenisve   Treasury
                                       Shares         Amount    Capital     Reserves  Earnings  Income (Loss)     Stock     Total
                                       --------------------------------------------------------------------------------------------

Balance January 1, 2005               5,445,000     5,445,000  $       -   $  13,686  $  77,555   $       -     $     -  $5,536,241

Capital contributions                 1,856,445     1,856,445          -           -          -           -           -   1,856,445

Shares cancelled upon merger
 with Tian An (Nevada)               (7,301,445)   (7,301,445)         -           -          -           -           -  (7,301,445)

Shares issued for services                  100             -          1           -          -           -           -           1

Shares issued in merger with
 Xi' An Tian' An                     13,994,750        13,995  7,287,450           -          -           -           -   7,301,445

Transfer of statutory reserves                -             -          -     139,364   (139,364)          -           -           -

Net income for the year ended
 December 31, 2005                            -             -          -           -  1,061,050     129,553           -   1,190,603
                                    ------------  ------------ ---------- ----------- ---------- ----------- ----------- -----------

Balance December 31, 2005            13,994,850        13,995  7,287,451     153,050    999,241     129,553           -   8,583,290

Transfer of statutory reserves                -             -          -     227,582   (227,582)          -           -           -

Net income for the year ended
 December 31, 2006                            -             -          -           -  1,520,220     296,986           -   1,817,206
                                    ------------  ------------ ---------- ----------- ---------- ----------- ----------- -----------

Balance December 31, 2006            13,994,850        13,995  7,287,451     380,632  2,291,879     426,539           -  10,400,496


Net income for the period
 ended June 30, 2007                          -             -          -           -  1,813,199     285,738           -   2,098,937
                                    ------------  ------------ ---------- ----------- ---------- ----------- ----------- -----------
Balance June 30, 2007              $13,994,850    $    13,995  $7,287,451 $  380,632 $4,105,078  $  712,277  $        -  $2,499,433
                                   =============  ============ ========== =========== ========== =========== =========== ===========

</TABLE>

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

                                       3

<PAGE>


                        TIAN' AN PHARMACEUTICAL CO., LTD.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)
                                    (IN US $)

                                                         2007            2006
                                                       -------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                        $ 1,813,035    $   686,009
                                                     ------------   ------------

   Adjustments to reconcile net income (loss) to
   net cash provided by (used in) operating
   activities:
     Depreciation, amortization and impairment           244,737        187,977
     Loss on disposal of fixed assets                          -          1,671
     Minority interest                                       164           (268)

  Changes in assets and liabilities
     (Increase) in accounts receivable                  (786,154)      (294,996)
     (Increase) decrease in inventory                     (3,404)        (7,178)
     (Increase) in other receivables                           -        (10,747)
     Decrease in prepaid expenses and other current assets     -        (29,665)
     Decrease in other assets                                  -         60,327
     (Decrease) in accounts payable and
       and accrued expenses                              (28,740)        26,439
     Increase in accrued taxes                            27,215              -
                                                     ------------   ------------
     Total adjustments                                  (546,182)       (66,440)
                                                     ------------   ------------

     Net cash provided by operating activities         1,266,853        619,569
                                                     ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES
   (Acquisitions) of fixed assets                           (477)       (29,165)
   Disposals of fixed assets                                   -         28,118
                                                     ------------   ------------

      Net cash (used in) investing activities               (477)        (1,047)
                                                     ------------   ------------
Effect of foreign currency translation                   159,263         89,989
                                                     ------------   ------------

NET INCREASE IN
    CASH AND CASH EQUIVALENTS                          1,425,639        708,511

CASH AND CASH EQUIVALENTS -
    BEGINNING OF PERIOD                                5,190,603      3,561,148
                                                     ------------   ------------

CASH AND CASH EQUIVALENTS - END OF PERIOD            $ 6,616,242    $ 4,269,659
                                                     ============   ============

CASH PAID DURING THE PERIOD FOR:
    Income taxes                                     $         -    $         -
                                                     ============   ============

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

                                       4

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2007 AND 2006

NOTE 1-   ORGANIZATION AND BASIS OF PRESENTATION
------------------------------------------------

          The unaudited condensed financial statements included herein have been
          prepared,  without audit, pursuant to the rules and regulations of the
          Securities and Exchange  Commission  ("SEC").  The condensed financial
          statements  and notes are presented as permitted on Form 10-QSB and do
          not contain  information  included in the Company's annual  statements
          and notes.  Certain  information  and  footnote  disclosures  normally
          included  in  financial   statements   prepared  in  accordance   with
          accounting  principles  generally  accepted  in the  United  States of
          America  have been  condensed  or omitted  pursuant  to such rules and
          regulations,  although the Company  believes that the  disclosures are
          adequate  to make the  information  presented  not  misleading.  It is
          suggested that these condensed  consolidated  financial  statements be
          read in  conjunction  with the  December  31, 2006  audited  financial
          statements  and  the  accompanying  notes  thereto.  While  management
          believes  the  procedures   followed  in  preparing   these  condensed
          consolidated financial statements are reasonable,  the accuracy of the
          amounts are in some respects dependent upon the facts that will exist,
          and procedures  that will be  accomplished by the Company later in the
          year.

          These condensed unaudited condensed  consolidated financial statements
          reflect all adjustments, including normal recurring adjustments which,
          in the opinion of  management,  are  necessary  to present  fairly the
          consolidated operations and cash flows for the periods presented.

          Tian' An Pharmaceutical Co. Ltd. ("Tian' An") was established in Xi'An
          of the Peoples Republic of China ("PRC") by Shaanxi Bafang Science and
          Technology  Investment Co., Ltd, Shaanxi Economic Cooperation Property
          Company,  Shaanxi  Ruike  Investment  Co.,  Ltd.,  Xi'An Green  Health
          Products  Research  Center,  Xi' An Green Science and  Technology  and
          nineteen  individuals  on January 17, 2003.  In 2005,  Shaanxi  Bafang
          Science  and  Technology   Investment  Co.,  Ltd.  and  Shaanxi  Ruike
          Investment Co., Ltd. transferred a portion of their ownership interest
          to two individuals,  and an additional 1,856,445 shares were purchased
          by two individuals and one company.

          Tian' An was  first  organized  for the  purpose  of the  development,
          manufacturing  and  commercialization  of  traditional  Chinese herbal
          medicines and  biological  pharmaceuticals.  The main business line of
          Tian' An is production and sales of hard capsule,  soft  ointment,  as
          well as  research  and  development  of biology  goods and health care
          products. The Company conducts its business exclusively in the PRC.

