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   <TITLE> China Biologic Products, Inc.: Form S-1 - Prepared by TNT Filings
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<P align=center style="margin-top: 0; margin-bottom: 0">As filed with the Securities and Exchange Commission on July
24, 2009 </P>
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<P align=right style="margin-top: 0; margin-bottom: 0"><B>Registration No. 333- </B></P>
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<P align=center><B><font size="5">UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION </font><br>
WASHINGTON, D.C. 20549 <br>
____________________________</B></P>
<P align=center><B><font size="5">FORM S-1 <br>
</font>REGISTRATION STATEMENT<br>
UNDER <br>
THE SECURITIES ACT OF 1933 </B></P>
<P align=center><B><font size="6">CHINA BIOLOGIC PRODUCTS, INC. <br>
</font> </B>(Exact name of registrant as specified in its charter) </P>
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    <TD align=center width="33%"><B>Delaware </B></TD>
    <TD align=center width="33%"><B>2836 </B></TD>
    <TD align=center width="33%"><B>75-2308816 </B></TD></TR>
  <TR vAlign=top>
    <TD align=center width="33%">(State or other jurisdiction of incorporation </TD>
    <TD align=center width="33%">(Primary Standard Industrial Classification
    </TD>
    <TD align=center width="33%">(I.R.S. Employer </TD></TR>
  <TR vAlign=top>
    <TD align=center width="33%">or organization) </TD>
    <TD align=center width="33%">Code Number) </TD>
    <TD align=center width="33%">Identification No.) </TD></TR></TABLE>
<P align=center><B>No. 14 East Hushan Road, Tai'an City, Shandong <br>
People's Republic of China 271000 <br>
(86-538)-620-3897 <br>
</B>(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices) <br>
<B>____________________________</B></P>
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    <TD align=center width="50%"><B>Tristan Kuo, Chief Financial Officer </B></TD>
    <TD align=center width="50%"><B>Louis A. Bevilacqua, Esq. </B></TD></TR>
  <TR vAlign=top>
    <TD align=center width="50%">China Biologic Products, Inc. </TD>
    <TD align=center width="50%">Pillsbury Winthrop Shaw Pittman LLP </TD></TR>
  <TR vAlign=top>
    <TD align=center width="50%">No. 14 East Hushan Road, Tai'an City </TD>
    <TD align=center width="50%">2300 N Street, N.W. </TD></TR>
  <TR vAlign=top>
    <TD align=center width="50%">Shandong, China 271000 </TD>
    <TD align=center width="50%">Washington, D.C. 20037-1122 </TD></TR>
  <TR vAlign=top>
    <TD align=center width="50%" style="border-bottom-style: none; border-bottom-width: medium">(86-538)-620-3897 </TD>
    <TD align=center width="50%" style="border-bottom-style: none; border-bottom-width: medium">(202) 663-8158 </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left colSpan=2 width="50%">
    <p align="center"><B>(Names, addresses and
      telephone numbers of agents for service) </B></TD></TR></TABLE>
<P align=center style="margin-top: 0"><B>____________________________</B></P>
<P align=justify style="margin-bottom: 0"><B>Approximate date of commencement of proposed sale to the
public: </B>As soon as practicable after the effective date of this registration
statement.<B> <br>
</B>If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X] <br>
If this form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.<br>
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.<br>
If this form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement the same offering.<br>
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of
&#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148;
in Rule 12b-2 of the Exchange Act. (Check one): </P>
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    <TD align=left width="50%">&nbsp;</TD>
    <TD align=center width="50%">&nbsp;</TD></TR>

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    <TD align=left width="50%">Large accelerated filer [&nbsp; ]</TD>
    <TD align=center width="50%">Accelerated filer [&nbsp; ]</TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%">Non-accelerated filer [&nbsp; ] (Do not check if smaller reporting
      company) </TD>
    <TD align=center width="50%">Smaller reporting company [X]
</TD></TR>
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    <TD align=left width="50%">&nbsp;</TD>
    <TD align=center width="50%">&nbsp;</TD></TR></TABLE></center>
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    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center colSpan=5><FONT
      size=2>&nbsp;CALCULATION OF REGISTRATION FEE&nbsp;&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center><FONT size=2><I>Title of each class of securities to be
      </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>Amount to be </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>Proposed maximum
    </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>Proposed maximum
    </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>Amount of registration
      </I></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center><FONT size=2><I>registered </I></FONT></TD>
    <TD align=center width="13%"><FONT
      size=2><I>registered</I><SUP>(</SUP><I><SUP>1) </SUP></I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>offering price per
    </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>aggregate offering price
      </I></FONT></TD>
    <TD align=center width="13%"><FONT size=2><I>fee </I></FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2><I>share </I></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff><FONT size=2>Common stock, $0.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>2,388,535<I><SUP>(2) </SUP></I></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>$3.78 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>$9,028,663 <I><SUP>(3) </SUP></I></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>$504 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left><FONT
      size=2>Common stock, $0.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>1,194,268<I><SUP>(4) </SUP></I></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$4.80 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$5,732,486<I><SUP>(5) </SUP></I></FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2>$320 </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      bgColor=#e6efff><FONT size=2>Total </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>3,582,803 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>$14,761,149 </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="13%"
    bgColor=#e6efff><FONT size=2>$824 </FONT></TD></TR></TABLE>
<P align=justify style="margin-top: 0"><FONT style="font-size: 8pt">(1) Pursuant to Rule 416 under the Securities Act
of 1933, as amended, this registration statement shall be deemed to cover any
additional securities to be offered or issued by the registrant to the selling
stockholders upon adjustment under anti-dilution provisions covering stock
splits, stock dividends and similar transactions. <BR>(2)
Represents shares of the registrant's common stock issuable upon conversion of
3.8% secured convertible notes (the &#147;Notes&#148;) issued in the June 2009 private
placement to certain accredited investors. Pursuant to the terms of the Notes
issued in connection with the private placement, the Notes are initially,
subject to adjustment, convertible or exercisable into an aggregate of 2,388,535
shares of Common Stock. <BR>(3) The proposed maximum
aggregate price per unit was estimated pursuant to Rule 457(c) promulgated under
the Securities Act of 1933, as amended, solely for the purpose of determining
the registration fee, based on the average of high and low prices of the
registrant's common stock as quoted on the over-the-counter bulletin board on
July 15, 2009. <BR>(4) Represents shares of the registrant's
common stock issuable upon exercise of three-year warrants to purchase shares of
the registrant's common stock by the selling stockholders named in this
registration statement. <BR>(5) Calculated in accordance
with Rule 457(g) based upon the price at which the warrants may be exercised. </FONT></P>
<P align=justify><B>The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine. </B></P>
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<p ALIGN="JUSTIFY">The information in this prospectus is not complete and may be
changed. No person may sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and no person named in this prospectus
is soliciting offers to buy these securities in any state where the offer or
sale is not permitted.</p>
</b></font>
<P align=justify><B><I>PROSPECTUS </I></B></P>
<P align=center><font color="#FF0000"><B><I>Subject to completion, dated July 24, 2009 </I></B>
</font></P>
<P align=center><IMG
src="cbpos1x2x1.jpg"
border=0 width="389" height="74"> </P>
<P align=center><B><font size="4">CHINA BIOLOGIC PRODUCTS, INC. </font> </B></P>
<P align=center><B>3,582,803 Shares of Common Stock </B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to the
resale of up to 3,582,803 shares of our common stock being offered by the
selling stockholders, which includes: </P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">2,388,535 shares of Common Stock issuable to the selling stockholders
  named in this prospectus upon conversion of 3.8% secured convertible notes
  issued in the June 2009 private placement to certain accredited investors; and

  <LI>
  <p style="margin-top: 0; margin-bottom: 12">1,194,268 shares of common stock issuable upon the exercise of three-year
  warrants owned by the selling stockholders named in this prospectus. </LI></UL>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any proceeds
from the sales by the selling stockholders, but we will receive funds from the
exercise of warrants held by the selling stockholders, if exercised for cash,
which we will use for working capital purposes.</P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is quoted on the
over-the-counter bulletin board (the &#147;OTCBB&#148;) maintained by the Financial
Industry Regulatory Authority under the symbol &#147;CBPO.&#148; The closing bid price for
our common stock on July 15, 2009 was $3.80 per share, as reported by the OTCBB.
</P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling stockholders will
sell our shares at prevailing market prices or at privately negotiated
prices.</P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our common stock
involves a high degree of risk. See &#147;Risk Factors&#148; beginning on page 11 to read
about factors you should consider before buying shares of our common stock.
</B></P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and
Exchange Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense. </B></P>
<P align=center>The date of this Prospectus is ___________, 2009. </P>
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  <TR vAlign=bottom>
    <TD align=center colSpan=2><B><U>TABLE OF CONTENTS</U></B>&nbsp; </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left>&nbsp; </TD>
    <TD align=right><U>Page</U> </TD></TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>SUMMARY </TD>
    <TD align=right bgColor=#e6efff>4</TD></TR>
  <TR vAlign=top>
    <TD align=left>RISK FACTORS </TD>
    <TD align=right>11 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>SPECIAL NOTE REGARDING FORWARD-LOOKING
      STATEMENTS </TD>
    <TD align=right bgColor=#e6efff>26</TD></TR>
  <TR vAlign=top>
    <TD align=left>USE OF PROCEEDS </TD>
    <TD align=right>27</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>DIVIDEND POLICY </TD>
    <TD align=right bgColor=#e6efff>27</TD></TR>
  <TR vAlign=top>
    <TD align=left>MARKET FOR OUR COMMON STOCK </TD>
    <TD align=right>27</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>DILUTION </TD>
    <TD align=right bgColor=#e6efff>28</TD></TR>
  <TR vAlign=top>
    <TD align=left>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS </TD>
    <TD align=right>28</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>CORPORATE STRUCTURE AND HISTORY </TD>
    <TD align=right bgColor=#e6efff>41</TD></TR>
  <TR vAlign=top>
    <TD align=left>OUR BUSINESS </TD>
    <TD align=right>44</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>MANAGEMENT </TD>
    <TD align=right bgColor=#e6efff>61</TD></TR>
  <TR vAlign=top>
    <TD align=left>EXECUTIVE COMPENSATION </TD>
    <TD align=right>66</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>TRANSACTIONS WITH RELATED PERSONS,
      PROMOTERS AND CERTAIN CONTROL PERSONS; DIRECTOR INDEPENDENCE </TD>
    <TD align=right bgColor=#e6efff>69</TD></TR>
  <TR vAlign=top>
    <TD align=left>CHANGE OF ACCOUNTANTS </TD>
    <TD align=right>70</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>SELLING STOCKHOLDERS </TD>
    <TD align=right bgColor=#e6efff>70</TD></TR>
  <TR vAlign=top>
    <TD align=left>DESCRIPTION OF SECURITIES TO BE REGISTERED </TD>
    <TD align=right>73</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>SHARES ELIGIBLE FOR FUTURE SALE </TD>
    <TD align=right bgColor=#e6efff>74</TD></TR>
  <TR vAlign=top>
    <TD align=left>PLAN OF DISTRIBUTION </TD>
    <TD align=right>75</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>LEGAL MATTERS </TD>
    <TD align=right bgColor=#e6efff>77</TD></TR>
  <TR vAlign=top>
    <TD align=left>EXPERTS </TD>
    <TD align=right>77</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>INTEREST OF NAMED EXPERTS AND COUNSEL </TD>
    <TD align=right bgColor=#e6efff>77</TD></TR>
  <TR vAlign=top>
    <TD align=left>WHERE YOU CAN FIND MORE INFORMATION </TD>
    <TD align=right>78</TD></TR></TABLE>
<P align=justify><B>You should only rely on the information contained in this
prospectus. We have not, and the selling stockholders have not, authorized any
other person to provide you with different information. This prospectus is not
an offer to sell, nor is it seeking an offer to buy, these securities in any
state where the offer or sale is not permitted. The information in this
prospectus is accurate only as of the date on the front cover, but the
information may have changed since that date. </B></P>
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<P align="center">
<B>SUMMARY</B><BR>
</P>
<P align="justify">
<I>The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the
more detailed information set out in this prospectus, including the financial statements, the notes thereto and matters set forth under &#147;Risk Factors.&#148; For certain defined terms, see &#147;Use of Terms&#148;  on Page 7.</I> </P>
<P align="justify">
<B>Overview of Our Business</B><BR>
</P>
<P align="justify">
We are a biopharmaceutical company and through our indirect Chinese subsidiaries, Shandong Taibang and Qianfeng, we are principally engaged in the research, development and manufacturing of plasma-based pharmaceutical products in China. Shandong
Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province and Qianfeng operates in Guizhou Province. The collection facilities of our minority owned subsidiary, Huitian, are located in Xi'an Province. The
plasma-based biopharmaceutical manufacturing industry in China is highly regulated by both the provincial and central governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma
from human donors to finished products. Our principal products include our approved human albumin and immunoglobulin products.</P>
<P align="justify">
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.</P>
<P align="justify">
We sell our products to customers in the PRC, mainly hospitals and inoculation centers. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended December
31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.</P>
<P align="justify">
We have product liability insurance covering all of our products. However, since our establishment in 2002, there has not been any product liability claims nor has any legal action been filed against the Company brought by patients related to the
use of our products.</P>
<P align="justify">
In this prospectus, we refer to information and statistics regarding the plasma-based biopharmaceutical industry that we have obtained from a variety of sources, including:</P>
<UL style="text-align:justify;">
<LI>
The 2006 Hua Yuan Medicine Net Survey</LI>
<LI>
The China National Institute for the Control of Pharmaceutical and Biological Products</LI>
</UL>
<P align="justify">
This information is publicly available for free and has not been specifically prepared for us for use in this prospectus or otherwise.</P>
<P align="justify">
<B>Overview of Our Industry</B><BR>
</P>
<P align="justify">
The collection of human plasma in China is generally influenced by factors such as government regulations, geographical locations of collection stations, sanitary conditions of collection stations, living standards of the donors, and cultural and
religious beliefs. Until recently, only licensed Plasmapheresis stations owned and operated by the government could collect human plasma. Furthermore, each collection station was only allowed to supply plasma to
the one manufacturer that had signed the &#147;Quality Responsibility&#148; statement with them. However, in March 2006, the Ministry of Health promulgated certain &#147;Measures on Reforming Plasma Collection Stations,&#148; or the Blood Collection
Measures, whereby the ownership and management of PRC plasma stations are required to be transferred to plasma-based biopharmaceutical companies and the local government is charged with regulatory supervision and administrative control in accordance
with the policies of the central government. Plasma stations that did not complete their reform by December 31, 2006 risked revocation of their license to collect plasma.</P>
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<P align="justify">
