<PAGE>

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

                                   FORM 10-QSB/A
                                 AMENDMENT NO. 1

                                   (Mark One)
[X]      Quarterly report under Section 13 or 15(d) of the Securities Exchange
         Act of 1934 For the quarterly period ended March 31, 2004

[ ]      Transition report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934
         For the transition period from _________ to _________

                           Commission File No. 0-29015

                     AMERICAN ORIENTAL BIOENGINEERING, INC.
                 (Name of Small Business Issuer in Its Charter)

            NEVADA                                               84-0605867
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

           NO.308 XUEFU ROAD, NANGANG DISTRICT, HARBIN, CHINA, 150086
                    (Address of principal executive offices)
                                 86-451-666-6601
                (Issuer's telephone number, including area code)

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 [ ]

The number of shares outstanding of each of the issuer's class of equity as of
the latest practicable date is stated below:

Title of each class of Common Stock                Outstanding as March 31, 2004
--------------------------------------------------------------------------------
Preferred Stock, $0.001 par value                             1,000,000
Common Stock, $0.001 par value                               32,725,827

Transitional Small Business Disclosure Format (check one):

                                 Yes [ ] No [X]

<PAGE>

            Explanatory Note Regarding the Purpose of this Amendment

American Oriental Bioengineering, Inc. is filing this report on Form 10-QSB/A to
amend its quarterly report for the period ended March 31, 2004. The date of
filing the original Form 10-QSB for the period ended March 31, 2004, was May 19,
2004. The main body of the financial statements contained in the Form 10-KSB are
not being amended. The Management Discussion and Analysis and the notes to the
financial statements were expanded and revised to provide discussion and
explanation in greater detail. The reasons that we are filing this amendment are
as follows:

1. Item 1. Financial Statements. We have clarified that the amounts previously
attributable to "selling and administrative expenses" are more accurately
attributable to "selling and marketing expenses". We have changed the item
previously titled "Property, Plant and Equipment" to "Plant and Equipment", to
reflect the fact that the Company does not own its property, but uses it in
accordance with a land use right granted by the PRC. We expanded our discussion
regarding Stock-Based Compensation in Note 4. Throughout the financial
statements, we have amended our prior references to "fixed assets" to specify
that we are referring to our "plant and equipment".

2. Item 2. Management Discussion and Analysis. We have amended the "Critical
Accounting Policies and Estimates" discussion to describe in greater detail why
estimates are made with respect to net realizable value of our accounts
receivable and inventories. Our "Results of Operations" discussions comparing
the three months ended March 31, 2003 and 2004 have been revised. Finally, our
discussion of the "liquidity and capital resources" section has been expanded.

3. Item 8A. Controls and Procedures has been revised in this amendment.

4. We have filed new Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications in
connection with this amended filing.

<PAGE>

                        --------------------------------
                                TABLE OF CONTENTS
                        --------------------------------

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.
          o   Condensed Consolidated Balance Sheets                         F-1
          o   Condensed Consolidated Statements of Income                   F-2
          o   Condensed Consolidated Statements of Cash Flows               F-3
          o   Notes to Condensed Consolidated Financial Statements   F-4 to F-7

Item 2.   Management Discussions & Analysis of Financial Condition            8
          and Results of Operations.

Item 3.   Controls and Procedures.                                           11

PART II - OTHER INFORMATION

Item  6.  Exhibits and Reports on Form 8-K.                                  12

<PAGE>
<TABLE>
<CAPTION>

                                        PART I - FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS

                           AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    ASSETS
                                                    ------

                                                                                    MARCH 31,     DECEMBER 31,
                                                                                      2004            2003
                                                                                  ------------    ------------
                                                                                    UNAUDITED
<S>                                                                               <C>             <C>
CURRENT ASSETS
    Cash and cash equivalents                                                     $ 5,186,548     $ 5,366,857
    Trade receivables                                                               3,390,428       3,256,807
    Note receivable                                                                 2,409,639              --
    Inventory                                                                       3,732,986       2,546,810
    Prepayments for goods                                                             428,656         868,458
    Advances to employees                                                              86,273          55,116
    Deferred taxes                                                                     78,439          78,439
    Deferred merger costs                                                              25,001          33,334
    Deferred consulting expenses                                                    1,339,009       1,569,442

                                                                                  ------------    ------------
    TOTAL CURRENT ASSETS                                                           16,676,979      13,775,263
                                                                                  ------------    ------------

