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The following is an excerpt from a 10KSB SEC Filing, filed by TIENS BIOTECH GROUP USA INC on 3/31/2005.
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Business Overview

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

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

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


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

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

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

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



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

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

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

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

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

Corporate History

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

Tianshi International was incorporated on March 24, 2003, in the territory of the British Virgin Islands. On June 18, 2003, Tianshi International acquired 80% of Biological. Biological is a Chinese-foreign equity joint venture company established under the laws of the PRC on March 27, 1997. Biological is subject to the Law on Sino Foreign Equity Joint Ventures ("Joint Venture Law"), its implementation regulations and other related rules and regulations ("Joint Venture Regulations"). Biological is an independent legal entity having the legal structure of a limited liability company, similar to a regular corporation with limited liability organized under state laws in the United States of America. The Articles of Association of Biological provides for a 50 year term with registered capital of $10,000,000. As an approved, Chinese-foreign equity joint venture Biological receives special income tax incentive treatment from both the local (Wuqing County) and central governments in China. The original partners in this joint venture were Tianshi Hong Kong International Development Co., Ltd. ("Tianshi Hong Kong") incorporated in Hong Kong which owned 80% of the joint venture, and Tianshi Engineering, which owned the remaining 20% of Biological. Tianshi Hong Kong is owned 100% by LI Jinyuan. Tianshi Engineering is 49% owned by Ms. Li Baolan and 51% by Tianshi Group. In June 2003, Tianshi Engineering transferred its 20% interest in Biological for no consideration to Tianshi Pharmaceuticals and Tianshi International acquired 80% of Biological from Tianshi Hong Kong for no consideration. This transfer was made for no consideration, since LI Jinyuan is president and sole shareholder of both companies.

Business and Industry Overview

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


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

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


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

Each of our products has been issued a Product Standard Code by the Bureau of Technical Supervision, and each of our 24 wellness products have been issued a Certificate of Domestic Wellness Product by the State Food and Drug Administration (SFDA). This SFDA certificate is required for the production and sale of wellness products in China. Furthermore, 23 out of 31 of our products have received Halal Approval by the end of 2004. Halal Approval is issued by the Islamic Association of Shandong Province for food products not containing substances banned by the Islamic religion. The issuance of this Approval certified that our manufacturing processes comply with the requirements of Islamic dietary law.


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

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


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


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

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

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

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


Our products have received significant recognition for quality:

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

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

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

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

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


Biological has put a great emphasis on product quality assurance. In 2002, it was awarded a Quality System Certificate for compliance with the standard "ISO9001: 2000" in the area of Design and Development, Production and Service of Food and Health Care Food in China.

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

1. Powder


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


2. Tea


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

3. Capsule


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

4. Tablet



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

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

5. Granule


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

6. Soft gel Capsule


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

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

Trademarks and Patents

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


o Under the High-Calcium series, Biological has conducted extensive research and developed Tianshi Super Calcium Powder with Metabolic Factors and Tianshi Super Calcium Powder for Children, which have been awarded patents from State Intellectual Properties Office in China with respective patent numbers of ZL97115067.2 and ZL97115068.0. These two patents are effective for 20 years, which commenced on January 13, 2001.


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

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

o Cordyceps mycelium powder supplier:
Tianjin Baiao Biotech Company

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

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

Research and Development

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

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

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

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

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

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


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

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

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

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

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

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

Business Development Strategy - Marketing and Distribution

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

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


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

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

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

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

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


America,  Asia and the Pacific Rim,  Southeast  Asia and Africa.  The  following
chart sets forth,  as of December 31, 2004,  the countries  where our affiliated
companies  are located and the year in which we  commenced  operations  in those
countries.  The majority of these companies are owned by Mr. LI Jinyuan,  except
in jurisdictions in which foreign ownership is not permitted.