The supply of plasma for plasma-based products in the PRC has been on the decline since 2003 from the historical high of annual supply of approximately 7,000 tons to approximately 4,000 tons. We believe that this decline is a direct result of the
government's industry reforms of the country's collection practices which led to the closure of many stations that did not meet the new industry standards. Based on reports promulgated by the PRC Ministry of Health, we estimate that the
current annual supply of plasma in China amounts to approximately 4,000 tons, as compared to 30,000 tons in the global market, with the six largest manufacturers of plasma products accounting for approximately 50% of the annual plasma collection. In
spite of the shortage of plasma supply, revenues from the sale of plasma products in China amounted to approximately &#36;1 billion in 2006, and revenues from the sale of human albumin products amounted to about &#36;593 million. We expect that the
plasma derivatives market to grow at a 15% rate per year through 2011.</P>
<P align="justify">
We believe that these regulatory changes, including measures which limit illegal selling of blood, have improved the quality of blood and plasma by increasing cleanliness standards at blood collection stations. As the operation of the plasma
stations become more regulated and the donor population expands, we believe that the overall quality of raw materials, such as human albumin will continue to improve, leading to a safer, more reliable finished product. </P>
<P align="justify">
<B>Competition</B><BR>
</P>
<P align="justify">
We are subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar biopharmaceutical products as our products in the PRC. These
competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than we do. In our industry, many competitive factors may affect our sales of products, including product efficacy,
safety, price and cost effectiveness, marketing effectiveness, quality control and quality assurance of our manufacturing operations, research and development of new products and logistical capabilities.</P>
<P align="justify">
We believe that we have strengthened our position in the marketplace with our recent acquisition of a 90% equity interest in Dalin and its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest in Huitian, Xi'an-based
biopharmaceutical company.</P>
<P align="justify">
Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors drastically reduce prices; or (iii) competitors develop new products or product substitutes having comparable medicinal applications or therapeutic effects
which are more effective and /or less costly than those produced by us.</P>
<P align="justify">
<B>Our Growth Strategy</B><BR>
</P>
<P align="justify">
Our mission is to become a first-class biopharmaceutical enterprise in China. To achieve this objective, we have implemented the following strategies:</P>
<UL style="text-align:justify;">
<LI>
<B><I>Securing the supply of plasma </I></B>&#150; Due to the shortage of plasma and the reform of the ownership of plasma stations, our immediate strategy is to negotiate and acquire plasma stations in order to secure our plasma supply. In December
2006, we acquired five of the plasma stations in Shandong Province. Furthermore, in January 2007, we acquired two additional plasma stations in Guangxi Province. See &#147;Raw Materials &#150; Plasma&#148; below. In June 2008, we received approval
from the Guangxi Province Bureau of Health to set up a new plasma collection station in Pu Bei County, Guangxi Province, which, when operational, will replace CBP's existing Fang Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate
Fang Cheng to a more strategic location to increase collection volumes. During the construction period, Fang Cheng will still continue with its normal operations. With the approval of the Centralized Industry Zone of Pu Bei County, once Fang Cheng
becomes operational, expected to be in the fourth quarter of 2009, we hope to expand its coverage area to secure higher collection volumes in the future. We also expect that our recent acquisition of a majority interest in Dalin and its PRC
operating subsidiary, Qianfeng, and our acquisition
of a minority interest in Huitian, will help secure our plasma supply as well as expand production capacity and market coverage.</LI> </LI>
</UL>
<P align="center">
- 5 -</P>

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<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">
<B><I>Acquisition of competitors and/or other biologic related companies </I></B>&#150; In addition to organic growth, acquisition is an important part of our expansion strategy. Although there are about 32 approved plasma- based biopharmaceutical
manufacturers in the market, we believe that there are only 26 manufacturers in operation, only about half of whom will be competitive. The top six manufacturers in China account for more than 50% market share. Furthermore, we believe that the
regulatory authorities are considering further reforming the industry and those smaller, less competitive manufacturers will face the possibility of having their manufacturing permits revoked by the regulators, making them potential targets for
acquisition. Also, if we are presented with appropriate opportunities, we may acquire additional companies, products or technologies in the biologic related sectors (including but not limited to medical, pharmaceutical and biopharmaceutical).</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">
<B><I>Further strengthening of research and development capability &#150; </I></B>We believe that, unlike other more developed countries such as the U.S., China's plasma-based biopharmaceutical products are at the initial stage of development.
There are many other plasma-based products that are being used in the U.S. which are not currently being manufactured in China. We intend to strengthen our research and development capability so as to expand our product line to include
higher-margin, technologically more advanced plasma-based biopharmaceutical products. We believe that our increased focus on research and development will give us a competitive advantage over our competitors</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">
<B><I>Market development and network expansion </I></B>&#150; Leveraging on the high quality and excellent safety record of our products, we intend (i) to enhance our product penetration with our existing customers by introducing new products and
(ii) to extend the reach of our products from our current market to include other provinces where we envision significant market potential.</LI>
</UL>
<P align="justify">
<B>Risk Factors</B><BR>
</P>
<P align="justify">
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled &#147;Risk Factors,&#148; including for example: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">our ability to overcome competition from local and overseas pharmaceutical enterprises;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">decrease in the availability, or increase in the cost, of plasma;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">failure to obtain PRC governmental approval to increase retail prices of certain of our biopharmaceutical products;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">difficulty in servicing our debt;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">loss of key members of our senior management; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">unexpected change in the PRC government's regulation of the biopharmaceutical industry in China, or changes in China's economic situation and legal environment.</LI>
</UL>
<P align="justify">
Any of the above risks could materially and negatively affect our business, financial position and results of operations. An investment in our common stock involves risks. You should read and consider the information set forth in &#147;Risk
Factors&#148; and all other information set forth in this prospectus before investing in our common stock. </P>
<P align="justify">
<B>Corporate Information</B><BR>
</P>
<P align="justify">
China Biologic Products, Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food
Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003, merger between Shepherd and GRC Holdings, Inc. or GRC. In the merger, the company adopted the Articles of Incorporation and By-Laws of GRC and changed its
corporate name to GRC Holdings, Inc. On January 10, 2007, a Plan of Conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc. We conduct our business in China
through our indirect PRC operating subsidiaries, Shandong Taibang and Qianfeng. We also have a minority interest in Huitian, a Xi'an based biopharmaceutical company. </P>
<P align="center">
- 6 -</P>

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<A name="page_7"></A>

<P align="justify">
The following chart reflects our current corporate organizational structure:</P>
<P align="center">
<IMG src="cbpos1x7x1.jpg" border=0 width="500" height="468">
</P>
<P align="justify">
Our principal executive offices are located at No. 14 East Hushan Road, Tai'an City, Shandong, the People's Republic of China 271000. Our corporate telephone number is (86)538-620-2306 and our fax number is (86)538-620-3895. We maintain a
website at <U>http://www.chinabiologic.com</U> that contains information about our operating company, but that information is not part of this prospectus. </P>
<P align="justify">
<B>Use of Terms</B><BR>
</P>
<P align="justify">
Except as otherwise indicated by the context, all references in this prospectus to:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;BVI&#148; are to the British Virgin Islands;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;China Biologic,&#148; the &#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our,&#148; are to the combined business of China Biologic Products, Inc., a Delaware corporation, and its direct and indirect subsidiaries;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Dalin&#148; are to our majority owned subsidiary, Chongqing Dalin Biologic Technologies Co., Ltd., a PRC limited company;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Exchange Act&#148; are to the Securities Exchange Act of 1934, as amended;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Hong Kong&#148; are to the Hong Kong Special Administrative Region of the People's Republic of China. &#147;China&#148;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Huitian&#148; are to Xi'an Huitian Blood Products Co., Ltd., our minority owned PRC operating subsidiary;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Logic Express&#148; are to our wholly owned subsidiary Logic Express Limited, a BVI company;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;Logic Holdings&#148; a to Logic Holdings (Hong Kong) Limited, our wholly-owned Hong Kong subsidiary;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">&#147;PRC&#148; are to the People's Republic of China;</LI>
</UL>
<P align="center">
- 7 -<BR>
</P>

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<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">&#147;Qianfeng&#148; are to Qianfeng Biological Products Co., Ltd., Dalin's majority
  owned PRC operating subsidiary;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">&#147;RMB&#148; are to Renminbi, the legal currency of China; &#147;Securities Act&#148; are
  to the Securities Act of 1933, as amended;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">&#147;Shandong Medical&#148; are to Shandong Taibang's wholly owned PRC subsidiary,
  Shandong Missile Medical Co., Ltd.;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">&#147;Shandong Taibang&#148; are to our subsidiary Shandong Taibang Biological
  Products Co. Ltd., a sino-foreign joint venture incorporated in China; and
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">&#147;U.S. dollar,&#148; &#147;$,&#148; &#147;USD&#148; and &#147;US$&#148; are to the legal currency of the
  United States. </LI></UL>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">Throughout this prospectus, we have converted RMB to USD as
      follows: </TD>
    <TD align=left width="15%" style="border-style: none; border-width: medium">&nbsp; </TD></TR>
  <TR>
    <TD style="border-style: none; border-width: medium">&nbsp; </TD>
    <TD width="15%" style="border-style: none; border-width: medium">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left>December 31, 2008
    </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="15%">&nbsp;
    </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium">Balance sheet </TD>
    <TD align=left width="15%" bgColor=#e6efff style="border-style: none; border-width: medium">RMB 6.82 to US$1.00 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">Statement of income and comprehensive income </TD>
    <TD align=left width="15%" style="border-style: none; border-width: medium">RMB 6.94 to US$1.00 </TD></TR>
  <TR>
    <TD style="border-style: none; border-width: medium">&nbsp; </TD>
    <TD width="15%" style="border-style: none; border-width: medium">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left>December 31, 2007
    </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="15%">&nbsp;
    </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium">Balance sheet </TD>
    <TD align=left width="15%" bgColor=#e6efff style="border-style: none; border-width: medium">RMB 7.29 to US$1.00 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">Statement of income and comprehensive income </TD>
    <TD align=left width="15%" style="border-style: none; border-width: medium">RMB 7.59 to US$1.00 </TD></TR></TABLE>
<P align=justify>As the result of foreign currency fluctuations the financial
statements if prepared as of the date of this prospectus would present different
figures. The change of the foreign currency rate of USD to RMB as of July 13,
2009 would require a translation of amounts from RMB into USD according to the
following exchange rates: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left>July 13, 2009 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="15%">&nbsp;
    </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium">Balance sheet </TD>
    <TD align=left width="15%" bgColor=#e6efff style="border-style: none; border-width: medium">RMB 6.84 to US$1.00 </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: none; border-width: medium">Statement of income and comprehensive income </TD>
    <TD align=left width="15%" style="border-style: none; border-width: medium">RMB 6.84 to US$1.00 </TD></TR></TABLE>
<P align=center>- 8 -</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<p>
<A name=page_9></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=center colSpan=2>&nbsp;<B>The Offering </B></TD></TR>
  <TR>
    <TD>
      <P align=justify></P></TD>
    <TD>
      <P align=justify></P></TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%">
      &nbsp;</TD>
    <TD align=left width="50%">
      &nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="50%">
      <P align=justify style="margin-left: 10; margin-right: 10">Common stock offered by selling stockholders </P></TD>
    <TD align=left width="50%" bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">3,582,803 shares of our common stock that are issuable to
      the selling stockholders, including up to 2,388,535 shares of our common
      stock issuable upon the conversion of 3.8% secured convertible notes
      issued to, and up to 1,194,268 shares of our common stock issuable upon
      the exercise of outstanding warrants held by, the selling stockholders
      named in this prospectus. This number represents 16.6% of our current
      outstanding common stock <SUP>(1) </SUP></P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD></TR>
  <TR vAlign=top>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">Common stock outstanding before the offering </P></TD>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">21,474,942 shares. </P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD></TR>
  <TR vAlign=top>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">Common stock outstanding after the offering </P></TD>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">25,057,745 shares, assuming full conversion of the
      convertible note and full exercise of the warrants held by the selling
      stockholders. </P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD></TR>
  <TR vAlign=top>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">Proceeds to us </P></TD>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">We will not receive any proceeds from the sales by the
      selling stockholders, but we will receive funds from the exercise of
      warrants, if exercised for cash, held by the selling stockholders which we
      will use for working capital purposes. </P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD></TR>
  <TR vAlign=top>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">Over-the-Counter Bulletin Board Symbol: </P></TD>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">CBPO.OB </P></TD></TR>
  <TR>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD>
    <TD>
      <P align=justify style="margin-left: 10; margin-right: 10"></P></TD></TR>
  <TR vAlign=top>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD>
    <TD align=left>
      <p style="margin-left: 10; margin-right: 10">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">Risk Factors: </P></TD>
    <TD align=left bgColor=#e6efff>
      <P align=justify style="margin-left: 10; margin-right: 10">See &#147;Risk Factors&#148; beginning on page 11 and the other
      information in this prospectus for a discussion of the factors you should
      consider before deciding to invest in our common stock.