PLANT AND EQUIPMENT, NET                                                            7,144,245       7,264,822

DEPOSIT FOR MACHINERY                                                                 375,904              --

OTHER ASSETS, NET                                                                     609,941         632,531

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

TOTAL ASSET                                                                       $24,807,069     $21,672,616
-----------                                                                       ============    ============

CURRENT LIABILITIES
    Accounts payable and accrued expenses                                         $ 1,640,169     $ 1,253,826
    Prepayments for materials                                                       1,500,140          76,593
    Bank loans                                                                      1,445,783       1,445,783
    Taxes payable                                                                     313,172         310,480
    Obligation under finance leases within one year                                     6,875           6,780
    Payable to related party                                                           43,243          43,243

                                                                                  ------------    ------------
    TOTAL CURRENT LIABILITIES                                                       4,949,382       3,136,705
                                                                                  ------------    ------------

LONG-TERM LIABILITIES
    Obligation under finance leases                                                    23,185          25,449
                                                                                  ------------    ------------

TOTAL LIABILITIES                                                                   4,972,567       3,162,154
                                                                                  ------------    ------------

SHAREHOLDERS' EQUITY

    Preferred stock, $0.001 par value; 2,000,000 shares authorized;
    1,000,000 shares issued or outstanding at March 31, 2004 and
    December 31, 2003, respectively                                                     1,000           1,000

    Common stock, $0.001 par value; 60,000,000 shares authorized;
    32,725,827 shares issued and outstanding at March 31, 2004 and
    December 31, 2003, respectively                                                    32,726          32,726

    Additional paid-in capital                                                     10,112,734      10,048,734
    Retained earnings
      Restricted portion                                                              534,177         534,177
      Unrestricted portion                                                          9,153,865       7,893,825

                                                                                  ------------    ------------
TOTAL SHAREHOLDERS' EQUITY                                                         19,834,502      18,510,462
                                                                                  ------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                        $24,807,069     $21,672,616
                                                                                  ============    ============


                                                     F-1
</TABLE>

<PAGE>

             AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                    3 MONTHS ENDED MARCH 31,
                                                     2004              2003
                                                 -------------     -------------

SALES                                            $  5,906,619      $  4,498,662

COST OF SALES                                       1,819,761         1,632,362

                                                 -------------     -------------
GROSS PROFIT                                        4,086,858         2,866,300

SELLING AND MARKETING EXPENSES                        478,731           286,475

ADVERTISING                                           845,773           635,198

GENERAL AND ADMINISTRATIVE EXPENSES                 1,023,697           390,984

MERGER COSTS                                            8,333             8,333

DEPRECIATION AND AMORTIZATION                         145,483           126,395

                                                 -------------     -------------
INCOME FROM OPERATIONS                              1,584,841         1,418,915

INTEREST, NET                                         (23,980)          (23,298)

OTHER INCOME / (EXPENSES)                              12,351            (4,818)

                                                 -------------     -------------
INCOME BEFORE INCOME TAXES                          1,573,212         1,390,799

INCOME TAXES                                          313,172           221,120

                                                 -------------     -------------
NET INCOME                                       $  1,260,040      $  1,169,679
                                                 =============     =============

NET INCOME PER SHARE
    BASIC                                        $       0.04      $       0.06
    DILUTED                                      $       0.04      $       0.06

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
    BASIC                                          32,725,827        19,905,715
    DILUTED                                        33,437,031        20,327,937


                                      F-2

<PAGE>
<TABLE>
                        AMERICAN ORIENTAL BIOENGINEERING, INC.
                                   AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)
<CAPTION>

                                                           3 MONTHS ENDED MARCH 31,
                                                            2004             2003
                                                        ------------     ------------
<S>                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                          $ 1,260,039      $ 1,169,679
    Adjustments to reconcile net income to net cash
         provided by operating activities:
    Depreciation and amortization                           145,482          126,395
    Provision for doubtful accounts                          91,724               --
    Deferred merger cost                                      8,333            8,333
    Stock option compensation expenses                       32,000               --
    Deferred consulting expenses                            230,433           75,000
    Changes in operating assets and liabilities:
         Inventory                                       (1,186,176)        (728,939)
         Trade receivables                                 (133,622)      (1,504,979)
         Prepayments for goods                              348,078           54,058
         Due from related parties                                --          330,933
         Advances to employee                               (31,157)              --
         Trade payables and accrued expenses                418,343          368,097
         Prepayments for materials                        1,423,547          418,235
         Payable to related party                                --         (175,093)
         Income taxes payable                                 2,692          186,910