No.           Country                    Overseas Affiliates                            Incorp. Date
Russia Area

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

2             Russia                     Tianshi Ltd. Co.                               2002.05.16

3             Russia                     Shengshi Ltd. Co.                              2001.07.12

4             Russia                     Huamao Ltd. Co.                                2001.07.10

5             Russia                     Tian Dihe Ltd. Co.                             2001.07.16

6             Russia                     Huafeng Travel Ltd. Co.                        2001.05.04

7             Russia                     Baofeng Ltd. Co.                               2003.04.11

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

9             Russia                     Tianshi Ural Trading Co., Ltd.                 2000.01.31

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

11            Russia                     Tianshi Co., Ltd.                              2000.03.20

12            Russia                     Tianshi CaliningCo., Ltd.                      2000.06.07

13            Russia                     BiermuBaolan Co., Ltd.                         2001.02.01

14            Russia                     Tianshi LiShi Ltd. Co.                         2001.04.28

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


16            Russia                     Nanfang Ltd. Co.                               2002.01.14

17            Russia                     Bao Yuan Co., Ltd.                             2003.06.04

18            Russia                     Tianshi Volgograd Co., Ltd.                    2003.12.09

19            Russia                     Irkutsk Dongfang Co., Ltd.                     2003.04

No.           Country                    Overseas Affiliate                             Incorp. Date

20            Russia                     Tianshi Kazan Co., Ltd.                        2003.02.27

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

Ukraine Area

1             Ukraine                    Company "Hua Yuan"                             2001.01

2             Ukraine                    Tianshi Company                                2002.12

3             Ukraine                    Huaerkev Hua Mao Co., Ltd.                     2002.12.16

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

5             Poland                     Tianshi Poland Sp                              2000.11.01

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

Eastern Europe

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

2             Hungary                    Tiens KFT                                      2000.08.23

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

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

5             Esthonia                   Tianshi Esthonia Co., Ltd.                     2000.12.22


6             Lithuania                  Tianshi (Lithuania) Co. Ltd.                   2001.11.18

7             Slovakia                   Tiens Slovakia S.R.O.                          2002.07.11

8             Bulgaria                   Balkan Tianshi                                 2003.05

9             Croatia                    TIENS D.O.O.ZAGREB                             2004.05.26

10            Greece                     Tiens Hellas A.E.                              2002.06.19

No.           Country                    Overseas Affiliate                             Incorp. Date