</P></TD></TR></TABLE>
<P align=justify><FONT style="font-size: 8pt">(1) Based on 21,474,942 shares of common stock
outstanding at the filing of this Registration Statement.</FONT></P>
<P align=center>- 9 -</P>
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<P align=center><B>SUMMARY CONSOLIDATED FINANCIAL INFORMATION</B></P>
<P align=justify>The following table summarizes selected financial data
regarding our business and should be read in conjunction with our consolidated
financial statements and related notes contained elsewhere in this prospectus
and the information under &#147;Management's Discussion and Analysis of Financial
Condition and Results of Operations.&#148; The financial statement data as of and for
each of the fiscal years ended December 31, 2007 and 2008 have been derived from
our audited consolidated financial statements included elsewhere in this
prospectus. The financial statement data as of and for each of the three months
ended March 31, 2008 and 2009 have been derived from our unaudited consolidated
financial statements included elsewhere in this prospectus. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=bottom>
    <TD align=center colSpan=13><FONT size=2>(All amounts in U.S. dollars,
      except per share data) </FONT></TD></TR>
  <TR>
    <TD><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD>
    <TD width="1%" >&nbsp;</TD>
    <TD width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>STATEMENT OF INCOME</B> </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Three Months Ended
      March 31, </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Years Ended December
      31, </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; &nbsp;2009 </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2008 </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2008 </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2007 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Revenues </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>21,148,598
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>7,849,007
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>46,751,160
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>32,398,669
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Cost of revenues </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,214,930 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>1,948,898 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>14,040,602 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>9,945,921 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Gross profit </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>14,933,668
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>5,900,109
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>32,710,558
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>22,452,748
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Operating expenses </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,870,130 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>2,262,439 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>12,374,787 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>9,695,333 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Income from operations
    </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>10,063,538
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>3,637,670
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>20,335,771
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>12,757,415
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Income before taxes and noncontrolling
      Interest </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>9,288,594 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>3,614,285 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>19,886,115 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>12,245,838 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Provision for
      income taxes </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,030,194
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>740,482
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>4,596,603
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,074,560
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Net income attributable to noncontrolling interest </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>3,000,082 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>606,003 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>3,303,841 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>1,991,902 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Net income attributable to
    controlling interest</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>4,258,318
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,267,800
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>11,985,671
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>8,179,376
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Basic Earnings Per Share
</FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>0.20 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>0.11 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>0.56 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>0.38 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Diluted Earnings Per Share
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2>0.20 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2>0.10 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2>0.56 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2>0.37 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD></TR>
  <TR>
    <TD style="border-right-style: none; border-right-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD width="1%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="10%" align="center" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="1%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="10%" align="center" style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD width="2%" align="center" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD width="1%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="10%" align="center" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="1%" align="center" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD width="10%" align="center" style="border-style:none; border-width:medium; "><FONT size=2>&nbsp; </FONT></TD>
    <TD width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>BALANCE SHEET DATA</B>
      </FONT></TD>
    <TD align=center width="1%" style="border-top-style: none; border-top-width: medium">&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: none; border-top-width: medium"><FONT size=2>March 31,
    </FONT></TD>
    <TD align=center width="2%" style="border-top-style: none; border-top-width: medium; border-right-style:none; border-right-width:medium">&nbsp;</TD>
    <TD align=center width="1%" style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD align=center width="10%" style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD align=center width="2%" style="border-top-style: none; border-top-width: medium; border-left-style:none; border-left-width:medium">&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>December 31, </FONT></TD>
    <TD align=left width="2%" style="border-top-style: none; border-top-width: medium">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; &nbsp;2009 </FONT></TD>
    <TD align=center width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-style:none; border-width:medium; " >&nbsp;</TD>
    <TD align=center width="10%" style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2008 </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2007 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Working capital </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>2,158,853
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style:none; border-width:medium; ">&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>6,267,039
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>9,149,810
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Current assets </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>65,113,842 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>25,195,816 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>15,727,332 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Total assets </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>139,110,903
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>67,169,392
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>33,305,245
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Current liabilities </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>62,954,989 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>18,928,777 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,577,522 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Long-term debt </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>8,790,000
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>5,868,000
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Total liabilities </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>72,069,535 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>25,120,484 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,881,608 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff>Shareholders' equity</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>39,879,829</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>37,243,527</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff>22,100,179</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Noncontrolling interest
    </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>25,100,490
    </FONT></TD>
    <TD align=left width="2%" style="border-right-style: none; border-right-width: medium">&nbsp;</TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="10%" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,805,381
    </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,181,338
    </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgcolor="#E6EFFF"><FONT size=2>Total liabilities and equity
      </FONT></TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF"><FONT size=2>139,110,903 </FONT></TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-right-style: none; border-right-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF"><FONT size=2>67,169,392 </FONT></TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=left width="1%" bgcolor="#E6EFFF" >&nbsp;</TD>
    <TD align=right width="10%" bgcolor="#E6EFFF"><FONT size=2>33,305,245 </FONT></TD>
    <TD align=left width="2%" bgcolor="#E6EFFF" >&nbsp;</TD></TR></TABLE>
<P align=center>- 10 -</P>
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<P align="center">
<B>RISK FACTORS</B><BR>
</P>
<P align="justify">
<I>The shares of our common stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock.  Before purchasing our common stock, you
should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occurs, our business, financial condition or operating results will suffer, the trading price of our common stock could
decline, and you may lose all or part of your investment. You should also refer to the other information about us contained in this prospectus, including our financial statements and related notes. </I></P>
<P align="justify">
<B>RISKS RELATED TO OUR BUSINESS</B><BR>
</P>
<P align="justify">
<B><I>We face risks related to general domestic and global economic conditions and to the current credit crisis. Disruptions in the capital and credit markets related to the current national and worldwide financial crisis, which may continue
indefinitely or intensify, could adversely affect our results of operations, cash flows and financial condition, or those of our customers, suppliers and creditors. </I></B></P>
<P align="justify">
We currently generate sufficient operating cash flows, which combined with access to the credit markets, provide us with significant discretionary funding capacity. However, the current uncertainty arising out of domestic and global economic
conditions, including the recent disruption in credit markets, may impact our ability to manage normal relationships with our customers, suppliers and creditors. The current disruptions in the capital and credit markets may continue indefinitely or
intensify, and adversely impact our results of operations, cash flows and financial condition, or those of our customers, suppliers and creditors. Disruptions in the capital and credit markets as a result of uncertainty, changing or increased
regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed to conduct or expand our businesses or conduct acquisitions or make other discretionary investments. Such
disruptions may also adversely impact the capital needs of our customers and suppliers, which, in turn, could adversely affect our results of operations, cash flows and financial condition. </P>
<P align="justify">
In addition, the demand for our products is largely affected by the general economic conditions in China as our products are still not affordable to many patients. As China's economy grows, we expect more Chinese people will become consumers of
medical treatments and procedures, including procedures requiring human plasma. However, we expect that the current global economic slowdown will result in slower economic growth in China and a depressed economic environment which in turn may make
our products less affordable to more patients and result in an overall decreased demand for our products. Such reductions and disruptions could have a material adverse effect on our business operations.</P>
<P align="justify">
<B><I>In order to grow at the pace expected by management, we will require additional capital to support our long-term business plan. If we are unable to obtain additional capital in future years, we may be unable to proceed with our long-term
business plan and we may be forced to curtail or cease our operations or further business expansion. </I></B> </P>
<P align="justify">
We will require additional working capital to support our long-term business plan, which includes identifying suitable targets for horizontal or vertical mergers or acquisitions, so as to enhance the overall productivity and benefit from economies
of scale. Our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our customers. We
may not be able to obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources, especially in light of the current global financial crisis and the market downturn. To raise funds, we may need to
issue new equities or bonds which could result in additional dilution to our shareholders and investors. Additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our
current outstanding securities or contain covenants that would restrict our operations and strategy. In addition, we may grant registration rights to investors purchasing our equity or debt securities in the future. If we are unable to raise
additional financing, we may be unable to implement our long-term business plan, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a
lack of additional financing could force us to substantially curtail or cease operations.</P>
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<P align="justify">
<B><I>We have a significant amount of debt, which could have negative consequences to us.</I></B> </P>
<P align="justify">
We have a significant amount of debt. As of March 31, 2009, we had, on a consolidated basis, approximately &#36;17.8 million principal amount of indebtedness outstanding. Our substantial indebtedness could have important consequences, including: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">increasing our vulnerability to adverse general economic and industry conditions and adverse changes in governmental regulations;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">limiting our ability to obtain additional financing to fund capital expenditures and other general corporate requirements;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund capital expenditures or other general corporate purposes;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">limiting our flexibility in planning for or reacting to changes in our business and the industry in which we operate; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">placing us at a competitive disadvantage compared to our less leveraged competitors.</LI>
</UL>
<P align="justify">
Our ability to pay interest on our indebtedness and to satisfy our other debt obligations will depend upon, among other things, our future operating performance and cash flow and our ability to refinance indebtedness when necessary. Each of these