                                                        ------------     ------------
Net cash provided by operating activities                 2,609,716          328,629
                                                        ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of plant and equipment                          (2,315)          (1,162)
    Addition to note receivable                          (2,409,638)              --
    Deposit for machinery                                  (375,904)              --

                                                        ------------     ------------
Net cash uesd in investing activities                    (2,787,857)          (1,162)
                                                        ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayment of finance leases                              (2,168)              --

                                                        ------------     ------------
Net cash used in financing activities                        (2,168)              --
                                                        ------------     ------------

NET (DECREASE)/INCREASE IN CASH                            (180,309)         327,467
  AND CASH EQUIVALENTS
    Cash and cash equivalents, beginning of period        5,366,857        2,816,723
                                                        ------------     ------------

    Cash and cash equivalents, end of period            $ 5,186,548      $ 3,144,190
                                                        ============     ============

SUPPLEMENTARY CASH FLOWS DISCLOSURES
       1 Interest paid                                  $    23,980      $    23,298
                                                        ============     ============

       2 Taxes paid                                     $   310,480      $    83,500
                                                        ============     ============

       3 In 2003, issued 1,000,000 preferred shares and 20,284,810 common shares in
         February 2003 valued at $3,285,856 for the assets acquisition.

       4 Stock options granted in 2004 to purchase 19,393 shares of common
         stock for $32,000 of accrued compensation in 2003.


                                         F-3
</TABLE>

<PAGE>

             AMERICAN ORIENTAL BIOENGINEERING, INC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    UNAUDITED
                                 MARCH 31, 2004
                -------------------------------------------------

NOTE 1 - BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of American Oriental
Bioengineering, Inc. (formerly Internet Golf Association, Inc.) and subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and pursuant to the
requirements for reporting on Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all the information and footnotes required by
accounting principles generally accepted in United States of America for
complete financial statements. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments), which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods. Results shown for interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year. The condensed
consolidated balance sheet information as of December 31, 2003 was derived from
the audited consolidated financial statements included in the Company's Annual
Report Form 10-KSB. These interim financial statements should be read in
conjunction with that report.

NOTE 2 - NATURE OF COMPANY

On December 18, 2001, the Company and Harbin Bioengineering entered into an
agreement whereby the Company acquired 100% of the equity interest of Harbin
Bioengineering. As a result, Harbin Bioengineering became a wholly owned
subsidiary of the Company (the "Acquisition"). The Company exchanged 8,538,943
shares of its common stock for that number of shares of Harbin Bioengineering
that constitutes 100% of the equity interest of Harbin Bioengineering. On
December 18, 2001, the directors and executive officers of the Company resigned
and Shujun Liu was appointed Chairman of the Board of Directors and President of
the Company. On June 26, 2002, the Acquisition became effective when the Company
filed Articles of Exchange with the Secretary of State of Nevada.

On October 15, 2002, the Company filed a Information Statement of Schedule 14C
reporting the issuance of 20,284,810 shares of common stock and 1,000,000 shares
of class A preferred stock in consideration for all of the ownership interest in
a soybean protein peptide biochemical engineering project (the "Project") as
described in the purchase agreement, dated as of August 17, 2002 by Shujun Liu
and the Company ("Purchase Agreement"). The value of the common stock issued was
approximately $3,205,000, which was equivalent to $0.158 per share of common
stock, the average of the closing price for the five-day period immediately
following the date of the Purchase Agreement, i.e, from August 19, 2002 to
August 23, 2002. By acquiring the Project, among other assets, the Company had
also acquired the ownership of the building housing the Project's manufacturing
plant, manufacturing equipment, and environmental control equipment the
historical cost of which was approximately $3,205,000. In addition, the Company
had also received the right to produce the products that resulted from the
Project as well as ownership rights on a pending patent in PRC for the process
of the extraction and production of soybean peptide. The shares were issued on
February 22, 2003.


                                      F-4

<PAGE>

NOTE 3 - USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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 revenue and expenses during the reporting period. Actual
results when ultimately realized could differ from those estimates.

NOTE 4 - STOCK BASED COMPENSATION

The Company's stock option plan is subject to the provisions of Statement of
Financial Accounting Standards ("SFAS") No 123, Accounting for Stock-Based
Compensation. Under the provisions of this standard, employee stock-based
compensation expense is measured using either the intrinsic-value method as
prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees and related Interpretations, or the fair value method
described in SFAS No. 123. The Company has elected to account for its employee
stock-based awards under the provisions of APB Opinion No. 25. Under APB Opinion
No. 25, compensation cost for stock options is measured as the excess, if any,
of the fair value of the underlying common stock on the date of grant over the
exercise price of the stock option.