          In December 2005, Tian' An and another  individual set up a subsidiary
          company, Xi' An Tianan Pharmacy Marketing Co., Ltd (the "Subsidiary").
          Tian' An injected cash  amounting to  approximately  $2,600,000 as its
          capital  contribution,  accounting  for 96.3% of the total  registered
          capital of the Subsidiary (See Note 7).

          On  August  15,  2005,  the  officers  of Tian' An filed  Articles  of
          Incorporation  in the State of Nevada  which was  approved  August 23,
          2005 to create Tian' An Pharmaceutical  Co., Ltd, a Nevada corporation
          (the  "Company")  and  also  established  T2  Pharmaceutical  Inc.,  a
          Colorado  corporation  ("T2")  and  wholly  owned  subsidiary  of  the
          Company.

                                       5

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 1-   ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
------------------------------------------------------------

          On August 25,  2005,  Tian' An merged  into and with T2 and became the
          surviving  entity and wholly  owned  subsidiary  of the  Company.  The
          Company  incorporated  with  50,000,000  shares  of  common  stock and
          20,000,000  shares of preferred stock both with a par value of $0.001.
          The  Company  issued 100  shares of common  stock to its  founder  for
          $1.00,  then issued  13,994,750 shares of common stock in exchange for
          100% of the issued and outstanding  shares of Tian' An. Thereafter and
          for purposes of these consolidated  financial statements the "Company"
          and  "Tian'  An" are  used to  refer  to the  operations  of  Tian' An
          Pharmaceutical Co. Ltd. For accounting purposes, the Company accounted
          for the acquisition of Tian' An as a recapitalization. The transaction
          involved  entities  under  common  control as defined in  Statement of
          Financial  Standard 141,  "Business  Combinations".  As such,  the net
          assets of Tian' An were acquired at their carrying  values at the time
          of the  acquisition.  The  comparative  figures  for 2004 are those of
          Tian' An.

          As modern medical  science is  experiencing  a change from  biological
          research to biological-psychological-social  research with traditional
          medical  science  playing a more important role than ever, the Company
          has positioned itself with the products they currently  manufacture as
          well as the products under  development to be successful.  Many modern
          chemical  medicines  contain high toxicities and present numerous side
          effects.  Purely chemical medicines are difficult,  time consuming and
          expensive to develop.

          The Company's  Traditional Chinese Medicines represent advantages over
          chemical  medicines and the process of combining herbal extraction and
          chemical  medicines is becoming a popular  alternative,  following the
          current  trends of  "natural"  and  "green"  products  in a variety of
          industries.

          The Company  sells its products on a wholesale  basis to  distributors
          who resell the product to customers  located in China. The Company has
          five major  sales  agents,  Huayuan  Life  Pharmacy,  Shaanxi  Guangda
          Pharmacy,  Hubiaohang  Nanyang Tonic,  Gansu Fuhe and Guangzhou Jidong
          Pharmacy,  which  distribute  approximately  91% of the  products.  In
          general,  sales  are made  under a  purchase  order  arrangement  with
          payment in full on the order due prior to  shipment.  The Company does
          not sell its products directly to end-users.

          The Company employs Good Manufacturing Practice "GMP" approved methods
          in processing and manufacturing its products.  The Company obtains its
          raw  materials  from  company-approved  vendors  and then  process the
          materials into Traditional  Chinese Medicine formulas in its facility.
          In the  case of  batch  manufacturing,  the  Company  employs  a fully
          automated    production    line   to   produce   the    bio-engineered
          neutraceuticals.  Post Production,  the product is shipped to vendors.
          The raw  materials  are  subjected to a combined  process  involving a
          solid/liquid  extraction step,  followed by a  liquid/liquid-purifying
          step to obtain the purified extract.


                                       6


<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 1-   ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
------------------------------------------------------------

          Once the  purification  process  has been  completed,  the  extract is
          concentrated and re-filtering at which time it is packaged and shipped
          to its customers.  The Company  maintains  approximately  one month of
          finished  product  on  hand,  and  approximately  two  months  of  raw
          materials for production.

          The  GMP   inspection   was   performed   by   State   Food  and  Drug
          Administration.  The Chinese central government mandates manufacturers
          of Chinese  herbs to comply with GMP  standards  by December 31, 2005.
          Starting on January 1, 2006,  only  products  manufactured  within GMP
          certified  facilities  are  available  for sale in  China.  Currently,
          approximately one third of Chinese  manufacturers in this industry are
          in  compliance  with  the  new  mandate.   The  Company  has  invested
          substantial  capital in its manufacturing  facility in order to comply
          with the more stringent  standards  mandated by the central government
          in order to pass the GMP inspection.

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Principles of Consolidation

          The condensed  consolidated  financial statements include the accounts
          of the  Company and its  subsidiaries.  All  significant  intercompany
          accounts and transactions have been eliminated in  consolidation.  The
          3.7%  interest not owned by the Company in its joint  venture with Xi'
          An Tian'An  Pharmacy  Marketing  Co.,  Ltd. is reflected as a minority
          interest in the consolidated financial statements.

          Use of Estimates

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions  that affect the reported
          amounts of assets and liabilities and disclosure of contingent  assets
          and  liabilities  at the  date  of the  financial  statements  and the
          reported amounts of revenues and expenses during the reporting period.
          On an on-going basis, the Company evaluates its estimates,  including,
          but not  limited  to,  those  related to bad debts,  income  taxes and
          contingencies.   The  Company   bases  its   estimates  on  historical
          experience  and on various other  assumptions  that are believed to be
          reasonable  under the  circumstances,  the  results  of which form the
          basis for  making  judgments  about the  carrying  value of assets and
          liabilities that are not readily  apparent from other sources.  Actual
          results could differ from those estimates.


                                       7


<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------------------

          Economic and Political Risks
          ----------------------------

          The Company's  operations are conducted in the PRC.  Accordingly,  the
          Company's business,  financial condition and results of operations may
          be influenced by the political,  economic and legal environment in the
          PRC, and by the general state of the PRC economy.

          The   Company's   operations   in  the  PRC  are  subject  to  special
          considerations  and  significant  risks not typically  associated with
          companies in North  America and Western  Europe.  These  include risks
          associated  with,  among  others,  the  political,  economic and legal
          environment and foreign currency  exchange.  The Company's results may
          be adversely affected by changes in governmental policies with respect
          to  laws  and  regulations,   anti-inflationary   measures,   currency
          conversion,  remittances  abroad,  and rates and methods of  taxation,
          among other things.