factors is, to a large extent, dependent on general economic, financial, competitive, legislative, regulatory and other factors beyond our control. If in the future we cannot generate sufficient cash from operations to make scheduled payments on our
indebtedness or to meet our liquidity needs or other obligations, we will need to refinance our existing debt, obtain additional financing or sell assets. We cannot assure you that we will be able to renegotiate or refinance any of our debt on
commercially reasonable terms or at all. In addition, our interest expense may increase if general economic conditions result in an increasing interest rate environment. We cannot assure you that our business will generate cash flow, or that we will
be able to obtain funding sufficient to satisfy our debt service requirements. </P>
<P align="justify">
<B><I>If the PRC government bans or limits plasma-based biopharmaceutical products, our operations, revenues and profitability would be adversely affected. </I></B> </P>
<P align="justify">
The principal raw materials of our existing and planned biopharmaceutical products is human source plasma, which, due to its unique nature, is subject to various quality and safety control issues which include, but are not limited to, contaminations
and blood-born diseases. In addition, limitations of current technology pose biological hazards inherent in plasma that have yet to be discovered which could result in a wide spread epidemic due to blood infusion. The primary law that regulates
plasma products in China is the PRC Pharmaceutical Law, the Implementation Rules on the PRC Pharmaceutical Law and the Regulations on the Administration of Blood Products. These rules and regulations require entities producing blood products to
strictly comply with certain hygienic standards and specifications promulgated by the government. In the event that human plasma is discovered to be noncompliant with the government's hygienic standards and specifications, the health department
may revoke the registration and/or the approval of the blood product, or otherwise limit the use of such blood product. If the PRC government bans or limits plasma-based biopharmaceutical products, our operations, revenues and profitability would be
adversely affected.</P>
<P align="justify">
<B><I>If the plasma from Shandong Province are found to be contaminated, or the supply from these plasma stations becomes restricted, our operation, revenues and profitability would be adversely affected.</I></B></P>
<P align="justify">
We currently source plasma mainly from human donations to our plasma stations in Shandong and Guangxi Provinces, and Qianfeng sources its plasma from stations in Guizhou Province. If any of our human donors is infected with certain diseases, then
the plasma from such donor may be infected. If such contaminated plasma is not appropriately screened out, our entire plasma source may become contaminated. If the plasma from these collection stations are found to be contaminated or the supply from
these plasma stations becomes restricted, our operation, revenues and profitability would be adversely affected.</P>
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<P align="justify">
<B><I>If we are unable to adequately monitor our plasma stations our plasma supply may be tainted and we will be subject to sanctions by the government which would have a material adverse effect on our business.</I></B></P>
<P align="justify">
As part of the industry reform initiative by the Chinese government, in 2006 we acquired the assets of five of the six then existing plasma stations in Shandong Province through our wholly owned subsidiaries, Xia Jin Plasma Company, the Qi He Plasma
Company, the He Ze Plasma Company, the Zhang Qiu Plasma Company and the Yang Gu Plasma Company. We received permits to operate these subsidiaries in January 2007. In April 2007, we acquired the assets of two additional plasma stations, one through
our newly formed subsidiary, the Huan Jiang Plasma Company, and the other through our majority owned subsidiary, the Fang Cheng Plasma Company, which is 80% owned by Shandong Taibang and 20% owned by Lin Feng, an unrelated third party. We obtained
necessary permits and commenced their operation in July and August 2007, respectively. Qianfeng, the main operating subsidiary of our recently acquired Dalin, is the 85% owner of the seven plasma stations in Guizhou province. Huitian, the 35%
minority owned by the Company, has three plasma stations operate in Shaanxi province. While we monitor our blood plasma intake procedures through frequent unscheduled inspections of our stations, there remains a risk that our blood supply may
become tainted during the collection process. Our blood supply may become tainted if we accept blood from donors whose blood shows any irregular findings including HIV, Hepatitis C and liver disease. We pre-screen all donors in order to ensure that
these diseases are not present. If our blood supply becomes tainted, the consequences for our business could be severe. We could be subject to civil liability from suits brought by consumers and to criminal liability and loss of our registration if
we are found by the government to have been criminally negligent.</P>
<P align="justify">
<B><I>Our operations, sales, profit and cash flow will be adversely affected if our albumin products fail inspection or are delayed by regulators.</I></B></P>
<P align="justify">
Each batch of our albumin products requires inspection by Chinese government regulators before we can ship it to our customers. The PRC State Food and Drug Authority, or the SFDA, has a quality standard which considers, among other things, the
appearance, packing capacity, thermal stability, pH value, protein content and percentage of purity of the product. In order to pass inspection, our plasma must test negative for any blood irregularities, including Hepatitis C, HIV and liver
disease. The plasma must be packaged in 25 separate 600g bags and boxed with a packing list and labeled to be consistent with computer records. The plasma must then be stored at -20&deg;C as soon as possible after collection to ensure that it will
congeal within 6 hours. Government regulators usually take one month to inspect a batch of albumin products. The process begins when the regulator randomly selects samples of our albumin products and delivers them to the National Institute for the
Control of Pharmaceutical and Biological Products, or the NICBPB, in Beijing for testing, and the process ends when the products are given final approval by the NICBPB. In the event that the regulators delay the approval of our products, change the
requirements in such a way that we are unable to comply with those requirements, or require our other products to be inspected by regulators before we can ship them to our customers, our operations, sales, profit and cash flow will be adversely
affected.</P>
<P align="justify">
<B><I>We rely on a Secondment Agreement with the Shandong Institute, which is expected to terminate upon the future privatization of the Shandong Institute, for over 39% of our Shandong Taibang employees. If the Secondment Agreement is breached or
terminated, it could have an adverse effect on our operations and on our financial results.</I></B></P>
<P align="justify">
The Shandong Province Institute of Biological Products, or the Shandong Institute, has provided us with approximately 131 of our employees out of a total of approximately &#150; 753 employees, pursuant to a secondment agreement, or Secondment
Agreement, dated October 28, 2002, between Shandong Taibang and the Shandong Institute. Pursuant to the Secondment Agreement, we are responsible for the salaries of these employees, as well as for their social benefits such as insurance. Our
Secondment Agreement with the Shandong Institute will expire on the sooner to occur of October 2032 or upon the privatization of the Shandong Institute, which was originally expected to occur before the end of 2008. However, the completion of
privatization of Shandong Institute has been further delayed indefinitely due to slower action taken by the Shandong Ministry of Health in implementing the privatization plan. Upon expiration or termination of the Secondment Agreement, we plan to
hire the seconded employees directly. However, we cannot be sure that all of the employees will accept our employment offers at that time. Guang Li Pang, Shandong Taibang's Deputy Chief Executive Officer, Yun Hua Gao and Dian Cong Liu, our
Senior Technical Advisors are employed through the Secondment Agreement. Although none of our seconded
employees have indicated that they do not plan to continue working for our Company after the privatization, if the Secondment Agreement is terminated or expires and we are unable to hire replacement employees on time, our operations, as well as our
financial results, may suffer.</P>
<P align="center">
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<P align="justify">
<B><I>If the distributors who we rely on do not purchase our products, our business and results of operations will be adversely affected.</I></B></P>
<P align="justify">
We sell all of our products in China through our network of about 397 distributors located in about 27 provinces and municipal cities throughout China. While we have established working relationships with many of our distributors and strictly
regulate their sales and marketing activities by annual distribution agreements, there are no restrictions in these distribution agreements preventing our distributors from also supplying products produced by our competitors. Our own marketing and
sales staff work to develop and maintain relationships with our distributors, but there can be no assurance that we will be able to maintain such relationships. For the years ended December 31, 2008 and 2007, direct sales to distributors represented
approximately 65.6% and 58.3%, respectively, of our total revenues. If a number of our distributors cease to purchase our products and we are unable to find suitable replacement, our business and results of operations will be adversely affected.</P>
<P align="justify">
<B><I>Our inability to successfully research and develop new</I></B> <B><I>biological pharmaceutical products could have an adverse effect on our future growth.</I></B></P>
<P align="justify">
We believe that the successful development of biological pharmaceutical products can be affected by many factors. Products that appear to be promising in the early phases of research and development may fail to be commercialized for various reasons,
including the failure to obtain the necessary regulatory approvals. In addition, the research and development cycles for new medicine for which we must obtain a Certificate of New Medicine from the PRC Ministry of Health, is a relatively lengthy
process. In our experience, the process of conducting research and various tests on new products before obtaining a Certificate of New Medicine and subsequent procedures may take approximately three to five years. There is no assurance that our
future research and development projects will be successful or that they will be completed within the anticipated time frame or budget. Also, there is no guarantee that we will receive the necessary approvals from relevant authorities for the
production of our newly developed products. Even if such products could be successfully commercialized, there is no assurance that they will be accepted by the market as anticipated.</P>
<P align="justify">
<B><I>Our financial position and operations may be materially and adversely affected, if our product liability insurance does not sufficiently cover our liabilities.</I></B></P>
<P align="justify">
Under current PRC laws, manufacturers and vendors of defective products in the PRC may incur liability for loss and injury caused by such products. Pursuant to the General Principles of the Civil Law of the PRC or the PRC Civil Law, which became
effective in 1987, a defective product which causes property damage or physical injury to any person may subject the manufacturer or vendor of such product to civil liability.</P>
<P align="justify">
In 1993, the PRC promulgated the Product Quality Law of the PRC or the Product Quality Law, which was revised in 2000. The Product Quality Law was enacted to protect the rights and interests of end-users and consumers and to strengthen the
supervision and control of the quality of products. Under the Product Quality Law, manufacturers who produce defective products may be subject to fines and required to cease production, and in severe cases, be subject to criminal liability and may
have their business licenses revoked.</P>
<P align="justify">
In 1993, the Law of the PRC on the Protection of the Rights and Interests of Consumers or the Consumers' Rights Law was promulgated to further protect the legal rights and interests of consumers in connection with the purchase or use of goods
and services. All businesses, including our business, must observe and comply with the Consumers' Rights Law.</P>
<P align="justify">
We maintain product liability insurance for sales in the PRC for all of our products in the amount of approximately &#36;2.9 million (RMB 20 million). Although no one has filed any claims in relation to the use of our pharmaceutical products, our
financial position and operations may be materially and adversely affected, if our insurance coverage is insufficient to cover a successful claim.</P>
<P align="center">
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<P align="justify">
<B><I>We depend heavily on key personnel, and turnover of key employees and senior management could harm our business.</I></B></P>
<P align="justify">
Our success, to a certain extent, is attributable to the expertise and experience of our senior management and key research and technical personnel, including Chao-Ming Zhao, our Chief Executive Officer, Yu-Yun Tristan Kuo, our Chief Financial
Officer, Tung Lam, the Chief Executive Officer of Shandong Taibang and Dian Cong Liu, the Chief Technical Adviser of Shandong Taibang, who carry out key functions in our operation. If we lose the service of any of our senior management or key
research or technical personnel or fail to attract additional personnel with suitable experience and qualification, our business operations and research capability may be adversely affected.</P>
<P align="justify">
<B><I>Our senior management and employees have worked together for a short period of time, which may make it difficult for you to evaluate their effectiveness and ability to address challenges.</I></B></P>
<P align="justify">
Due to our limited operating history and recent additions to our management team, certain of our senior management and employees have worked together at our company for only a relatively short period of time. Specifically, Chao Ming Zhao became our
Chief Executive Officer in June 2008 after serving as our Chief Financial Officer since November 2006 and Y. Tristan Kuo became our Chief Financial Officer in June 2008 and had served as our Vice President-Finance since September 2007. Siu Ling Chan
and Lin Ling Li became our directors in July 2006. In addition, while Mr. Zhao, Ms. Chen and Ms. Lin were employed in various capacities by Logic Express and Shandong Taibang, Mr. Kuo is a newcomer to our Company. As a result of these circumstances,
it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to address future challenges to our business.</P>
<P align="justify">
<B><I>Future acquisitions may have an adverse effect on our ability to manage our business.</I></B></P>
<P align="justify">
Selective acquisitions form part of our strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional companies, products or technologies. Future acquisitions and the subsequent integration of
new companies into ours would require significant attention from our management. Our company has little experience with integrating newly acquired businesses. Potential problems encountered by each organization during mergers and acquisitions would
be unique, posing additional risks to the company. The diversion of our management's attention and any difficulties encountered in any integration process could have an adverse effect on our ability to manage our business. Future acquisitions
would expose us to potential risks, including risks associated with the assimilation of new operations, technologies and personnel, unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, the
inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, relationships with employees, customers and suppliers as a result of integration of new businesses.</P>
<P align="justify">
<B><I>We may lose our competitive advantage and our operations may suffer if we fail to prevent the loss or misappropriation of, or disputes over, our intellectual property.</I></B></P>
<P align="justify">
None of our products are currently covered by patents, except for the trademark &#147;Lu Yue&#148; that has been licensed to us by the Shandong Institute for our use as in the labeling of human-use medicine, biopreparate and blood products, pursuant
to a trademark license agreement, dated February 27, 2007. We plan to apply for patents for our manufacturing processes. The patent application will be subject to approval from the relevant PRC authorities. We may not be able to successfully obtain
the approval of the PRC authorities for our patent applications. Furthermore, third parties may assert claims to our proprietary procedures, technologies and systems. These proprietary procedures, technologies and systems are important to our
business as they allow us to maintain our competitive edge over our competitors.</P>
<P align="justify">
While we are not aware of any infringement on our intellectual property and we have not been notified by any third party that we are infringing on their intellectual property, our ability to compete successfully and to achieve future revenue growth
will depend, in significant part, on our ability to protect our proprietary technology and operate without infringing upon the intellectual property rights of others. The legal regime in China for the protection of intellectual property rights is
still at its early stage of development. Intellectual property protection became a national effort in China in 1979 when China adopted its first statute on the protection of trademarks. Since then, China has adopted its Patent Law, Trademark Law and
Copyright Law and promulgated related regulations such as Regulation on Computer Software Protection, Regulation on the Protection of Layout Designs of Integrated Circuits and Regulation on Internet Domain Names. China has also acceded to various
international treaties and conventions
in this area, such as the Paris Convention for the Protection of Industrial Property, Patent Cooperation Treaty, Madrid Agreement and its Protocol Concerning the International Registration of Marks. In addition, when China became a party to the
World Trade Organization in 2001, China amended many of its laws and regulations to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights. Despite many laws and regulations promulgated and other efforts made by China
over the years with a view to tightening up its regulation and protection of intellectual property rights, private parties may not enjoy intellectual property rights in China to the same extent as they would in many Western countries, including the
United States, and enforcement of such laws and regulations in China have not achieved the levels reached in those countries. Both the administrative agencies and the court system in China are not well-equipped to deal with violations or handle the
nuances and complexities between compliant technological innovation and non-compliant infringement.</P>
<P align="center">
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<P align="justify">
We rely on confidentiality agreements with our management and employees to protect our confidential proprietary information. However, the protection of our intellectual properties may be compromised as a result of:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">departure of any of our management members or employees in possession of our confidential proprietary information;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">breach by such departing management member or employee of his or her confidentiality and non-disclosure undertaking to us;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">infringement by others of our proprietary information and intellectual property rights; or</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">refusal by relevant regulatory authorities to approve our patent or trademark applications.</LI>
</UL>
<P align="justify">
Any of these events or occurrences may have a material adverse effect on our operations and the measures that we have put into place to protect our intellectual property rights may not be sufficient. Litigation to enforce our intellectual property
rights could result in substantial costs and may not be successful. If we are not able to successfully defend our intellectual property rights, we might lose rights to technology that we need to conduct and develop our business. This may seriously
harm our business, operating results and financial condition, and enable our competitors to use our intellectual property to compete against us.</P>
<P align="justify">
Furthermore, if third parties claim that our products infringe their patents or other intellectual property rights, we may be required to devote substantial resources to defend against such claims. If we are unsuccessful in defending against such
infringement claims, we may be required to pay damages, modify our products or suspend the production and sale of such products. We cannot guarantee that we will be able to modify our products on commercially reasonable terms.</P>
<P align="justify">
<B><I>A disruption in the supply of utilities, fire or other calamity at our manufacturing plant would disrupt production of our products and adversely affect our sales.</I></B></P>
<P align="justify">
Our products are manufactured solely at our production facility located in Tai'an City, Shandong Province in the PRC. While we have not in the past experienced any calamities which disrupted production, any disruption in the supply of
utilities, in particular, electricity or power supply, or any outbreak of fire, flood or other calamity resulting in significant damage at our facilities would severely affect our production and have a material adverse effect on our business,
financial condition and results of operations.</P>
<P align="justify">
We maintain insurance policies covering losses with respect to damages to our properties and products. We do not have insurance coverage for machinery and inventories of raw materials. There is no assurance that our insurance would be sufficient to
cover all of our potential losses.</P>
<P align="justify">
<B><I>We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have the</I></B> <B><I>operating effectiveness of our internal controls attested to by our independent auditors.</I></B></P>
<P align="justify">
As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports on Form 10-K. A
report of our management is included under Item 9A(T) of our Form 10-K for the year ended December 31, 2008. In addition, Section 404 requires the independent registered public accounting firm auditing a
company's financial statements to also attest to and report on the operating effectiveness of such company's internal controls. However, we will not be subject to these requirements until our annual report for the fiscal year ending
December 31, 2009. We can provide no assurance that we will comply with all of the requirements imposed thereby. There can be no assurance that we will receive a positive attestation from our independent registered public accountants. In the event
we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent registered public accountants with respect to
our internal controls, investors and others may lose confidence in the reliability of our financial statements.</P>
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<P align="justify">
<B><I>There is a dispute between the former shareholders of Shandong Taibang that calls into question our ownership of 66%, or a majority, of our primary operating subsidiary, which if not resolved in our favor will adversely affect our
business.</I></B> </P>
<P align="justify">
Mr. Zu Ying Du was one of the original equity holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement, among the original equity holders, Mr. Du was obligated to make a capital contribution of RMB 20 million (or
approximately &#36;2.6 million) for a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed to repay Beijing Chen Da for his
loan of the capital contribution amount. Mr. Du disputes that the money was due and owing. A Beijing court found that Beijing Chen Da had given money to Mr. Du but found that the loan agreement failed to comply with Chinese law. A notice was issued
on July 5, 2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a stay of the Beijing action pending their investigation into money laundering relating to the 20 million RMB loan to Zu Ying Du.</P>
<P align="justify">
Subsequently, Beijing Chen Da entered into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB 20 million debt. This agreement
was signed by Mr. Du's brother who held a power of attorney from Mr. Du. Mr. Du disputes the legitimacy of this transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued his brother in the
court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently
the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei
Jingzhou Intermediate Court.</P>
<P align="justify">
Missile Engineering, another original equity holder wholly controlled by Mr. Du, was obligated to contribute RMB 32.8 million (or &#36;4.2 million) for a 41% interest in Shandong Taibang by means of cash, equipment and patent technology. It was
obligated to obtain new drug certificate and production license of its patent technology from the government within a stipulated period in order to be recognized as a valid capital contribution, or in the alternative, make a cash payment. The patent
technology was valued as RMB 26.4 million (or approximately &#36;3.4 million). However, Missile Engineering failed to obtain the new drug certificate and production license within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders resolution on September 26, 2004, Missile Engineering agreed to sell its 41% interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB 26.4 million in cash. Missile Engineering disputes this transaction and sued the brother of Mr. Du in the court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the
power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei Jingzhou Intermediate Court.</P>
<P align="justify">
In June 10, 2005, Beijing Chen Da also sold its equity interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a share transfer agreement, which became effective on September 2, 2005, upon approval by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our subsidiary.</P>
<P align="justify">
In 2006, Missile Engineering applied for arbitration before the China International Economic and Trade Arbitration Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing Investments Limited, of the equity interests in
Shandong Taibang formerly owned by Missile Engineering. The equity transfer had been approved by the Shandong Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong
COFTEC. Missile Engineering later voluntarily withdrew this application and instead applied for administrative reconsideration of the equity transfer, but this application was rejected by the Ministry of Commerce in 2007. Missile Engineering applied
with the District Court of Lixia District, Jinan City, Shandong province requesting revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by Missile Engineering. Missile Engineering later voluntarily withdrew the action. In
April 2007, Logic Express initiated an arbitration proceeding before the Shandong Tai'an Arbitration Committee, to establish that Logic Express is the lawful shareholder of Shandong Taibang. The parties to that proceeding were Logic Express
Ltd. and Shandong Taibang Biological Products Co., Ltd. The Arbitration Committee's decision on September 6, 2007 confirmed that Logic Express had legitimate ownership as a result of the transfer of Shandong Taibang. Up-Wing started an action
in the Intermediate Court of Tai'an City, Shandong province requesting the court to establish that Up-Wing is the lawful shareholder of Shandong Taibang. The Intermediate Court of Tai'an City, Shandong province on December 20, 2007
rejected the application on the basis that the same matter had been tried by the arbitration panel.</P>
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<P align="justify">
Up-Wing filed a defamation case in the District Court of Hi-technology and Industry Development District, Tai'an City, Shandong province claiming defamation against Mr. Du and the 21<SUP>st</SUP> Century Economic Report Newspaper. Judgment in
favor of Up-Wing was rendered on July 22, 2008 ordering the newspaper and Mr. Du to publish an apology to Up-Wing.</P>
<P align="justify">
Mr. Du and Missile Engineering have filed two actions in the Intermediate Court of Wuhan City, Hubei province, against the following defendants, Du Hai Shan, his brother, Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have
requested that the Wuhan Intermediate Court to restore the equity interests originally held by the plaintiffs, 25% equity interest held by Mr. Du and 41% equity interest held by Missile Engineering. The Wuhan Intermediate Court has issued a
preliminary order attaching 66% of the equity of Shandong Taibang pending the outcome of the case.</P>
<P align="justify">
Dr. Du has alleged that Mr. Lam, the current CEO of our subsidiary Taibang, was formerly known as Lin Zepin and that the individual, Lin Zepin, was court martialed for smuggling in Fujian in 1999. Dr. Du alleges that Lin Zepin was released from
prison in 2003. Mr. Lam denies these statements and has provided an affidavit stating that he was never know as Lin Zepin and has not been convicted of any crime. If it were determined that Mr. Lam, the CEO of Taibang, was formerly known as Lin
Zepin and was in fact convicted of a crime, our business and results of operations could be adversely affected.</P>
<P align="justify">
Failure to resolve these disputes in our favor may adversely affect our business and operations. </P>
<P align="justify">
<B>RISKS RELATING TO OUR FINANCIAL CONDITION </B> </P>
<P align="justify">
<B><I>We face risks related to general domestic and global economic conditions and to the current credit crisis.</I></B></P>
<P align="justify">
We currently generate sufficient operating cash flows, which combined with access to the credit markets, provide us with significant discretionary funding capacity. However, the current uncertainty arising out of domestic and global economic
conditions, including the recent disruption in credit markets, has impacted accounts receivable collectivity from our customers, and may impact our ability to pay suppliers and creditors. If the current situation deteriorates significantly, we could
see a tightened cash flow position and an abnormal amount of bad debt expenses related to the general economic slow-down, or supplier or customer disruptions resulting from tighter credit markets. Such reductions and disruptions could have a
material adverse effect on our business operations.</P>
<P align="justify">
<B><I>Our cash flow could be negatively affected as a result of our extension of relatively long payment terms to customers that we believe are credit worthy.</I></B></P>
<P align="justify">
As is customary in our industry, we extend relatively long payment terms (up to six months) to customers that we believe are credit worthy. The dollar amount of our accounts receivable, net of our allowance for doubtful accounts as of December 31,
2008 and 2007 was &#36;313,087 and &#36;316,869, respectively. The bad debt (credit) expenses for the years ended December 31, 2008 and 2007 were (&#36;56,462) and &#36;221,813, respectively. Although we attempt to establish appropriate reserves for
our receivables, those reserves may not prove to be adequate in view of actual levels of bad debts. The failure of our customers to pay us timely would negatively affect our working capital, which could in turn adversely affect our cash flow.</P>
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<P align="justify">
<B><I>Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.</I></B></P>
<P align="justify">
We have a limited operating history. Shandong Taibang as began its operation in October 2002. With the rapid growth of the industry, it has experienced a high growth rate since 2002. Furthermore, we did not acquire a controlling interest in Shandong
Taibang until September 2005. As such, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects. We may not be able to achieve a similar growth rate in future periods.
Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance.</P>
<P align="justify">
<B><I>We face risks associated with debt financing (including exposure to variation in interest rates).</I></B></P>
<P align="justify">
Our total outstanding indebtedness, entirely comprising of long-term bank loan, as of December 31, 2008 was &#36;5.9 million. The interest rate on this long-term bank loan is fixed at 7.02% per annum. Our obligations under our existing loans have
been mainly met through the cash flow from our operations and our financing activities. We are subject to risks normally associated with debt financing, including the risk of significant increase in interest rates and the risk that our cash flow
will be insufficient to meet required payment of principal and interest. In the past, cash flow from operations had been sufficient to meet payment obligations and/or we have been able to roll over our borrowings. There is however no assurance that
we will be able to do so in the future. We may also underestimate our capital requirements and other expenditures or overestimate our future cash flows. In such event, additional capital, debt or other forms of financing may be required for our
working capital. If any of the aforesaid events occur and we are unable for any reason to raise additional capital, debt or other financing to meet our working capital requirements, our business, operating results, liquidity and financial position
will be adversely affected.</P>
<P align="justify">
<B><I>We will incur capital expenditures in the future in connection with our growth plans and therefore may require additional financing.</I></B></P>
<P align="justify">
To grow our sales volume, we need to increase our raw material supplies and strengthen our commitment to our research and development efforts to accelerate new product development. We plan to solve our raw materials shortage through either the
building of new plasma collection stations or through scaling up our existing collection stations, both of which will require substantial capital expenditures. We anticipate that our capital expenditure for the next 12 months will be approximately
&#36;2.5 million. Such expenditures are likely to be incurred in advance of any increase in sales. Our revenue may not increase after these capital expenditures are incurred. This will depend on, among other factors, on our ability to maintain or
achieve high capacity utilization rates. Any failure to increase our revenue after incurring capital expenditure to expand production capacity will reduce our profitability.</P>
<P align="justify">
<B><I>We may need to obtain additional debt or equity financing which may result in dilution to our stockholders and have a material adverse economic effect on our business.</I></B></P>
<P align="justify">
We may need to obtain additional debt or equity financing to fund our capital expenditures. Additional equity financing may result in dilution to our shareholders. Additional debt financing may be required, which, if obtained, may:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">limit our ability to pay dividends or require us to seek consents for the payment of dividends;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">increase our vulnerability to general adverse economic and industry conditions;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">limit our ability to pursue our growth plan;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">require us to dedicate a substantial portion of our cash flow from operations as payment for our debt, thereby reducing availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and/or</LI>
</UL>
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<ul>
  <li>

<P align="justify">
limit our flexibility in planning for, or reacting to, changes in our business and our industry.</P>
  </li>
</ul>
<P align="justify">
We cannot assure you that we will be able to obtain the additional financing on terms that are acceptable to us.</P>
<P align="justify">
<B>RISKS RELATING TO OUR INDUSTRY</B><BR>
</P>
<P align="justify">
<B><I>If our supply of quality plasma is interrupted, our results of operations and profitability will be adversely affected.</I></B></P>
<P align="justify">
The production of plasma-based biopharmaceutical products relies on the supply of plasma of suitable quality. For the years ended December 31, 2008 and 2007, the cost of plasma used by us for production accounted for approximately 76% and 73%,
respectively, of total production cost. The supply and market prices of plasma may be adversely affected by factors such as regulatory restrictions, weather conditions or outbreak of diseases which would impact our costs of production. We may not be
able to pass on any resulting increase in costs to our customers and therefore any substantial fluctuation in supply or market prices of plasma may adversely affect our results of operations and profitability.</P>
<P align="justify">
<B><I>The biopharmaceutical industry in the PRC is strictly regulated and changes in such regulations may have an adverse effect on our business.</I></B></P>
<P align="justify">
The biopharmaceutical industry in the PRC is strictly regulated by the government. The regulatory regime, such as administrative approval of medicines and production approvals, comprises of series of regulations and administrative rules. The PRC
regulatory authorities may amend such regulations and administrative rules and promulgate new regulations and administrative rules from time to time. Changes in these regulations and administrative rules could have a significant impact on our
business. Such changes may have any adverse impact on our business.</P>
<P align="justify">
<B><I>We may not be able to carry on our business if we lose any of the permits and licenses required by the PRC Government in order to carry on our business.</I></B></P>
<P align="justify">
All pharmaceutical manufacturing and distribution enterprises in the PRC are required to obtain from various PRC governmental authorities certain permits and licenses, including, in the case of manufacturing enterprises, a Pharmaceutical
Manufacturing Permit and, in the case of distribution enterprises, a Pharmaceutical Distribution Permit.</P>
<P align="justify">
We have obtained permits and licenses and the GMP certificates, required for the manufacture of our pharmaceutical products. These permits and licenses held by us are subject to periodic renewal and/or reassessment by the relevant PRC Government
authorities and the standards of compliance required in relation thereto may from time to time be subject to changes. We intend to apply for the renewal of such permits and licenses when required by applicable laws and regulations. Any changes in
compliance standards, or any new laws or regulations that may prohibit or render it more restrictive for us to conduct our business or increase our compliance costs may adversely affect our operations or profitability. Any failure by us to obtain
such renewals may have a material adverse effect on the operation of our business. In addition, we may not be able to carry on business without such permits and business licenses being renewed.</P>
<P align="justify">
<B><I>We may encounter increased competition from both local and overseas pharmaceutical enterprises as a result of a relaxation of the PRC regulatory approval process for plasma-based biopharmaceutical products or a relaxation of international
trade restrictions. A change in our competitive environment could adversely affect our profitability and prospects.</I></B></P>
<P align="justify">
Our continued ability to compete depends on the development of the plasma-based biopharmaceutical manufacturing industry in China. The plasma-based biopharmaceutical manufacturing industry in China is highly regulated by both provincial and central
governments. Prior to engaging in the collection and production of plasma products, companies such as ours are required to obtain collection permits from the central health department and production permits and certificates for each new product
formulation from the various provincial food and drug authorities. We have the advantage of being already approved by the state to collect plasma from human donors and manufacture and sell plasma-based biopharmaceutical products in Shandong
Province, and our research and development department has become familiar with the provincial product approval process. However, although we
believe that the regulatory requirements pose a competitive barrier to entry into the biopharmaceutical industry, over time there may be new entrants. If the government relaxes these restrictions and allow more competitors to enter into the market,
these competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than us. Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors
drastically reduce prices; or (iii) competitors develop new products having comparable medicinal applications or therapeutic effects which are more effective or less costly than those produced by us.</P>
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In addition we expect that competition from imported products will increase as a result of a trend towards lower import tariffs and China's admission as a member of the WTO in December 2001. We believe that lower import tariffs will result in
more affordable pricing for imported biopharmaceutical products manufactured overseas as compared to domestically manufactured products such as ours. In addition, China's membership in the WTO makes it more accessible to foreign
biopharmaceutical manufacturers who may wish to set up production facilities in the PRC and compete directly with domestic manufacturers. The expected increased supply of both domestic and foreign competitively priced biopharmaceutical products in
the PRC will result in increased competition. There is no assurance that our strategies to remain competitive can be implemented successfully as scheduled or at all. Our inability to remain competitive may have an adverse effect on our profitability
and prospects.</P>
<P align="justify">
<B><I>If we do not receive PRC governmental approval to increase the retail prices of certain of our biopharmaceutical products our revenues may be adversely affected.</I></B></P>
<P align="justify">
Retail prices of certain of our biopharmaceutical products in the PRC are subject to the control of the relevant central and provincial price administration authorities. The actual price for any given price-controlled product set by manufacturers,
wholesalers and retailers cannot exceed the price ceiling imposed in accordance with the applicable government price control rules. Only those pharmaceutical products which are included in the Insurance Catalogue administered at the central or
provincial level are subject to price control.</P>
<P align="justify">
Our two principal product categories, human albumin and human rabies immunoglobulin, which accounted for a total of approximately 65.5% of our total revenues for the year ended December 31, 2008, were subject to national price control regulations in
the PRC. Hence, the prices of those products could not be increased at our discretion above the relevant controlled retail price ceiling without prior governmental approval. This, in turn, may affect the ex-factory prices set by us for our products
and we therefore do not have unfettered freedom to maximize our profits. It is uncertain whether we will be able to obtain necessary approvals to increase the price of any of our products.</P>
<P align="justify">
<B>RISKS RELATED TO DOING BUSINESS IN CHINA</B><BR>
</P>
<P align="justify">
<B><I>Changes in China's political or economic situation could harm us and our operating results.</I></B></P>
<P align="justify">
Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or
damage our operations and profitability. Some of the things that could have this effect are:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">Level of government involvement in the economy;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Control of foreign exchange;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Methods of allocating resources;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Balance of payments position;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">International trade restrictions; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">International conflict.</LI>
</UL>
<P align="justify">
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways. For example, state-owned enterprises still constitute a large portion of the Chinese
economy and weak corporate governance and a lack of flexible currency exchange
policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of the OECD member countries.</P>
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<B><I>Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.</I></B></P>
<P align="justify">
We conduct substantially all of our business through our operating subsidiaries in the PRC. Our operating subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to
foreign-invested enterprises. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly
enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of
these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management
attention. In addition, all of our executive officers and all of our directors are residents of China and not of the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be
difficult for investors to affect service of process in the United States or to enforce a judgment obtained in the United States against our Chinese operations and subsidiaries.</P>
<P align="justify">
<B><I>You may have difficulty enforcing judgments against us.</I></B><BR>
</P>
<P align="justify">
We are a Delaware holding company and most of our assets are located outside of the United States. Most of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries
other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also
be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial
majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law, has advised us that the
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties
between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United
States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national
sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.</P>
<P align="justify">
<B><I>The PRC government exerts substantial influence over the manner in which we must conduct our business activities.</I></B></P>
<P align="justify">
The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and
regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and
regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our
part to ensure our compliance with such regulations or interpretations.</P>
<P align="justify">
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies,
could have a significant effect on economic conditions in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.</P>
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<P align="justify">
<B><I>Future inflation in China may inhibit our ability to conduct business in China.</I></B></P>
<P align="justify">
In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2% . These factors have
led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government
to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.</P>
<P align="justify">
<B><I>Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.</I></B></P>
<P align="justify">
The majority of our revenues will be settled in RMB and U.S. dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or
other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction
that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account
items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese
regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.</P>
<P align="justify">
<B><I>Fluctuations in exchange rates could adversely affect our business and the value of our securities.</I></B></P>
<P align="justify">
The value of our common stock will be indirectly affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of
the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the
relative value of any dividend we issue that will be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.</P>
<P align="justify">
Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may
appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in
the foreign exchange market.</P>
<P align="justify">
Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability
and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our
ability to convert RMB into foreign currencies.</P>
<P align="justify">
Currently, some of our raw materials and major equipment are imported. In the event that the U.S. dollars appreciate against RMB, our costs will increase. If we cannot pass the resulting cost increases on to our customers, our profitability and
operating results will suffer. In addition, if our sales to international customers grow, we will be increasingly subject to the risk of foreign currency depreciation.</P>
<P align="justify">
<B><I>Restrictions under PRC law on our PRC subsidiaries' ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to
you, and otherwise fund and conduct our businesses.</I></B></P>
<P align="justify">
Substantially all of our revenues are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. PRC legal restrictions permit payments
of dividend by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at
least 10% of our annual after-tax profits determined in
accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in
the form of loans, advances or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our
business, pay dividends and otherwise fund and conduct our business.</P>
<P align="center">
- 23 -<BR>
</P>

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<P align="justify">
<B><I>Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to
inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us or otherwise materially adversely affect us.</I></B></P>
<P align="justify">
In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China,
generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity
financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1)
purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire &#147;control&#148; over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements
relating to the source of the PRC resident's funds used to establish or acquire the offshore entity; covering the use of existing offshore entities for offshore financings; (3) purporting to cover situations in which an offshore SPV establishes
a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration,
notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and
acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was
established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended
indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the
requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV's
affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.</P>
<P align="justify">
We believe our stockholders who are PRC residents as defined in Circular 75 have registered with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC
subsidiaries. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals
required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For
example, our present and prospective PRC subsidiaries' ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC
resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect
stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to
fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries' ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and
prospects.</P>
<P align="justify">
<B><I>Under the New EIT Law, we may be classified as a &#147;resident enterprise&#148; of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.</I></B> </P>
<P align="center">
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<P align="justify">
China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with &#147;de facto management
bodies&#148; within China is considered a &#147;resident enterprise,&#148; meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto
management as &#147;substantial and overall management and control over the production and operations, personnel, accounting, and properties&#148; of the enterprise.</P>
<P align="justify">
On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto
Management Bodies, or the Notice, further interpreting the application of the New EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities.  Pursuant to the Notice, an enterprise incorporated in an offshore
jurisdiction and controlled by a Chinese enterprise or group will be classified as a &#147;non-domestically incorporated resident enterprise&#148; if (i) its senior management in charge of daily operations reside or perform their duties mainly in
China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least
half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying
dividends to its non-PRC shareholders.  However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically
incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case. </P>
<P align="justify">
We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a &#147;resident enterprise&#148; for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could
follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing
proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as &#147;tax-exempt
income,&#148; we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of
outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new &#147;resident enterprise&#148; classification could result
in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.  We are actively monitoring the possibility of
&#147;resident enterprise&#148; treatment for the 2008 tax year and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible. </P>
<P align="justify">
If we were treated as a &#147;resident enterprise&#148; by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax. </P>
<P align="justify">
<B><I>We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.</I></B></P>
<P align="justify">
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute,
for the purpose of obtaining or retaining business. We have operations, agreements with third parties and we make most of our sales in China. PRC also strictly prohibits bribery of government officials. Our activities in China create the risk of
unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices
by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.</P>
<P align="center">
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<P align="justify">
<B>RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY </B> </P>
<P align="justify">
<B><I>Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.</I></B></P>
<P align="justify">
Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market
available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our
common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing. </P>
<P align="justify">
<B><I>We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.</I></B></P>
<P align="justify">
The SEC has adopted regulations which generally define so-called &#147;penny stocks&#148; to be an equity security that has a market price less than &#36;5.00 per share or an exercise price of less than &#36;5.00 per share, subject to certain
exemptions. If our common stock becomes a &#147;penny stock&#148;, we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and &#147;accredited investors&#148; (generally, individuals with a net worth in excess of &#36;1,000,000 or annual incomes exceeding &#36;200,000, or &#36;300,000 together with their spouses).