Companies choosing the intrinsic-value method are required to disclose the pro
forma impact of the fair value method on net income.

On March 31, 2004, and in accordance with certain executive employee employment
agreements, the Company granted 23,704 stock options with an exercise price of
$2.00 per share and expire March 31, 2009. The options vest immediately. For the
three months ended March 31, 2004, the Company recognized $32,000 of
compensation expense for the difference between the closing market price of the
Company's common stock on March 31, 2004 and the exercise price of $2.00.

The pro forma effect on net income and income per share relating to the 2004
stock option grants, net of the previously recognized intrinsic value expense
are as follows:

<TABLE>
<CAPTION>
                                                Three months ended       Three months ended
                                                  March 31, 2004           March 31, 2003
                                                ------------------       ------------------
<S>                                                  <C>                     <C>
                   Net income as reported            $1,260,040              $1,169,679
                     Pro forma net income            $1,232,544              $1,169,679

             Income per share as reported                 $0.04                  $0.06
               Pro forma income per share                 $0.04                  $0.06
</TABLE>

Additionally, in accordance with the executive employment agreements, the
Company was obligated to grant stock options to purchase 19,393 shares of the
Company's common stock in the last quarter of 2003. The options vested
immediately, are exercisable at $2.00 per share and expire December 31, 2008.
Since the options were not physically granted until the establishment of the


                                       F-5

<PAGE>

Company's stock option plan in March 2004, the Company had accrued for the
compensation expense associated with the options at December 31, 2003 amounting
to $32,000. In the first quarter 2004, the $32,000 was reclassified from accrued
expenses to additional paid-in capital.

The fair value of options granted under the Company's stock option plans were
estimated on the date of grant using the Black-Scholes pricing model with the
following assumptions:

         Weighted average of expected risk-free interest rates        3.00%
         Expected years to exercise date                                5
         Expected stock volatility                                   81.49%
         Expected dividend yield                                       0%

Stock-based compensation for service, other than for employees, is accounted for
in accordance with the provision of SFAS 123, Accounting For Stock - Based
Compensation. Accordingly, all transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measurable. The fair value
is generally then amortized over the term of the services. If the service period
is not defined as an earlier or shorter period, the service period is presumed
to be the vesting period.


NOTE 5 - EARNING PER SHARE

Basic earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding during
the period. Diluted earnings per share is computed similar to basic earnings per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive.

Basic and diluted earnings per share are calculated as follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                    March 31,
                                                              2004            2003
                                                          ------------    ------------
<S>                                                       <C>             <C>
Earnings:
   Net income                                             $ 1,260,040     $ 1,169,679
   Dividend                                                        --              --
                                                          ------------    ------------
Income applicable to common shareholders                  $ 1,260,040     $ 1,169,679
                                                          ============    ============

Basic:
Income applicable to common shareholders                  $ 1,260,040     $ 1,169,679
Weighted average shares outstanding during the period      32,725,827      19,905,715
                                                          ------------    ------------
   Basic                                                  $      0.04     $      0.06
                                                          ============    ============

Diluted:
Income applicable to common shareholders                  $ 1,260,040     $ 1,169,679

Weighted average shares outstanding during the period      32,725,827      19,905,715
Effect of dilutive securities:
   Stock options                                               20,414              --
   Warrants                                                   690,790         422,222
                                                          ------------    ------------
Diluted weighted common shares outstanding                 33,437,031      20,327,937
                                                          ============    ============

   Diluted                                                $      0.04     $      0.06
                                                          ============    ============
</TABLE>


                                      F-6

<PAGE>

NOTE 6 - RECLASSIFICATIONS

Certain amounts were reclassified in prior periods to conform to the current
period's presentation.

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of financial instruments including cash and cash equivalents,
receivables, accounts payable and accrued expenses and debt, approximates their
fair value at March 31, 2004 and December 31, 2003 due to the relatively
short-term nature of these instruments.

NOTE 8 - FOREIGN CURRENCY CONVERSION

The Company's financial information is presented in US dollars. People's
Republic of China currency (Reminbi dollars) has been converted into US dollars
at the exchange rate of 8.3 to 1.