          Cash and Cash Equivalents
          -------------------------

          The Company  considers  all highly liquid debt  instruments  and other
          short-term  investments  with an initial  maturity of three  months or
          less to be cash  equivalents.  The Company  maintained $906 as of June
          30, 2007 in cash on hand.  The  remainder of the cash was in financial
          institutions.

          Comprehensive Income
          --------------------

          The Company adopted  Statement of Financial  Accounting  Standards No,
          130,  "Reporting  Comprehensive  Income," (SFAS No. 130). SFAS No. 130
          requires  the  reporting  of  comprehensive  income in addition to net
          income from operations.

          Comprehensive   income  is  a  more  inclusive   financial   reporting
          methodology that includes  disclosure of information that historically
          has not been recognized in the calculation of net income.

          Inventory
          ---------

          Inventory is valued at the lower of cost or market (using the weighted
          average  method) and net  realizable  value.  Inventory  includes  raw
          material, work in process and finished goods.

          The  net  realizable  value  is the  estimated  selling  price  in the
          ordinary  course of business less the estimated  costs of  completion,
          selling expenses and related taxes.

                                       8

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Fair Value of Financial Instruments
          -----------------------------------

          The carrying  amounts reported in the condensed  consolidated  balance
          sheet for cash and cash equivalents,  and accounts payable approximate
          fair value because of the  immediate or  short-term  maturity of these
          financial instruments.

          Currency Translation
          --------------------

          The  Company's  functional  currency  is that of the PRC  which is the
          Chinese  Renminbi  (RMB).  The  reporting  currency  is that of the US
          Dollar.  Capital  accounts  of the  condensed  consolidated  financial
          statements are translated into United States dollars from RMB at their
          historical  exchange  rates when the  capital  transactions  occurred.
          Assets and  liabilities are translated at the exchange rates as of the
          balance  sheet date.  Income and  expenditures  are  translated at the
          average  exchange rate of the year. The period end RMB to US dollar as
          of June 30, 2007 was 7.62 and the average  period RMB to the US dollar
          for the six months  ended June 30, 2007 and 2006 were 7.653 and 8.007,
          respectively.  The RMB is not freely convertible into foreign currency
          and all foreign currency exchange transactions must take place through
          authorized  institutions.  No  representation  is  made  that  the RMB
          amounts could have been, or could be,  converted into US dollar at the
          rates used in  translation.  The  Company  records  these  translation
          adjustments as accumulated other  comprehensive  income (loss).  Gains
          and losses from foreign  currency  transactions  are included in other
          income  (expense)  in the  results of  operations.  For the six months
          ended  June 30,  2007 and 2006,  the  Company  recorded  approximately
          $285,738  and  $89,989 in  transaction  gains  (losses) as a result of
          currency translation.

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

          The  Company  annually  incurs  costs on  activities  that  relate  to
          research and  development  of new products.  Research and  development
          costs are expensed as incurred.

          Retirement Benefits
          -------------------

          Retirement  benefits  in  the  form  of  contributions  under  defined
          contribution  retirement plans to the relevant authorities are charged
          to the consolidated statements of income as incurred.

                                        9


<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Revenue Recognition
          -------------------

          The Company generates revenue from the sale of its nutritional  herbal
          products.

          Revenue for the sale of its goods are  recognized in  accordance  with
          Staff Accounting Bulletin 101. Revenue is recognized when:

               1)   Persuasive evidence of an arrangement exists;
               2)   Delivery has occurred or services have been rendered;
               3)   The  seller's  price to the buyer is fixed or  determinable,
                    and
               4)   Collectibility is reasonably assured.

          The  Company's  customers  consist  primarily of large  pharmaceutical
          wholesalers who sell directly into the retail channel.

          Accounts Receivable
          -------------------

          The  Company  conducts   business  and  extends  credit  based  on  an
          evaluation of the customers'  financial  condition,  generally without
          requiring collateral. Exposure to losses on receivables is expected to
          vary by customer due to the financial condition of each customer.  The
          Company  monitors  exposure to credit losses and maintains  allowances
          for anticipated  losses considered  necessary under the circumstances.
          The Company has established a reserve for  uncollectibles of $7,796 as
          of June 30, 2007.

          Accounts receivable are generally due within 30 days and collateral is
          not required.

          Advertising Costs
          -----------------

          The  Company   expenses  the  costs  associated  with  advertising  as
          incurred.  Advertising expenses for the six months ended June 30, 2007
          and 2006 of  $1,016,595  and  $986,983,  respectively  are included in
          selling  and  promotional  expenses  in  the  condensed   consolidated
          statements of income.  Advertising costs include  marketing  brochures
          and displays for retail outlets.

          Advance to Suppliers
          --------------------

          Advances  to  suppliers   represent  the  cash  paid  in  advance  for
          purchasing raw materials.


                                       10

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Fixed Assets
          ------------

          Fixed assets are stated at cost.  Depreciation  is computed  using the
          straight-line  method over the  estimated  useful lives of the assets,
          net  of  the  estimated  residual  values;  building  - 35  years  (5%
          estimated  residual  value),  equipment - 5 years (5% residual value),
          machinery- 10 years (5% residual  value),  leasehold  improvements - 5
          years (no residual value) and vehicles - 8 years (5% residual value).

          When  assets  are  retired  or  otherwise  disposed  of, the costs and
          related  accumulated  depreciation are removed from the accounts,  and
          any resulting gain or loss is recognized in income for the period. The
          cost of  maintenance  and  repairs is  charged to income as  incurred;
          significant  renewals and  betterments are  capitalized.  Deduction is
          made for retirements resulting from renewals or betterments.

          Land Use Rights
          ---------------

          According to the laws of China,  the  government  owns all the land in
          China.  Companies or individuals are authorized to possess and use the
          land only through land use rights  granted by the Chinese  government.
          Land use rights would be amortized using the straight-line method over
          the  respective  lease term.  The  Company  does not have nay land use
          rights.

          Construction in Progress
          ------------------------

          Construction  in progress  represents  direct costs of construction or
          acquisition  and design fees  incurred,  as well as  interest  charges
          directly related to debt incurred on behalf of particular construction
          projects. Capitalization of these costs ceases and the construction in
          progress is transferred to fixed assets  (building or equipment)  when
          substantially  all the activities  necessary to prepare the assets for
          their intended use are completed. No depreciation is provided until it
          is completed and ready for intended use.