For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability
of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.</P>
<P align="justify">
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made
about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stock.</P>
<P align="justify">
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.</P>
<P align="center">
<B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></P>
<P align="justify">
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled &#147;Summary,&#148; &#147;Risk Factors,&#148; &#147;Management's Discussion and Analysis of Financial
Condition and Results of Operations,&#148; and &#147;Business.&#148; These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned &#147;Risk Factors&#148; above.
</P>
<P align="justify">
In some cases, you can identify forward-looking statements by terms such as &#147;anticipates,&#148; &#147;believes,&#148; &#147;could,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148; &#147;plans,&#148;
&#147;potential,&#148; &#147;predicts,&#148; &#147;projects,&#148; &#147;should,&#148; &#147;would&#148; and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to
future events and are based on assumptions subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.  </P>
<P align="justify">
Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus, or that we filed as exhibits to the registration
statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. </P>
<P align="center">
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<P align=justify>Except as required by law, we assume no obligation to update
any forward-looking statements publicly, or to update the reasons actual results
could differ materially from those anticipated in any forward-looking
statements, even if new information becomes available in the future. </P>
<P align=center><B>USE OF PROCEEDS</B><BR></P>
<P align=justify>We will not receive any proceeds from the sale of common stock
covered by this prospectus. To the extent that the selling stockholders
exercise, for cash, all of the warrants covering the 1,194,268 shares of common
stock registered for resale under this prospectus, we would receive
approximately $5.7 million in the aggregate from such exercises. We intend to
use such proceeds for general corporate and working capital purposes, such as
for the purchase of plasma and other raw materials used in the production of our
biopharmaceutical products. </P>
<P align=center><B>DIVIDEND POLICY</B><BR></P>
<P align=justify>We have never declared dividends or paid cash dividends. Any
gains on an investment in our common stock will likely occur through an increase
in our stock price, which may or may not occur. Our board of directors will make
any future decisions regarding dividends. Even if our board of directors decides
to pay dividends, the form, frequency and amount will depend upon our future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that the board of
directors may deem relevant. We currently intend to retain and use any future
earnings for the development and expansion of our business and do not anticipate
paying any cash dividends in the near future.</P>
<P align=center><B>MARKET FOR OUR COMMON STOCK</B><BR></P>
<P align=justify>Our common stock is quoted on the OTCBB under the symbol
&#147;CBPO,&#148; but has not been traded except on a limited and sporadic basis. The
CUSIP number is 16938C 10 6. </P>
<P align=justify>The following table sets forth, for the periods indicated, the
high and low closing prices of our common stock. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="27%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Closing Prices
      <SUP>(1</SUP></FONT> <SUP>)</SUP> </TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>High </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=center width="12%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Low </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B><I>Year Ended December 31, 2009</I></B>
      </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>First Quarter </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>2.45 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>1.69 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Second Quarter </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>5.00 </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>2.25 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Third Quarter (through July
      15, 2009) </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>4.18 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>3.85 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B><I>Year Ended December 31, 2008</I></B>
      </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>First Quarter </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>5.85 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>3.30 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Second Quarter </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>4.32 </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>2.76 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Third Quarter </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>4.70 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>2.00 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Fourth Quarter </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>2.79 </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>1.26 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B><I>Year Ended December 31,
      2007</I></B> </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>&nbsp;
</FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>&nbsp;
</FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>First Quarter </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>N/A </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>N/A </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Second Quarter </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>3.15 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>2.70 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Third Quarter </FONT></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>3.40 </FONT></TD>
    <TD align=center width="2%">&nbsp;</TD>
    <TD align=center width="1%">&nbsp;</TD>
    <TD align=center width="12%"><FONT size=2>2.70 </FONT></TD>
    <TD align=left width="2%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Fourth Quarter </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>15.00 </FONT></TD>
    <TD align=center width="2%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="1%" bgColor=#e6efff>&nbsp;</TD>
    <TD align=center width="12%" bgColor=#e6efff><FONT size=2>3.80 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<p style="margin-top: 0; margin-bottom: 0">__________________<BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">
    <p align="center"><FONT style="font-size: 8pt">(1) </FONT></TD>
    <TD><FONT style="font-size: 8pt">
      <P align=justify>The above tables set forth the range of high and low
      closing bid prices per share of our common stock as reported by
      www.quotemedia.com for the periods
indicated.</P></FONT></TD></TR></TABLE>
<P align=justify>All of the shares being registered in this offering may be sold
without restriction under the Securities Act, so long as the registration
statement of which this prospectus is a part is, and remains, effective. </P>
<P align=justify>We currently have outstanding 21,474,942 shares of common
stock, all of which can currently be sold under Rule 144. </P>
<P align=center>- 27 -</P>
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<P align="justify">
We plan to furnish our stockholders with an annual report for each fiscal year ending December 31 containing financial statements audited by our independent certified public accountants. We are subject to the information reporting requirements of
the Exchange Act. As such, we file annual, quarterly and current reports and other documents with the SEC. We intend to maintain compliance with the periodic reporting requirements of the Exchange Act. </P>
<P align="justify">
As of July 15, 2009, there were approximately 450 stockholders of record of our common stock. The number of record holders does not include persons who held our common stock in nominee or &#147;street name&#148; accounts through brokers. </P>
<P align="center">
<B>DILUTION</B><BR>
</P>
<P align="justify">
Our net tangible book value per share of common stock as of March 31, 2009 was &#36;2.02. Net tangible book value per share is determined by dividing our net tangible book value (total assets less intangible assets including knowhow,
trademarks and copyrights and less total liabilities) by the number of outstanding shares of our capital stock. Since this offering is being made solely by the selling stockholders and none of the proceeds will be paid to us, our net tangible book
value will be unaffected by this offering. </P>
<P align="center">
<B>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></P>
<P align="justify">
<B>Overview</B><BR>
</P>
<P align="justify">
We are a biopharmaceutical company and through our indirect Chinese subsidiaries, Shandong Taibang and Qianfeng, we are principally engaged in the research, development and manufacturing of plasma-based pharmaceutical products in China. Shandong
Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province and Qianfeng operates in Guizhou Province. Our minority owned subsidiary, Huitian, operates from facilities in Xi'an Province. The plasma-based
biopharmaceutical manufacturing industry in China is highly regulated by both the provincial and central governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma from human
donors to finished products. Our principal products include our approved human albumin and immunoglobulin products.</P>
<P align="justify">
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.</P>
<P align="justify">
We sell our products to customers in the PRC, mainly hospitals and inoculation centers. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended December
31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.</P>
<P align="justify">
We operate and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis. </P>
<P align="center">
- 28 -</P>

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<P align="justify">
All our business has been conducted in Renminbi, the official currency of China.  Renminbi is still not a free floating currency. The value of Renminbi is subject to changes in the Chinese government's policies and depends to a large extent on
China's domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. dollars has generally been stable, and Renminbi
has appreciated against the U.S. dollar since July 2005. </P>
<P align="justify">
<B>Principal Factors Affecting Our Financial Condition</B><BR>
</P>
<P align="justify">
The following are key factors that affect our financial condition and results of operations and we believe them to be important to the understanding of our business: </P>
<P align="justify">
<B><I>Global Financial Crisis</I></B><BR>
</P>
<P align="justify">
The ongoing downturn in global financial markets has is expected to slow down China's GDP growth, and may have an adverse effect on the demand for our products which are still not affordable to many PRC patients. If the current global economic
slowdown continues and a depressed economic environment make our products less affordable to more patients or result in an overall decreased demand for our products, such reductions and disruptions could have a material adverse effect on our
projected total sales increase and deteriorate our profit margins. </P>
<P align="justify">
We believe that due to the rate of attrition of non-compliant companies in the wake of increased governmental regulations imposed on our industry, we have not yet seen a decline in the demand for our products. However, we can give no assurance that
this demand for our products will continue. </P>
<P align="justify">
<B><I>Raw Material Prices</I></B><BR>
</P>
<P align="justify">
The primary raw material used in the production of our albumin and immunoglobulin products is human plasma. These products are still not affordable to many PRC patients. As China's economy grows, we expect more Chinese people will become consumers
of medical treatments and procedures, including procedures requiring the use of human plasma, resulting in increased demand for human plasma. Collection of human plasma in China is regulated and until recently, only licensed Plasmapheresis stations
owned and operated by the government could collect human plasma. Each collection station was only allowed to supply plasma to the one manufacturer that has signed the &#147;Quality Responsibility&#148; statement with them. The price of human plasma
is negotiated on an annual basis and is determined by a number of factors including, but not limited to, the cost of operating the collection stations, the nutritional supplement fee awarded to the donors for each donation, and the anticipated
volume of total plasma donated. However, in March 2006, the Ministry of Health promulgated certain &#147;Measures on Reforming Plasma Collection Stations,&#148; or the Blood Collection Measures, whereby the ownership and management of PRC plasma
stations are required to be transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the State. Plasma stations that did not complete their reform by December 31, 2006, risked
revocation of their license to collect plasma.</P>
<P align="justify">
In December 2006, we acquired five of the six then existing plasma stations in Shandong. On January 1, 2007 we obtained the permit to operate these stations. These acquisitions have allowed us to have direct influence on the operation of these
collection stations and secure a stable source of plasma supply for production. In April 2007, we acquired two plasma stations in Guangxi Province, and we obtained permit to operate them.</P>
<P align="justify">
The foregoing acquisitions have led to an increase in our plasma supply and did not result in any material differences in our cost structure. Due to current market conditions, we have generally been able to pass substantially all cost increases in
recent years on to our customers. </P>
<P align="justify">
<B><I>Prices of and Demand for Our Products</I></B><BR>
</P>
<P align="justify">
In recent years, due to increased regulatory restrictions and market demand, we have been able to increase the selling price of most of our key products. The demand for our products is largely affected by the general economic conditions in China
because they are still not affordable to many patients. As China's economy grows, we expect more Chinese people will become consumers of medical treatments and procedures, including procedures requiring human plasma. A significant improvement in the
economic environment in China will likely improve consumer income which in turn would make our products more affordable and consequently increase the demand for our
products. We have been able to expand our product range and markets by introducing new products required by customers. We believe that our technical expertise is important in introducing products that are in demand. </P>
<P align="center">
- 29 -</P>

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<P align="justify">
<B><I>Production Capacity</I></B><BR>
</P>
<P align="justify">
Our sales volume is limited by our annual production capacity. As we grow our business in the future, our ability to fulfill additional and larger orders will depend on our ability to increase our production capacity.  Our plan to expand our
production capacity will depend on, inter alia, the availability of capital to meet our needs of expansion or upgrading of production lines, and the availability of stable plasma supply. </P>
<P align="justify">
As of December 2008, our production capacity was 700 metric tons per annum. We estimate that the production capacity of our major competitors ranges from 300 tons to 1,000 tons per annum.  Due to the shortage of raw material supply, our current
production capacity should be sufficient for next couple years. </P>
<P align="justify">
<B><I>Competition</I></B><BR>
</P>
<P align="justify">
We are subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar biopharmaceutical products as our products in the PRC. These
competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than we do. In our industry, we compete based upon product quality, product cost, ability to produce a diverse range
of products and logistical capabilities.</P>
<P align="justify">
We believe that we have strengthened our position in the marketplace with our recent acquisition of a 90% equity interest in Dalin and its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest in Huitian, Xi'an-based
biopharmaceutical company.</P>
<P align="justify">
Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors drastically reduce prices; or (iii) competitors develop new products or product substitutes with comparable medicinal applications or therapeutic effects
which are more effective or less costly than those produced by us. Please refer to &#147;Competition&#148; for more information regarding this factor.</P>
<P align="justify">
<B><I>Taxation</I></B><BR>
</P>
<P align="justify">
<I>United States</I> and <I>British Virgin Islands</I><BR>
</P>
<P align="justify">
We are subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as we have no income taxable in the United States. Our subsidiary, Logic Express Ltd., was incorporated in the BVI and under
the current laws of the BVI, is not subject to income taxes.</P>
<P align="justify">
<I>China</I><BR>
</P>
<P align="justify">
Before the implementation of the New EIT Law, Foreign Invested Enterprises, or FIEs, established in the PRC are generally subject to an enterprise income tax, or EIT, rate of 33.0%, which includes a 30.0% state income tax and a 3.0% local income
tax. The New EIT Law imposes a unified EIT of 25.0% on all domestic enterprises and FIEs, unless they qualify under certain limited exceptions. Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather
than benefiting from the old tax laws applicable to FIEs, and its associated preferential tax treatments, beginning January 1, 2008.</P>
<P align="justify">
Despite these pending changes, the New EIT Law gives the FIEs established before March 16, 2007, or Old FIEs, such as our 82.76% owned subsidiary Shandong Taibang, a five-year grandfather period during which they can continue to enjoy their existing
preferential tax treatment. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition,
the Old FIEs that are eligible for the &#147;two-year exemption and three-year half reduction&#148; or &#147;five-year exemption and five-year half-reduction&#148; under the original EIT law, are allowed to remain to enjoy their preference until
these holidays expire. The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse effect on any organization's business, fiscal condition and current operations in China.</P>
<P align="center">
- 30 -<BR>
</P>

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<P align=justify>Under the New EIT Law, dividend distributions paid out of
earnings from our PRC subsidiaries are subject to a withholding tax at 10%. This
new dividend withholding tax, however, will only be levied on our PRC subsidiary
in respect of profits earned in 2008 onwards. Profits distributed after January
1, 2008 but related to financial results generated in the year ended December
31, 2007 and prior years will not be subject to dividend withholding tax.</P>
<P align=justify>In addition to the changes to the current tax structure, under
the New EIT Law, an enterprise established outside of China with &#147;de facto
management bodies&#148; within China is considered a resident enterprise and will
normally be subject to an EIT of 25.0% on its global income. The implementing
rules define the term &#147;de facto management bodies&#148; as &#147;an establishment that
exercises, in substance, overall management and control over the production,
business, personnel, accounting, etc., of a Chinese enterprise.&#148; If the PRC tax
authorities subsequently determine that the Company should be classified as a
resident enterprise, then our global income will be subject to PRC income tax of
25.0% .</P>
<P align=justify>As a sino-foreign joint venture company, Shandong Taibang has
been granted a preferential tax holiday by the Tax Bureau of the PRC as of 2003.