NOTE 9 - NOTE RECEIVABLE

On March 1, 2004, the Company loaned $2,409,638 to an unrelated third party. The
loan is due in August 2004 and bears compounded interest at the prevailing best
lending rate of the Bank of China on the first bank day of each month. The
interest rate at March 31, 2004 was 5.31%. The borrower pledged assets and a
patent as security for the loan.

NOTE 10 - INCOME TAXES

Income taxes are provided on Harbin Three Happiness Bioengineering Limited in
accordance with taxation principles currently effective in the People's Republic
of China as it relates to the Company.

NOTE 11 - SUBSEQUENT EVENT

On July 22, 2003, the Company filed a Form 8-K current report pursuant to
section 13 or 15(D) of the Securities Exchange Act of 1934, to announce that BH
Capital Investments, LP and Excalibur Limited Partnership (together, the
"Investors") and the Company entered into an investment agreement (the
"Investment Agreement"). On September 18, 2003, in conjunction with the
Investment Agreement, the Company filed with the Securities and Exchange
Commission (the "Commission") a Form SB-2 registration statement under the
Securities Act of 1933 ("Registration Statement") to register the common stock
and the warrants associated with the Investment Agreement and on April 14, 2004,
the Company filed with the Commission a request to withdraw the September 18,
2003 registration statement, for reasons specified in that request.

On April 16, 2004, the Company formed a subsidiary registered in Hong Kong,
American Oriental Bioengineering (H.K.) Limited to be wholly owned by Bestkey
International Limited, a 100% subsidiary of the Company. The director of the new
subsidiary is the Company's Chief Executive Officer and the Company intended to
operate Hong Kong and Asian business developments through American Oriental
Bioengineering (H.K.) Limited. As of March 31, 2004 and as of the date of this
report, American Oriental Bioengineering (H.K.) Limited had not conducted any
business activity nor had it incurred any business transactions.


                                      F-7

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the information
contained in the condensed consolidated financial statements of the Company and
the notes thereto appearing elsewhere herein and in conjunction with the
Management's Discussion and Analysis set forth in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2003 and Quarterly Report on Form
10-QSB for the quarter ended March 31, 2003.

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
-----------------------------------------------------

This quarterly report contains forward-looking statements within the meaning of
the federal securities laws. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe,"
"AOBO believes," "management believes" and similar language. The forward-looking
statements are based on the current expectations of AOBO and are subject to
certain risks, uncertainties and assumptions, including those set forth in the
discussion under "Description of Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," including the
discussion under "--Risk Factors" thereunder. The actual results may differ
materially from results anticipated in these forward-looking statements. We base
the forward-looking statements on information currently available to us, and we
assume no obligation to update them..

Investors are advised to consult any further disclosures by us on the subject in
our filings with the Securities and Exchange Commission, especially on Forms
10-KSB, 10-QSB and 8-K, in which we discuss in more detail various important
factors that could cause actual results to differ from expected or historic
results. It is not possible to foresee or identify all such factors. As such,
investors should not consider any list of such factors to be an exhaustive
statement of all risks and uncertainties or potentially inaccurate assumptions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
------------------------------------------

We have identified one policy area as critical to the understanding of our
consolidated financial statements. The preparation of our consolidated financial
statements 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 consolidated financial statements and the
reported amounts of sales and expenses during the reporting periods. With
respect to net realizable value of the Company's accounts receivable and
inventories, significant estimation judgments are made and actual results could
differ materially from these estimates.

The Company did not provide any reserves against its accounts receivable or
inventories at March 31, 2004. Management's estimation that there are no
reserves is based on the facts that our sales are paid for on a timely basis and
there are currently no significant aged accounts receivable and the current
inventory turnover is sufficiently high to realize the current carrying value of
the inventories. In addition, some of our raw material inventories appreciate in
value as demand for certain commodities used in our processes have appreciated
in market value. In making this judgment, management has reasonably assumed,
based on the past and current experience, that the current demand trend for our
products will continue in the near future and that our inventory turnover will
maintain this efficiency level. The Company closely tracks the payment record of
its customers. Based on the current payment record, management has assumed that
our customers will continue to pay their outstanding invoices timely, and that
our customers' financial position will not deteriorate significantly in the near
future to impair their ability to pay for purchases from the Company. However,
while we currently do not believe that actual results will differ materially in
the near future from our current estimates, if customer demand for our products
decreases significantly in the near future, or if the financial positions of our
customers deteriorate in the future, the Company might have to provide reserves
or write-downs on its accounts receivable and inventories.