          Impairment of Long-Lived Assets
          -------------------------------

          Long-lived  assets,  primarily fixed assets and intangible assets, are
          reviewed for impairment  whenever  events or changes in  circumstances
          indicate  that  the  carrying  amount  of  the  assets  might  not  be
          recoverable.  The Company does perform a periodic assessment of assets
          for  impairment  in the  absence of such  information  or  indicators.
          Conditions that would necessitate an impairment  assessment  include a
          significant  decline in the  observable  market  value of an asset,  a
          significant  change in the extent or manner in which an asset is used,
          or a significant  adverse change that would indicate that the carrying
          amount  of an  asset  or  group  of  assets  is not  recoverable.  For
          long-lived  assets  to be held and used,  the  Company  recognizes  an
          impairment loss only if its carrying amount is not recoverable through
          its undiscounted  cash flows and measures the impairment loss based on
          the difference between the carrying amount and estimated fair value.

                                       11

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Intangible Assets

          Intangible assets consist of pharmaceutical licenses and are initially
          recorded at acquisition  cost and amortized on a  straight-line  basis
          over their  estimated  useful  lives of between  five and eight years.
          Amortization  expense is included in cost of sales in the consolidated
          statements of operations.

          Costs  incurred  in  creating  products  are  charged to expense  when
          incurred as research and development until  technological  feasibility
          is established  upon  completion of a working model.  Thereafter,  all
          production  costs are  capitalized  and  carried at cost.  Capitalized
          costs  are  amortized  based on  straight-line  amortization  over the
          remaining estimated economic life of the product.

          Identified  intangible  assets are  regularly  reviewed  to  determine
          whether facts and  circumstances  exist which indicate that the useful
          life is shorter than  originally  estimated or the carrying  amount of
          assets may not be recoverable. The Company assesses the recoverability
          of its identifiable  intangible  assets by comparing the fair value of
          the intangible assets against the respective carrying amounts of these
          intangible assets.  Impairment,  if any, is based on the excess of the
          carrying amount over the fair value of those assets.


                                         As of June 30, 2007
                                   -------------------------------
                                   Gross
                                  Carrying    Accumulated
                                   Amount     Amortization     Net
                                  --------    ------------   -------

Amortized Intangible Assets:

 Pharmaceutical licenses        $ 2,521,272   $ 1,221,235   $1,300,037
                                ===========   ===========   ==========

Amortization Expense:

 For the six months ended June 30, 2007       $   186,845
 For the six months ended June 30, 2006           179,823

Estimated Amortization Expense:

 For the six months ended December 31, 2007   $   205,870
 For the year ended December 31, 2008             373,342
 For the year ended December 31, 2009             373,342
 For the year ended December 31, 2010             347,483
                                              -----------
              Total                           $ 1,300,037
                                              ============

                                       12

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Earnings Per Share of Common Stock
          ----------------------------------

          Basic net  earnings  per common  share is computed  using the weighted
          average  number of common  shares  outstanding.  Diluted  earnings per
          share  (EPS)   includes   additional   dilution   from  common   stock
          equivalents,  such as stock issuable pursuant to the exercise of stock
          options and warrants. Common stock equivalents are not included in the
          computation of diluted  earnings per share when the Company  reports a
          loss because to do so would be antidilutive for periods presented. The
          Company did not have a loss for either period.

          The following is a  reconciliation  of the  computation  for basic and
          diluted EPS:

                                         June 30,       June 30,
                                          2007           2006
                                      -------------  -------------

Net income                             $ 1,813,035    $  686,009
                                      -------------  -------------

Weighted-average common shares
Outstanding (Basic)                     13,994,850    13,994,850

Weighted-average common stock
Equivalents
  Stock options                                  -             -
  Warrants                                       -             -
                                      -------------  -------------

Weighted-average common shares
Outstanding (Diluted)                   13,994,850    13,994,850
                                      =============  =============


          Major Customers
          ---------------

          A major  customer is a customer that  represents  10% of the Company's
          sales.

          For the six months ended June 30, 2007 and 2006,  the Company had five
          major  customers  that  represented  approximately  96% and 92% of the
          Company's sales, respectively.

                                       13

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Income Taxes
          ------------

          The  Company  accounts  for  income  tax using an asset and  liability
          approach and allows for recognition of deferred tax benefits in future
          years.  Under the asset and  liability  approach,  deferred  taxes are
          provided for the net tax effects of temporary  differences between the
          carrying  amounts of assets and  liabilities  for financial  reporting
          purposes  and the amounts  used for income tax  purposes.  A valuation
          allowance  is provided  for  deferred  tax assets if it is more likely
          than not these items will either  expire before the Company is able to
          realize their benefits, or that future realization is uncertain.

          In accordance  with the relevant tax laws and  regulations  of PRC and
          US, the corporation income tax rate applicable ranges from 15% to 34%.

          Stock-Based Compensation
          ------------------------

          The  Company  follows  FASB 123R in  accounting  for its  stock  based
          compensation  (see Recent  Accounting  Pronouncements).  This measures
          compensation expense for its employee  stock-based  compensation using
          the  intrinsic-value  method.  Under  the  intrinsic-value  method  of
          accounting for  stock-based  compensation,  when the exercise price of
          options  granted to employees and common stock issuances are less than
          the estimated fair value of the underlying stock on the date of grant,
          deferred  compensation  is recognized and is amortized to compensation
          expense over the applicable  vesting period.  The Company for 2007 and
          2006 did not grant any  options  or  warrants  that  would  need to be
          valued under such method.  The following  represents the effect on net
          income attributable to common shareholders per share if the fair value
          method had been applied to all awards.

          On January 1, 2006, the Company adopted the provisions of FAS No. 123R
          "Share-Based  Payment"  ("FAS 123R")  which  requires  recognition  of
          stock-based compensation expense for all share-based payments based on
          fair  value.   Prior  to  January  1,  2006,   the  Company   measured
          compensation expense for all of its share-based compensation using the
          intrinsic  value method  prescribed  by  Accounting  Principles  Board
          ("APB")  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
          ("APB 25") and related  interpretations.  The Company has provided pro
          forma disclosure  amounts in accordance with FAS No. 148,  "Accounting
          for  Stock-Based   Compensation  -  Transition  and  Disclosure  -  an
          amendment of FASB Statement No. 123" ("FAS 148"), as if the fair value
          method   defined  by  FAS  No.  123,   "Accounting   for  Stock  Based
          Compensation"   ("FAS  123")  had  been  applied  to  its  stock-based
          compensation.