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

Western Europe

1             UK                         Tiens UK PLC                                   2001.07.16

2             Spain                      Tianshi Spain, S.L.                            1999.12.29

3             Germany                    Tianshi Gmbh                                   2000.12.01

4             Germany                    Tiens BmbH                                     2003.11.06

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

6             Denmark                    Tianshi Danmark Sundhedsprodukter              2001.01.30

7             Finland                    Tianshi Finland Healthproduct Co., Ltd.        2002.01.13

8             France                     Tiens France SARL                              2002.02.26

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

10            Holland                    Tianshi Israel Co., Ltd.                       2004.05.10

11            Sweden                     Tiens sverige AB                               2003.07.01

12            Israel                     Tianshi Israel Co., Ltd.                       2000.07


Middle Asia

1             Kazakhstan                 Tianshi Kazakhstan Co., Limited                2000.09.02

2             Kazakhstan                 Aztanai Bao Lan Company                        2003.05.13

3             Azerbaijan                 Azerbaijan Baolan Company                      2003.06.25

4             Armenia                    LLC"Tianshi"                                   2003.05.20

5             Mongolia                   Tianshi Mongolia Co., Ltd.                     2001.10.02

6             Uzbekistan                 Tianshi Invest                                 2004.06.25

7             Kirghizstan                Tianshi Lishi Ltd. Co.                         2003.05.20

North America

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

2             USA                        Tianshi Health Products, Inc.                  1998.02.12

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

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

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

Central & South America

1             Brazil                     Tianshi Brazil Co., Ltd.                       2002.08.01

2             Brazil                     Tiends Brasil                                  2004.08

3             Peru                       Tianshi Peru S.A.C.                            2000.11

4             Argentina                  Tianshi Argentina Co., Ltd.                    2004.03


5             Chile                      Tianshi Chile Co., Ltd.                        2004.03.25

6             Venezuela                  Tianshi Venezuela Co., Ltd.                    2004.04.23

7             Ecuador                    Tianshi Ecuador Co., Ltd.                      2004.04.02

Southeast Asia

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

2             Hong Kong                  Tianshi Development Co., Ltd.                  2001.02.27

3             Hong Kong                  Jinyuan Development Co., Ltd.                  2002.04.16

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

5             Hong Kong                  Tianshi Communication Co., Ltd.                2003.03.24

6             Australia                  Tiens Australia Pty Ltd.                       2002.08.05

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

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

9             India                      Tianjin Tianshi (India) Private Ltd.           2002.04.29

10            Philippines                Tianshi Philippine Inc                         2001.07.01

11            Lao                        Tianshi Lao Co., Ltd.                          2001.06.21

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

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


14            Brunei                     TIEN-SHI SDN BHD                               2004.06.03

15            Indonesia                  Pt. Singa Langit Jaya                          2000.09.11

16            Indonesia                  Snga Langit                                    2003.06.25

17            Indonesia                  PT. Tianshi Bandung Jaya                       2003.07.01

18            Indonesia                  PT. Singa Langit Utama Medan                   2003.09.08

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

20            Indonesia                  PT.Tianshi Palembang Indonesia                 2003.05.01

21            Indonesia                  PT. Tianshi Surabaya                           2004.06.29

22            Indonesia                  PT. KALIMAN TIANSHI                            2003.09.24

23            Taiwan                     Tianshi Health Products Inc.,                  2001.05.20
                                         Taiwan Branch

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

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

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

27            Singapore                  Tianshi (Singapore) Pte.Ltd.                   2003.03.12

Africa & Middle East

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

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

3             Nigeria                    Tianshi Health Products Company                2000.10.23
                                          (NIG) LTD

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


5             Ghana                      Tianshi Health Industries and                  2000.06.29
                                         Enterprises Ghana Ltd.

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

7             Botswana                   Tianshi (Botswana) Pty. Ltd.                   2000.08.23

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

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

10            Cameroon                   Tianshi Health Products Cameroon Ltd.          2003.09.29

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

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

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

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

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

16            U.A.E.                     Tiens Enirates LLC                             2003.03.26

17            Nambia                     Tianshi Health Products C.C.                   2003.08.01

18            Zinbabwe                   TIANSHI (ZINBABWE)                             2000.10
                                         (PRIVATE) LIMITED Company

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


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

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


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

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

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

Regulatory Framework

Product Regulation

The central governing authority in the PRC for wellness products is the State Food and Drug Administration ("SFDA"), which is under the jurisdiction of the State Council.

SFDA issues administrative rules. Provincial, city and town authorities implement the rules of the SFDA. Other than the SFDA, other ministries and administrations also have certain responsibility for the management of wellness or nutrition supplement products, such as the State Administration for Industry and Commerce.


Sales and Marketing Regulation

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

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

Government Approval Process for New Products

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

1) An application for a product certificate is filed with SFDA;
2) SFDA gives a notice to the applicant requiring the applicant to send the product samples to one of the government appointed research institutes;
3) The appointed research institute conducts clinic trials, stability tests, function tests and toxical tests on the product, makes a report and sends the report back to SFDA within 6 months;
4) The Expert Committee of SFDA makes a final decision on the application and issues a "wellness products certificate" or a refusal notice to the applicant.

This certificate authorizes the sales and marketing of the product in the PRC. The whole process generally takes 9 to 12 months.

Environmental Compliance

Biological operates from facilities that are located in the PRC.

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


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

PRC Laws and Regulations on Sino-Foreign Equity Joint Ventures

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

1. Overview

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

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

2. Chinese-Foreign Equity Joint Ventures

(a) Legal Structure

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


(b) Capital Contribution

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

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

(c) Board of Directors

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

(d) Profit Distribution

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


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

(e) Termination

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

3. Taxation

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

Income Tax for Equity Joint Ventures

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

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

U.S. Tax Impact

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


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

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

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

Currency Conversion and Exchange

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

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


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


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

Risks Related to our Business

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


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

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

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

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

o accurately anticipate consumer needs;

o innovate and develop new products;

o successfully commercialize new products in a timely manner;

o price our products competitively;


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

o differentiate our product offerings from those of our competitors.