We believe the following is among the most critical accounting policies that
impact our consolidated financial statements. We suggest that our significant
accounting policies, as described in our consolidated financial statements in
the Summary of Significant Accounting Policies, be read in conjunction with this
Management's Discussion and Analysis of Financial Condition and Results of
Operations.


                                        8
<PAGE>

We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No.
104. All of the following criteria must exist in order for us to recognize
revenue:

         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 majority of the Company's revenue results from sales contracts with
distributors and, in a significant number of cases, payments are received upon
the shipment of goods. The Company's pricing structure is fixed and there are no
rebate or discount programs. We conduct a credit background check on new
customers as a means of reducing risks and subjectivity and to assure
collectability. Based on these factors, the Company believes that it can apply
the provisions of SAB 104 with minimal subjectivity.

RECENT DEVELOPMENTS
-------------------

On January 10, 2002, the Company filed a Current Report on Form 8-K reporting
the acquisition (the "Acquisition") by the Company of all of the equity interest
of Harbin Three Happiness Bioengineering Co., Ltd. ("Harbin Bioengineering"), a
People's Republic of China company. On June 26, 2002, the Acquisition became
effective when the Company filed Articles of Exchange with the Secretary of
State of Nevada. On July 1, 2002, the Company filed an Amendment No. 2 to the
Company's Current Report on Form 8-K in order to report the effectiveness of the
Acquisition.

On October 15, 2002, the Company filed another Information Statement Pursuant to
Section 14(c) of the Securities Exchange Act of 1934 the acquisition of a
soybean protein peptide biochemical engineering project ("Project") of which the
transaction was closed in February, 2003.

The Project covers derivatives and extractions of soybean protein peptides,
substances derived from soybeans through a biochemical engineering process
involving cutting, decomposition, conversion and synthesis of soybean protein
that can be absorbed by the body. In addition to absorbing soybean peptide
directly in the form of various tablets or powders, soybean peptide can also be
used as an additive in various foods and beverages including milk, tea and
coffee. By acquiring the Project, the Company acquired ownership of the
properties associated with the Project, the manufacturing plant, manufacturing
equipment and environmental control equipment. The purchased Project was crucial
to the Company's expansion and growth in the field of bioengineering. It was
also important to the Company's over-all technological strategy. Acquiring the
Project enabled the Company to develop new products and will increase the
Company's revenue in the future.

RESULTS OF OPERATION - THREE MONTHS ENDED MARCH 31, 2004 AS COMPARED TO THREE
-----------------------------------------------------------------------------
MONTHS ENDED MARCH 31, 2003
---------------------------

For the quarter ended March 31, 2004 revenues increased by $1,407,957 or 31% to
$ 5,906,619 from $4,498,662 as compared to the corresponding period of the prior
year. This increase is attributed primarily to the increase in sales volume from
our existing product lines. Compared to three months ended March 31, 2003, our
sales revenue from our three main categories of products were as follows:

<TABLE>
                                                                              Increase /
                                                     SALES REVENUE            (decrease)
                                              THREE MONTHS ENDED MARCH 31,     in sales
         Product series                           2004            2003         revenue
                                               -----------    -----------    -----------
<S>                                            <C>            <C>            <C>
         Health food supplement                $  605,465     $  417,757     $  187,708
         Chinese herbal medicinal products      4,995,155      4,080,905        874,250
         Soybean protein peptide                  345,999             --        345,999
                                               -----------    -----------    -----------
         TOTAL REVENUE                         $5,906,619     $4,498,662     $1,407,957
                                               ===========    ===========    ===========
</TABLE>

                                        9

<PAGE>

In the quarter ending March 31, 2004 the sales of our Chinese herbal medicinal
products increased by $874,250 or to 21% increase as compared to the same
quarter last year. Our distribution strategy of selling Cease enuresis soft gel
and other Chinese herbal medicinal through clinic networks and hospitals in 2004
increased our sales revenue compared to 2003.

Sales revenue from our health food supplement series increased by $187,708 in
the current quarter as compared to the same quarter last year, representing a
45% increase. We recorded a reduction in sales revenue from health food
supplement products in 2003 against 2002 due to severe competition in the health
food supplement market in China, but we managed to slowly pick up and recover
our market penetration in 2004 through intensive marketing and promotional
campaigns. As a result, the sales of our health food supplement products
increased by 45% against the same quarter last year.