                                       14

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Stock-Based Compensation (Continued)
          ------------------------------------

          The  Company  has  elected  to use the  modified-prospective  approach
          method.  Under that transition  method, the calculated expense in 2006
          is equivalent to compensation expense for all awards granted prior to,
          but not yet vested as of January 1, 2006, based on the grant-date fair
          values  estimated in  accordance  with the original  provisions of FAS
          123.  Stock-based  compensation  expense for all awards  granted after
          January 1, 2006 is based on the  grant-date  fair values  estimated in
          accordance  with the  provisions of FAS 123R.  The Company  recognizes
          these  compensation  costs, net of an estimated  forfeiture rate, on a
          pro rata  basis  over the  requisite  service  period of each  vesting
          tranche of each award.  The Company  considers  voluntary  termination
          behavior  as  well  as  trends  of  actual  option   forfeitures  when
          estimating the forfeiture rate.

          The  Company  measures   compensation  expense  for  its  non-employee
          stock-based  compensation  under the  Financial  Accounting  Standards
          Board  (FASB)  Emerging  Issues  Task Force  (EITF)  Issue No.  96-18,
          "Accounting  for  Equity  Instruments  that are  Issued to Other  Than
          Employees for  Acquiring,  or in  Conjunction  with Selling,  Goods or
          Services".  The fair value of the option issued is used to measure the
          transaction,  as this is more  reliable  than  the  fair  value of the
          services  received.  The fair  value is  measured  at the value of the
          Company's common stock on the date that the commitment for performance
          by the counterparty has been reached or the counterparty's performance
          is  complete.  The fair  value of the  equity  instrument  is  charged
          directly to compensation expense and additional paid-in capital.


                                       15

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Segment Information
          -------------------

          The Company follows the provisions of SFAS No. 131, "Disclosures about
          Segments of an  Enterprise  and Related  Information".  This  standard
          requires  that  companies  disclose  operating  segments  based on the
          manner  in  which  management  disaggregates  the  Company  in  making
          internal operating decisions.  For 2007 and 2006, the Company operated
          in one segment and one geographical location.

          Recent Accounting Pronouncements
          --------------------------------

          In January  2003,  the FASB issued  Interpretation  No. 46 ("FIN 46"),
          "Consolidation  of Variable  Interest  Entities," an interpretation of
          Accounting   Research   Bulletin  No.  51,   "Consolidated   Financial
          Statements." FIN 46 establishes  accounting guidance for consolidation
          of variable  interest entities that function to support the activities
          of the primary beneficiary.  In December 2003, the FASB revised FIN 46
          and issued FIN 46 (revised  December 2003) ("FIN 46R"). In addition to
          conforming  to  previously  issued FASB Staff  Positions,  FIN No. 46R
          deferred  the  implementation   date  for  certain  variable  interest
          entities. This revised interpretation is effective for all entities no
          later than the end of the first reporting period that ends after March
          15, 2004. The Company does not have any  investments in or contractual
          relationship or other business  relationship  with a variable interest
          entity and therefore the adoption of this interpretation will not have
          any impact on the Company's results of operations,  financial position
          or cash flows.

          On  December  16,  2004,  FASB  issued  SFAS No.  153,  "Exchanges  of
          Non-monetary  Assets,  an amendment of APB Opinion 29,  Accounting for
          Non-monetary  Transaction"  ("SFAS 153").  This  statement  amends APB
          Opinion 29 to eliminate the exception  for  non-monetary  exchanges of
          similar productive assets and replaces it with a general exception for
          exchanges  of   non-monetary   assets  that  do  not  have  commercial
          substance.  Under  SFAS 153,  if a  non-monetary  exchange  of similar
          productive  assets  meets a  commercial-substance  criterion  and fair
          value is  determinable,  the transaction must be accounted for at fair
          value  resulting  in  recognition  of any  gain or  loss.  SFAS 153 is
          effective for  non-monetary  transactions in fiscal periods that begin
          after  June  15,  2005.  The  Company  does  not  anticipate  that the
          implementation  of this  standard  will have a material  impact on its
          financial position, results of operations or cash flows.

          In May  2005,  the  FASB  issued  Statement  of  Financial  Accounting
          Standard No. 154,  "Accounting  Changes and Error Corrections"  ("SFAS
          154"). SFAS 154 is a replacement of APB No. 20, "Accounting  Changes",
          and SFAS No. 3,  "Reporting  Accounting  Changes in Interim  Financial
          Statements".  SFAS 154 applies to all voluntary  changes in accounting
          principle and changes the requirements for accounting and reporting of
          a change in accounting  principle.  This statement  establishes  that,
          unless impracticable, retrospective application is the required method
          for  reporting of a change in  accounting  principle in the absence of
          explicit  transition   requirements  specific  to  the  newly  adopted
          accounting  principle.  It also  requires  the  reporting  of an error
          correction which involves  adjustments to previously  issued financial
          statements  similar to those  generally  applicable  to  reporting  an
          accounting change retrospectively.

                                       16

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------

          Recent Accounting Pronouncements (Continued)
          --------------------------------------------

          SFAS 154 is effective for accounting changes and corrections of errors
          made in fiscal years  beginning  after  December 15, 2005. The Company
          believes the  adoption of SFAS 154 will not have a material  impact on
          its consolidated financial statements.

          In February  2006, the FASB issued  Statement of Financial  Accounting
          Standard No. 155,  "Accounting for Certain Hybrid  Instruments" ("SFAS
          155").  FASB 155  allows  financial  instruments  that  have  embedded
          derivatives  to be accounted for as a whole  (eliminating  the need to
          bifurcate  the  derivative  from its  host) if the  holder  elects  to
          account for the whole instrument on a fair value basis. This statement
          is effective  for all financial  instruments  acquired or issued after
          the  beginning  of an entity's  first  fiscal  year that begins  after
          September  15, 2006.  The Company will evaluate the impact of SFAS 155
          on its consolidated financial statements.

          In   September   2006,   the  FASB  issued   SFAS  157,   "Fair  Value
          Measurements."  This  standard  defines  fair  value,   establishes  a
          framework for measuring  fair value in generally  accepted  accounting
          principles, and expands disclosure about fair value measurements. This
          statement  is effective  for  financial  statements  issued for fiscal
          years beginning after November 15, 2007. Early adoption is encouraged.
          The adoption of SFAS 157 is not expected to have a material  impact on
          the consolidated financial statements.