If we fail to make sufficient investments in research and pay close attention to consumer needs or we focus on technologies that do not lead to more effective products, our current and future products could be surpassed by more effective or advanced products of others.

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

Biological began operating in July 1998, and incurred losses until 2002. Although we were profitable in 2003 and 2004, due to increases in sales, especially internationally, this relatively short history of profitability may not be adequate to fully assess our ability to achieve market acceptance of our products or our ability to respond to competition and continue this level of performances. Therefore, we can give no assurance that we will maintain profitability in the long run.

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

Biological sells all of its products for resale in China to Tianshi Engineering. As both Biological and Tianshi Engineering are majority owned by Mr. LI Jinyuan, even given consideration to the internal price transferring policies set among the related parties, these internal policies could be faulty or might not be strictly followed.


Tiens USA is establishing a system to ensure the independence of its operations and financial controls. However, there can be no assurance that the systems and controls can be effectively designed.

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

Risks Related to Government Regulations

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


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

In China

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


The uncertainty of the development of direct selling regulations may adversely affect sales of our products in China. Substantially all of our assets are located in China and approximately 50% of our revenues derive from our operations in China. Accordingly, our operations are subject, to a significant degree, to PRC law. As stated under "Business Development Strategy", one of our overseas marketing strategies has been to develop strong direct sales force and Internet distribution networks through its overseas affiliated companies. Domestically, Tiens is aiming to develop strong Internet distribution networks, and expand its market share through the branches, chain stores, and domestic affiliated companies of its affiliated company, Tianshi Engineering. Chinese government is now in the process of developing new direct selling regulations. Publication of the new regulations has been delayed. There is no assurance that such new regulations will be enacted in the foreseeable future. Uncertainties and delays with respect to the new direct selling regulations may adversely affect our ability to increase sales growth in China by incorporating a direct sales marketing program there.

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

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


Risks Related to Manufacturing

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

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

Risks Related to our Common Stock

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

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

Our president and chief executive officer controls a majority of our common stock. Mr. LI Jinyuan beneficially owns approximately 92% of our outstanding common stocks. As a result, Mr. Li has the ability to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership


may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such change of control would benefit our other shareholders.

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

Shares available for future sale. A significant number of our shares are eligible for sale and their sale could depress the market price of our stock. Sales of a significant number of shares of our common stock in the public market following the merger and related transactions could harm the market price of our common stock. Moreover, as additional shares of our common stock become available for resale in the public market pursuant to the registration of the sale of the shares, and otherwise, the supply of our common stock will increase, which could decrease its price. Some or all of the shares of common stock may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for the shares of common stock. In general, a person who has held restricted shares for a period of one year may, upon filing with the SEC a notification on Form 144, sell into the market common stock in an amount equal to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks prior to such sale. Such sales may be repeated once each three months, and any of the restricted shares may be sold by a non-affiliate after they have been held two years.

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

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


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

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

Item 2. Description of Property

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

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

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


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

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

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


We are not a party to any legal proceedings.


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


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

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

2. Ratify the Board of Directors' appointment of Moore Stephens Wurth Frazer and Torbet, LLP, the independent public accountants as the auditor of the Company for the fiscal year 2004.

In this Annual Meeting, there were accordingly present, in person or by proxy, an aggregate of 69,710,176 shares of Common Stock, such shares being a majority of the 71,333,586 shares of Common Stock entitled to notice of and to vote at the meeting.

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

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

Wenjun Jiao                69,698,410                416                  11,350

Yupeng Yan                 69,698,410                416                  11,350

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

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

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

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

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

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

5,268 shares voted against the proposal

3,930 shares abstained.


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