In first quarter of 2004, newly launched soybean protein peptide series
contributed to additional $345,999 in sales revenue to the Company. The Company
first introduced soybean protein peptide series to the market in the second
quarter of 2003, and as a result, revenue from soybean protein peptide series in
first quarter of 2004 represented a net increase against the same quarter in
2003.

Cost of sales increased by $187,399 or 11% to $1,819,761 from $1,632,362 for the
three months ended March 2004, as compared to the corresponding period of the
prior year. This increase resulted from increased product costs incurred as
associated with increase in sales of all existing product lines including
soybean protein peptide, health food products and herbal medicinal products. The
increase in cost of sales by product categories were as follows:

<TABLE>
                                                                              Increase /
                                                     COST OF SALES            (decrease)
                                              THREE MONTHS ENDED MARCH 31,     in sales
         Product series                           2004            2003         revenue
                                               -----------    -----------    -----------
<S>                                            <C>            <C>            <C>
         Health food supplement                $  235,797     $  215,162     $   20,635
         Chinese herbal medicinal products      1,531,109      1,417,200        113,909
         Soybean protein peptide                   52,855             --         52,855
                                               -----------    -----------    -----------
         TOTAL COST OF SALES                   $1,819,761     $1,632,362     $  187,399
                                               ===========    ===========    ===========

</TABLE>

The cost of sales of our health food supplement series increased by $20,635, or
10% in 2004 compared to 2003. The increase in cost of sales was lower than the
proportional increase in sales revenue because the profit margin increased from
48% in 2003 to 61% in 2004. In the same quarter of 2003, our sales of health
food supplement decreased because there was increased competition of such
products in the Chinese market. Our production volume reduced and this caused a
reduction in our profit margin. However, in 2004, our sales in health food
supplement products increased, leading to an increase in production volume and
profit margin in first quarter of 2004.

The cost of sales of our Chinese herbal medicinal products increased by
$113,909, or 8% in 2004 compared to 2003 as a result of an increase in 21% in
sales revenue from Chinese herbal medicinal products. The increase in cost of
sales was lower than the proportional increase in sales revenue because the
profit margin increased from 65% in 2003 to 69% in 2004. The Company increased
its production volume to meet the sales increase and hence improved the profit
margin through the increased scale of production.

The overall profit margin for the Company was 69% in 2004, which represented an
improvement of 5% as compared to 64% in 2003.

Selling and marketing expenses increased by $192,256 or 67% to $478,731 as
compared to the corresponding period of the prior year. In the first quarter of
2004, the Company spent $95,054 for the payroll of our sales and marketing
executives and employees, which was approximately the same as the first quarter
of 2003, which was $92,825. The increase in selling and marketing expenses was
attributed primarily to increased selling and marketing overhead as compared to
the first quarter of the prior year in order to capture the increase in sales
revenues for the quarter ending March 31, 2004, as compared to the same quarter
of last year. The Company spent $383,677 in the first quarter of 2004 for sales
and marketing overhead, an increase of $190,027, or 98%, against the same
quarter last year, which was $193,650. Increased marketing and sales support
through increase resources contributed to the increase of our sales in health
food supplement products.

                                       10
<PAGE>

Advertising expenses increased by $210,575 or 33% to $845,773 as compared to the
corresponding period of the prior year. This increase is attributed to increase
advertising efforts in order to support the increase in sales and marketing
activities for all product lines that enabled increase in revenue in current
quarter ended March 31, 2004 as compared to March 31, 2003.

General and administrative expenses increased by $632,713 or 162% to $1,023,697
as compared to the corresponding period of the prior year. This increase is
attributed to: (1) increased in activity level as a result of sales expansion of
existing products of $ 367,780; (2) Expenses of $123,750 associated with
adoption of new director and officers compensation plan and stock option plan
and (3) Increase in consultancy expenses of $ 141,183 as compared to the same
period of the prior year.

Depreciation and amortization increased by $19,088 or 15% as compared to the
corresponding period to the prior year. This is the result of purchase of a new
asset.

Our net income increased by $90,361 to a net income of $1,260,040 from a net
income of $1,169,679.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

We have funded capital requirements through cash flow from operations. As of
March 31, 2004 we had a cash balance of $5,186,548 and a working surplus of
$11,727,597. This compares with a cash balance of $5,366,857 and a working
capital surplus of $10,638,558 for the end of the prior year.