          In September  2006, the FASB issued SFAS 158,  "Employers'  Accounting
          for  Defined  Benefit  Pension  and  Other  Postretirement  Plans,  an
          amendment of FASB  Statements  87, 88, 106 and 132(R)"  ("SFAS  158").
          SFAS  158  requires  an  employer  to  recognize  the  over-funded  or
          under-funded  status of a defined benefit  postretirement  plan (other
          than a  multiemployer  plan) as an asset or liability in its statement
          of financial  position and to recognize  changes in that funded status
          in the year in which the changes occur through  comprehensive  income.
          SFAS 158 also requires the  measurement of defined benefit plan assets
          and  obligations  as of the  date of the  employer's  fiscal  year-end
          statement of financial position (with limited exceptions).  Management
          does not expect  adoption of SFAS 158 to have a material impact on the
          Company's consolidated financial statements.

          In February  2007, the FASB issued FAS No. 159, "The Fair Value Option
          for  Financial  Assets  and  Financial   Liabilities  -  Including  an
          amendment  of FASB  Statement  No.  115",  ("FAS 159")  which  permits
          entities to choose to measure many financial  instruments  and certain
          other  items at fair value at  specified  election  dates.  A business
          entity is required to report  unrealized gains and losses on items for
          which the fair value  option  has been  elected  in  earnings  at each
          subsequent  reporting  date.  This statement is expected to expand the
          use of fair value  measurement.  FAS 159 is  effective  for  financial
          statements  issued for fiscal years beginning after November 15, 2007,
          and interim periods within those fiscal years.

                                       17

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Recent Accounting Pronouncements (Continued)

          In July 2006,  the FASB  issued  Interpretation  No. 48 (FIN No.  48),
          "Accounting  for  Uncertainty  in Income  Taxes." This  interpretation
          requires recognition and measurement of uncertain income tax positions
          using a  "more-likely-than-not"  approach. FIN No. 48 is effective for
          fiscal years  beginning  after December 15, 2006.  Management is still
          evaluating  what effect this will have on the  Company's  consolidated
          financial statements.

          In  September   2006,  the  United  States   Securities  and  Exchange
          Commission  ("SEC") issued SAB 108,  "Considering the Effects of Prior
          Year  Misstatements  when  Quantifying  Misstatements  in Current Year
          Financial Statements."

          This SAB  provides  guidance  on the  consideration  of the effects of
          prior year misstatements in quantifying current year misstatements for
          the  purpose  of a  materiality  assessment.  SAB 108  establishes  an
          approach that requires  quantification  of financial  statement errors
          based on the effects of each of the company's financial statements and
          the related financial statement disclosures.  SAB 108 permits existing
          public companies to record the cumulative effect of initially applying
          this  approach in the first year  ending  after  November  15, 2006 by
          recording the necessary correcting  adjustments to the carrying values
          of assets and  liabilities  as of the  beginning of that year with the
          offsetting  adjustment  recorded  to the  opening  balance of retained
          earnings.  Additionally,  the use of the cumulative  effect transition
          method requires  detailed  disclosure of the nature and amount of each
          individual error being corrected through the cumulative adjustment and
          how and when it arose.  The Company does not  anticipate  that SAB 108
          will have a material impact on its consolidated financial statements.


                                       18


<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 3-   FIXED ASSETS
----------------------

            Fixed assets as of June 30, 2007 were as follows:

                                        Estimated
                                         Useful
                                      Lives (Years)

            Land use right                  50            $0
            Building                        35       621,155
            Equipment                       5         45,192
            Machinery                       10       647,402
            Vehicles                        8         25,859
            Leasehold improvements          5        122,831
                                                  ----------

                                                   1,462,439
            Less: accumulated depreciation           246,722
                                                  ----------
            Property and equipment, net           $1,215,717
                                                  ==========

          There was $57,892 and $26,003  charged to operations for  depreciation
          expense for the six months ended June 30, 2007 and 2006, respectively,
          of which $43,419 and $19,956 is included in cost of goods sold.  There
          was no  impairment  for these assets  during the six months ended June
          30, 2007 and 2006.

          The  Company  leased  a  factory  in the  Xi'  An  High-and  new  tech
          Industrial  Development  Zone in  November  2004 to engage in pharmacy
          production.  In May 2005,  the Company  passed its Good  Manufacturing
          Practice,   which  as  of  June  1,  2005,   was   mandatory  for  all
          pharmaceutical   companies   in  PRC.   The   Company   employs   Good
          Manufacturing  Practice  "GMP"  approved  methods  in  processing  and
          manufacturing its products. The Company obtains its raw materials from
          company-approved   vendors  and  then  process  the   materials   into
          Traditional Chinese Medicine formulas in its facility.  In the case of
          batch manufacturing,  the Company employs a fully automated production
          line to produce the bio-engineered  neutraceuticals.  Post Production,
          the product is shipped to vendors.  The raw materials are subjected to
          a combined process involving a solid/liquid  extraction step, followed
          by a liquid/liquid-purifying step to obtain the purified extract.

          The Company has leased a portion of their buildings to two non-related
          parties.  The lease term runs from  November 2005 to November 2006 and
          has been  extended  for  another  year.  Rental  income  earned by the
          Company approximates $40,420 RMB per month ($3,370 US$). These amounts
          are included in other income in the condensed  consolidated  financial
          statements.

                                       19


<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 4-   INVENTORIES
---------------------

          Inventories consisted of the following as of June 30, 2007:



          Raw materials                           $195,850
          Work in process                           25,715
          Finished goods                           406,435
                                                 ---------

                                                   628,000

          Less: provision for write-down
          of inventory                                   -
                                                 ---------
          Inventory, net                         $ 628,000
                                                 =========

          There was no obsolescence of inventory or write-downs of inventory for
          the six months ended June 30, 2007 and 2006.

NOTE 5-   STOCKHOLDERS' EQUITY
------------------------------

          Common Stock
          ------------

          As of June 30, 2007, the Company has 50,000,000 shares of common
          stock authorized with a par value of $0.001.

          The  Company  issued 100  shares of common  stock to its  founder  for
          $1.00, then exchanged 13,994,750 shares of common stock in exchange of
          100% of the  authorized  capital of Tian' An  Pharmaceutical  Co., Ltd
          (CHINA).

          Tian' An  Pharmaceutical  Co.,  Ltd (CHINA) in 2003  issued  5,445,000
          shares.

          During 2005, Tian' An issued an additional 1,856,445 shares pre-merger
          with the Nevada  corporation  to have 7,301,445  shares issued.  These
          shares were exchanged for 13,994,750 shares of the Nevada corporation.
          No shares were issued in 2006 or 2007,  however,  two  shareholders of
          the Company  privately  sold  666,950  shares to another  entity.  The
          transaction had no impact on new issued shares,  and no value added to
          treasury stock.

          The Company  has not  granted  any options or warrants  during 2007 or
          2006.