Cash flow from operating activities amounted to $2,609,716 in the first quarter
of 2004, an increase of $2,281,087 from $328,629 in the same quarter of 2003.
During the current quarter, inventory increased by $1,186,176 and trade
receivables increased by $133,622. This was primarily attributed to an increase
in the scales of operations that resulted from increased sales revenue.
Prepayment for material for the same quarter, on the other hand, reduced by
$1,423,547. Prepayment for material was the customers' advances to the Company
for purchase of the Company's products. In the current quarter, the Company
filled out a portion of customers advances for product purchase as a result of
increased production volume and sales, leading to a reduced prepayment for
materials.

Cash flow generated from our existing operations will be sufficient to fund our
working capital needs of the Company for the next twelve months. We have strong
cash inflow streams attributable from our profit from operations and we do not
anticipate any liquidity issue in the near future.

We made an interest bearing loan of $2,409,638 to an unrelated third party for a
term of six months for the purpose earning interest from utilizing unused funds

We have no intention to fund up any of our future merger and acquisition plan
through our internal source of capital should such expenditure impair our
existing level of liquidity or affect our normal business operations.

We have not anticipated any trend, commitment, event and uncertainty that will
result in any material change in our liquidity in foreseeable future.

ITEM 3.  CONTROLS AND PROCEDURES.

As of the end of the period covered by this report (the "Evaluation Date"), we
carried out an evaluation in accordance with the requirements of the Chinese
auditing standards as well as the applicable rules in the United States. The
Company had set up an audit group, which consisted of the Chief Executive
Officer, Chief Financial Officer, one of the members of the board of directors
and two executives (including the manager) from our internal audit department.
This audit group is under the supervision of our Chief Executive Officer and
Chief Financial Officer. The Company's audit group evaluated the effectiveness
of the design and operation of our disclosure controls and procedures of our
Form 10QSB before it was filed with the Commission. The Company did not have any
restatements as a result of the SEC staff comments and the Company acknowledges
that the Management Discussion and Analysis needed expanded disclosure under the
current SEC guidelines and in future filings the Company will continue to expand
its Management Discussion and Analysis to be compliant with the SEC rules. In
response to the comments of the Staff of the Commission, the Company identified
certain areas for improvement, such as a more detailed breakdown discussion of
our product lines and inventory treatment. Pursuant to the request of the Staff



                                       11
<PAGE>

of the Commission, the Company has made such amendments in its amended periodic
reports, and the Company intends to make more detailed disclosure on a
going-forward basis. In view of the above, the audit group made their evaluation
pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange act") to the maximum possible extent and to the best knowledge of
the audit group. Notwithstanding the matters noted above, and based upon our
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective and basically sound in all material aspects under Rule
13a-15. However, given the fact that our major operations are located China, the
Company and the audit group consistently make efforts to coordinate the evolving
control and disclosure environment in China with the regulatory environment in
the United States. The Company has identified this aspect as an area for
improvement and is taking measures to train its staff for better performance.

The Company anticipates that it will be fully compliant with Section 404 of the
Sarbanes Oxley Act of 2002 by the required date for non-accelerated filers and
it is in the process of reviewing its internal control systems in order to be
compliant with Section 404 of the Sarbanes Oxley Act. However, at this time the
Company makes no representation that it's systems of internal control comply
with Section 404 of the Sarbanes Oxley Act.


                          PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

On February 13, 2004, the Company filed a form 8K current report pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934, to announce that
Thomas Leger & Co. ("Thomas Leger"), our certifying accounting firm, resigned as
our principal independent accountant on February 6, 2004. Our board of directors
authorized the engagement of Weinberg & Company, P.A. as the new independent
auditor to audit our financial statements. During our two most recent fiscal
years and any subsequent interim period up to the date of resignation of Thomas
Leger on February 6, 2004, there were no disagreements between our company and
Thomas Leger, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the former accountant's satisfaction, caused it to make reference to the subject
matter of the disagreement(s) in connection with its report.

(a)      Exhibits

         The following exhibits are filed as part of this quarterly report on
Form 10-QSB/A:

Exhibit No.                           Description
-----------                           -----------

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

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

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

32.2           Certification of Acting Chief Financial Officer pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002


                                        12

<PAGE>
                                   SIGNATURES

         In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.

AMERICAN ORIENTAL BIOENGINEERING, INC.

By  /s/  Shujun Liu
------------------------------------
SHUJUN LIU
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DATED: April 12, 2005

/S/ YANCHUN LI
------------------------------------
YANCHUN LI
ACTING CHIEF FINANCIAL OFFICER
DATED: April 13, 2005


                                        13