                                       20

<PAGE>


                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 5-   STOCKHOLDERS' EQUITY (CONTINUED)
------------------------------------------

          Preferred Stock
          ---------------

          As of June 30 2007,  the Company has  20,000,000  shares of  preferred
          stock  authorized  with a par  value of  $0.001.  There  are no shares
          issued and outstanding.

          Statutory Reserves
          ------------------

          Statutory reserves include a statutory surplus reserve and a statutory
          public welfare fund, which are maintained in accordance with the legal
          requirements of the PRC. Pursuant to the Articles of Association,  the
          Company  has to  appropriate  15%  of the  net  income,  based  on the
          accounts prepared in accordance with accounting  principles  generally
          accepted in the PRC, to the  statutory  surplus  reserve and statutory
          public welfare fund. The statutory  surplus reserve can be utilized to
          offset prior years' losses or for capitalization as additional paid-in
          capital,  whereas the statutory  public welfare fund shall be utilized
          for  collective  staff  welfare  benefits  such as  building  of staff
          quarters or housing.  No distribution of the statutory  reserves shall
          be made other than on a liquidation of the Company.

NOTE 6-   PROVISION FOR INCOME TAXES
------------------------------------

          Corporate Income Taxes
          ----------------------

          In accordance  with the relevant tax laws and  regulations of PRC, the
          corporate income tax rate is 15% and 33%. The corporate income tax for
          2007 and 2006 was 15%, respectively,  because Tian' An is considered a
          high  technology  company by the  Chinese  government.  For 2004,  the
          Company was provided tax relief by the government and their tax was at
          0%. For 2007, it is anticipated  that the Company will be taxed at the
          15%  rate,  and then  commencing  2008,  the  Company  will  apply for
          approval to be taxed as a high  technology  company  again for another
          three years to be taxed at 15%.  Should they not be  considered a high
          technology company they will be taxed at the 33% tax rate.

          At June 30,  2007 and  2006,  corporate  income  tax  consists  of the
          following:

                                             2007         2006
                                             ----         ----

          Tax expense - current          $  241,806   $  141,753

          The  surcharge on taxes not  deductible  for PRC  purposes  represents
          permanent  differences  due to salary and welfare items  exceeding the
          ceiling based on PRC  regulations  regarding  headcount.  In addition,
          there  are some  very  small tax  surcharges  included  here such as a
          business  tax  on the  rental  income,  water  conservancy  funds  and
          educational assessments.

                                       21

<PAGE>

                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 6-   PROVISION FOR INCOME TAXES (CONTINUED)
------------------------------------------------

          Corporate Income Taxes (Continued)
          ----------------------------------

          A  reconciliation  of  the  PRC  enterprise  income  tax  rate  to the
          effective income tax rate is as follows:

                                                    -------------------------
                                                       2007         2006
                                                    -----------  ------------

            Statutory rate - corporate income tax        15%           15%

            Surcharge on taxes not deductible for     (3.25)            3
            PRC purposes                            -----------  ------------
                                                      11.75%           18%
                                                    ===========  ============

          Deferred  income taxes are determined  using the liability  method for
          the temporary  differences  between the financial  reporting basis and
          income tax basis of the  Company's  assets and  liabilities.  Deferred
          income  taxes are  measured  based on the tax rates  expected to be in
          effect when the  temporary  differences  are included in the Company's
          tax return.  Deferred tax assets and liabilities are recognized  based
          on anticipated  future tax  consequences  attributable  to differences
          between financial statement carrying amounts of assets and liabilities
          and their  respective  tax bases.  The  Company  has no  temporary  or
          permanent   differences.   Therefore,   no  deferred  tax  assets  and
          liabilities  have been recognized and no valuation  allowance has been
          established.

          The  depreciation  and  amortization  methods  and lives  the  Company
          utilizes are identical for book and tax purposes.  Additionally, there
          is no income or expense included in books not included in tax.

          Value Added Tax
          ---------------

          In  accordance  with the relevant  taxation laws in the PRC, the Value
          Added tax ("VAT") rate for export  sales is 0% and  domestic  sales is
          17%.  VAT is  levied  at 17% on the  invoiced  value of  sales  and is
          payable by the purchaser.  The Company is required to remit the VAT it
          collects to the tax authority, but may deduct therefrom the VAT it has
          paid on eligible purchases. The VAT that the Company collects on sales
          is not  included  in sales.  The amount of VAT  payable as of June 30,
          2007 is  $110,688  and is  included  in  accounts  payable and accrued
          expenses.

NOTE 7-   SUBSIDIARY
--------------------

          As noted in Note 1, the Company  and an  individual  in December  2005
          established  a  subsidiary  company  through a joint  venture,  Xi' An
          Tian'an  Pharmacy  Marketing  Co.,  Ltd (the  "Subsidiary").  Tian' An
          injected  cash  amounting to  approximately  $2,600,000 as its capital
          contribution,  accounting for 96.3% of the total registered capital of
          the  Subsidiary.  The capital  infusion  will be utilized for start-up
          costs  of the  Subsidiary  as  well  as the  hiring  of  staff  and an
          extensive  marketing  campaign for the  Company.  The  remaining  3.7%
          ownership  is  reflected  as  minority  interest  in the  consolidated
          financial statements.

                                       22

<PAGE>


                        TIAN' AN PHARMACEUTICAL CO., LTD.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             JUNE 30, 2007 AND 2006

NOTE 8-   RELATED PARTY TRANSACTIONS
------------------------------------

          In July  2005,  the  Tian'an  entered  into a  Pharmaceutical  License
          Purchase  Contract  with  Xi' An  Gelin  Healthy  Production  Research
          Institute for the development of Tian' An Pain Relief capsule.  Xi' An
          Gelin Healthy  Production  Research  Institute is a shareholder of the
          Company and contributed their license for Compound Ginseng Capsule for
          their shares in Tian' An (see Note 2 - Intangible Assets). The Company
          has valued the intangibles at historical cost.

          Tian' An paid  Xi' An  Gelin  Healthy  Production  Research  Institute
          approximately  $1,000,000  (US$) (8,000,000 RMB). Xi' An Gelin Healthy
          Production  Research  Institute in accordance  with the agreement must
          offer the result of their research and development of the new medicine
          by August 2011, and have it licensed by December  2011.  Should Xi' An
          Gelin Healthy  Production  Research Institute fail to obtain a license
          for the  product,  they must return the fee.  The Company has recorded
          this fee in other  receivables on its condensed  consolidated  balance
          sheet as of June 30, 2007.

          Should Tian' An receive the license,  the payment will be reclassified
          to Intangible  Assets and  amortized  over the term of the license and
          tested for impairment quarterly by Management.

NOTE 9-   COMMITMENTS
---------------------

          Rental
          ------

          Tian' An has entered  into lease  agreements  for their  manufacturing
          plant and office space that expire through October 2009.  Rentals vary
          in amounts ranging up to $8,000 (US) per month.

          Minimum lease payments under operating  leases at June 30, 2007 are as
          follows:

                Period ending June 30, 2008                   $164,432
                                       2009                    110,992
                                       2010                     32,250


                                       23

<PAGE>


ITEM 2. MANAGEMENTS  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND PLAN OF
        OPERATION

      You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial statements
and the related notes included elsewhere in this report. Our financial
statements have been prepared in accordance with U.S. GAAP. In addition, our
financial statements and the financial data included in this report reflect our
reorganization and have been prepared as if our current corporate structure had
been in place throughout the relevant periods. The following discussion and
analysis contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those projected in
the forward-looking statements.

                                    Overview

      We were organized as a Nevada corporation on August 15, 2005. In September
2005 we issued 13,994,750 shares of our common stock to acquire all outstanding
shares of Tian'an Pharmaceutical Co., which we refer to as "Tian Pharma," a PRC
company which was formed in January 2003. The purpose of the transaction was to
redomicile us as a U.S. corporation. Unless otherwise indicated, all references
to us throughout this report includes the operations of Tian Pharma.

      We develop, manufacture and sell Traditional Chinese Medicine herbal
products for the treatment and prevention of diseases and to improve the
functions of the human body.

Six Months Ended June 30, 2007
------------------------------

      Material changes of items in our Statement of Operations for the six
months ended June 30, 2007, as compared to the six months ended June 30, 2006,
are discussed below:

      Operating Revenue: Our third product, the Nizhuanie soft capsule, came to
market in January 2007. As a result, revenues increased significantly during the
current six month period.

      Gross Profit: Our gross profit percentage was 67% during June 30, 2007,
which was comparable to our gross profit percentage of 64% during June 30, 2006.

      Net Income: Net income during the six months ended June 30, 2007 was 35%
of our Operating Revenues. In comparison, our net income was 19% of our
Operating Revenues during the six months ended June 30, 2006. The increase, from
a percentage standpoint, was due to a higher gross profit percentage during the
period and the fact that Operating Expenses were relatively the same amount as
during the six months ended June 30, 2006 despite a significant increase in
sales during the current period.



<PAGE>


Trends, Events and Uncertainties
--------------------------------

     We anticipate  that  revenues  will continue to increase  since we received
government  approval  to sell our  Nizhuanle  soft  capsule  in  December  2006.
Revenues are also  expected to increase once we receive  government  approval to
market  all of  our  products  through  our  subsidiary,  Xian  Tianan  Pharmacy
Marketing Co., Ltd.

      The TCM market may not be as large as reported and expected growth in this
market may not continue. Market data and projections are inherently uncertain
and subject to change. In addition, underlying market conditions are subject to
change based on economic conditions, consumer references and other factors that
are beyond our control. A slow-down in sales of TCM products could have a
material adverse effect on our business.


      Other than the factors listed above we do not know of any trends, events
or uncertainties that have had or are reasonably expected to have a material
impact on our net sales or revenues or income from continuing operations. Our
business is not seasonal in nature.

Liquidity and Capital Resources
-------------------------------

      Future payments due on our contractual obligations as of June 30, 2007 are
as follows:

                                            Twelve Months Ended June 30,
Item                    Total              2008         2009         2010
----                    -----            --------    --------      --------

Lease Payments        $307,674           $164,432    $110,992      $32,250


      Except as shown in the foregoing table, as of June 30, 2007 we did not
have any material capital commitments.

      If sufficient capital is available, during the next twelve months we plan
to spend approximately $1,300,000 to market our products through Xian Tianan
Pharmacy Marketing Co., Ltd., the subsidiary we formed in December 2005, and
approximately $3,700,000 to expand our product line and our manufacturing
facility.

      If cash generated by or operations is not sufficient to fund any future
capital requirements, we will attempt to raise any capital which we may need
through the sale of our equity securities or borrowings from third parties.

      We do not have any commitments or arrangements from any person to provide
us with any additional capital. Additional capital may not be available to us on
a timely basis, or if available, on acceptable terms.

                                       2


<PAGE>


Our material sources and (uses) of cash during the six months ended June 30,
2007 were:

                                                          2007
                                                          ----

         Cash provided by operations                  $1,266,853
         Changes in foreign exchange rate             $  159,263

       Our material sources and (uses) of cash during the six months ended
June 30, 2006 were:

                                                          2006
                                                          ----

         Cash provided by operations                   $619,569
         Changes in foreign exchange rate              $ 89,989

      Income from our operations has been, and is expected to be in the future,
our primary source of cash.

Off-Balance Sheet Arrangements
------------------------------

      We do not have any off-balance sheet items reasonably likely to have a
material effect on our financial condition.

Accounting Policies
-------------------

      Our critical accounting policies, as well as recent accounting
pronouncements which apply to us, are described in Note 2 to our financial
statements which are included as part of this report.

ITEM 3. CONTROLS AND PROCEDURES
-------------------------------

      Weng Jianjun, the Company's Chief Executive Officer and Zhu Jie, the
Company's Principal Financial Officer, have evaluated the effectiveness of the
Company's disclosure controls and procedures as of a date prior to the filing
date of this report, and in their opinion the Company's disclosure controls and
procedures are effective to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to them by
others within those entities, particularly during the period in which this
report is being prepared, so as to allow timely decisions regarding required
disclosure. There have been no changes in the Company's internal controls or in
other factors that could significantly affect the Company's internal controls.
As a result, no corrective actions with regard to significant deficiencies or
material weakness in the Company's internal controls were required.


                                       3


<PAGE>

                                     PART II

                                OTHER INFORMATION


Item 6. Exhibits

      Number      Exhibit
      ------      -------

        31        Rule 13a-14(a) Certifications

        32        Section 1350 Certifications









                                       4






<PAGE>



                                   SIGNATURES


     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on August 9, 2007.

                               TIAN'AN PHARMACEUTICAL CO., LTD.



                               By: /s/ Weng Jianjun
                                   ---------------------------------------
                                   Weng Jianjun, Principal Executive Officer


                               By: /s/ Zhu Jie
                                   ---------------------------------------
                                   Zhu Jie, Principal Financial and Accounting
                                   Officer