Accordingly, Shandong Taibang is entitled to tax concessions from 2003 whereby
the profit for the first two financial years beginning with the first
profit-making year is exempt from income tax in the PRC, and the profit for each
of the subsequent three financial years is taxed at 50% of the prevailing state
income tax rate. Local income tax of 3% is exempted for five years starting from
the first profit-making year. Shandong Taibang will be allowed the benefits of
tax holidays under the grandfather treatment over a five-year transition period,
and the applicable income rate will be 25% after the tax holiday. According to
the PRC's central government policy, new or high technology companies will enjoy
preferential tax treatment of 15%, instead of 25%. On February 12, 2009,
Shandong Taibang received the new technology or high technology certification
from Shandong provincial government. The Certification allows the Company to
receive the 15% preferential income tax rate, for a period of three years
starting from January 1, 2008.</P>
<P align=justify><B>Results of Operations </B></P>
<P align=justify>The following tables set forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
revenues. </P>
<P align=center>All amounts, other than percentages, in U.S. dollars </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2><B>Three Months Ended
      March 31,</B> </FONT></TD>
    <TD align=center width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>Years Ended December
      31,</B> </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; <B>2009</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>2007</B> </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>(unaudited)</B>
    </FONT></TD>
    <TD align=center width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2><B>(unaudited)</B>
    </FONT></TD>
    <TD align=center width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Revenue </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>21,148,598
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>7,849,007
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>46,751,160
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>32,398,669
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Cost of Revenue </FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>6,214,930 </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>1,948,898 </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>14,040,602 </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>9,945,921 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Gross Profit </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>14,933,668
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>5,900,109
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>32,710,558
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>22,452,748
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Operating Expenses: </FONT></TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>&nbsp;&nbsp;&nbsp;Selling
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>579,496
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>494,529
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>2,212,073
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>4,434,721
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>&nbsp; &nbsp;General and
    administrative
    </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>3,795,534 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>1,584,128 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>7,684,493 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>4,651,434 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>&nbsp;&nbsp; Research and development
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>467,727
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>183,782
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>1,166,494
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>609,178
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>&nbsp;&nbsp; Stock-based compensation (general and administrative)
      </FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>27,373 </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>1,311,727 </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Total Operating Expenses
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>4,870,130
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>2,262,439
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>12,374,787
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>9,695,333
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Income from Operations </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>10,063,538 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>3,637,670 </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>20,335,771 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>12,757,415 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Other Expense (Income):
    </FONT></TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Interest Expense (Income), net </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>370,853 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>22,973 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>373,497 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>88,686 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Other Expense (Income), net
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>51,315 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>412 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>251,390
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>422,891
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Equity in income of unconsolidated affiliate
      </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>(40,247</FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >) </TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>(175,231</FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >) </TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Change in fair value of
      warrant liabilities </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>393,023
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Total Other Expense </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>774,944 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>23,385 </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>449,656 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>511,577 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Income Before Taxes and
      Noncontrolling Interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>9,288,594
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>3,614,285
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>19,886,115
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>12,245,838
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Provision for income taxes </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>2,030,194 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>740,482 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>4,596,603 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>2,074,560 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff bordercolor="#000000"><FONT size=2>Net income attributable to noncontrolling interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>3,000,082
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>606,003
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>3,303,841
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>1,991,902
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bordercolor="#000000"><FONT size=2>Net Income attributable to
    controlling interest</FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>4,258,318 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>2,267,800 </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>11,985,671 </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>8,179,376 </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR></TABLE>
<P align=center>- 31 - </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<p style="margin-top: 0; margin-bottom: 0"><A name=page_32></A><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>As a percentage of Revenues </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2><B>Three Months Ended
      March 31,</B> </FONT></TD>
    <TD align=center width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>Years Ended December
      31,</B> </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>2009</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: none; border-bottom-width: medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: none; border-bottom-width: medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>(unaudited)</B>
    </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>(unaudited)</B>
    </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-right-style: none; border-right-width: medium; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: none; border-left-width: medium; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2><B>2007</B> </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Revenue:</B> </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>100% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>100% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>100% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>100% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Cost of Revenue:</B> </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>29.39% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>24.83% </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>30.03% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>30.70% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Gross Profit</B> </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>70.61% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>75.17% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>69.97% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>69.30% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Operating Expenses:</B> </FONT></TD>
    <TD align=right width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="1%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp; &nbsp;Selling
</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>2.74% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>6.30% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>4.73% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>13.69% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; &nbsp;General and administrative
    </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>17.95% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>20.18% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>16.44% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>14.36% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>&nbsp;&nbsp;&nbsp;Research and
      development </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>2.21% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>2.34% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>2.50% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>1.88% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Stock-based
      compensation(general and administrative) </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>0.13% </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>2.81% </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Total Operating
      Expenses</B> </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>23.03% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>28.82% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>26.47% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1" bordercolor="#000000"><FONT size=2>29.93% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Income from Operations</B> </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>47.58% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>46.35% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>43.50% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>39.38% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Other
      Expense</B>(<B>Income</B>) </FONT></TD>
    <TD align=right width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Interest expense(Income) </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>1.75% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>0.29% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>0.80% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>0.27% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Other expense(Income)
    </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>0.24% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>0.01% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000" style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-left-style: none; border-left-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>0.54% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff bordercolor="#000000"><FONT size=2>1.31% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Equity in income of unconsolidated affiliate
      </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>(0.19%</FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >) </TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000" style="border-right-style: none; border-right-width: medium"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>(0.37%</FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >) </TD>
    <TD align=left width="1%" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Change in fair value of
      warrant liabilities </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>1.86% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Total Other Expense</B> </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>3.66% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>0.30% </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>0.96% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>1.58% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2><B>Income Before Taxes and
      Noncontrolling Interest</B></FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>43.92% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>46.05% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>42.54% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>37.80% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Provision for income taxes </FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>9.60% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>9.43% </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>9,83% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>6.40% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Net income attributable to noncontrolling interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>14.19% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>7.72% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style:none; border-width:medium; " bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>7.07% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" bordercolor="#000000"><FONT size=2>6.15% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff bordercolor="#000000">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2><B>Net Income attributable to controlling
    interest</B></FONT></TD>
    <TD align=left width="1%" bordercolor="#000000" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>20.14% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3; border-right-style:none; border-right-width:medium" bordercolor="#000000"><FONT size=2>28.89% </FONT></TD>
    <TD align=left width="2%" style="border-style:none; border-width:medium; " bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3; border-left-style:none; border-left-width:medium" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>25.64% </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: double; border-bottom-width: 3" bordercolor="#000000"><FONT size=2>25.25% </FONT></TD>
    <TD align=left width="2%" bordercolor="#000000" >&nbsp;</TD></TR></TABLE>
<P align=justify><B><I>For the Three-Month Periods Ended March 31, 2009 and 2008
(Unaudited)</I></B> </P>
<P align=justify>The following tables set forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of
sales revenue and key components of our revenue for the periods indicated in
dollars. The financial data for the three months ended March 31, 2009 reflect
the operating results of the Company and its majority-owned subsidiaries,
including Dalin, while the financial data for the same period in 2008 only
reflect the operating results of the Company and its subsidiaries Logic Express
and Taibang.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><FONT size=2><B>Three Months</B>
      </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp;<B>$</B></FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>%</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4><FONT size=2><B>Ended March 31,</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Increase</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Increase</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<B>2009</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>(Decrease)</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>(Decrease)</B>
    </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Revenue </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp;21,148,598
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp;7,849,007
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp;13,299,591
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>169.4% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Cost of revenue </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>6,214,930 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>1,948,898 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,266,032 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>218.9% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Gross profit </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>14,933,668
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>5,900,109
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>9,033,559
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>153.1% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Gross profit as a percentage of revenue
    </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>70.6% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>75.2% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Operating expenses </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>4,870,130
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,262,439
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,607,691
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>115.3% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Other expense </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>774,944 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>23,385 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>751,559 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>3213.9% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Income before taxes and
      noncontrolling interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>9,288,594
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>3,614,285
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>5,674,309
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>157.0% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Income taxes </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>2,030,194 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>740,482 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>1,289,712 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>174.2% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Net income before
      noncontrolling interest</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;7,258,400
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;2,873,803
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;4,384,597
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>152.6% </FONT></TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=justify><I>Revenues</I>. Our revenues are derived primarily from the
sales of our human albumin and immunoglobulin products. Our revenues increased
169.4%, or $13,299,591, to $21,148,598 for the three months ended March 31,
2009, compared to revenues of $7,849,007 for the three months ended March 31,
2008. The increase in revenues during the first quarter of 2009 is primarily
attributable to a general increase in the price of plasma based products, but
was partially offset by a decrease in our sales volume for two of our products.
Among the factors that contributed to the growth in revenue, foreign exchange
translation accounted for 12.4% of the increase. Our first quarter financial
results also benefited from the consolidation of Dalin, which we acquired in the
first quarter of 2009. Dalin
contributed approximately &#36;9.5 million in revenue, which accounted for approximately 44.6% of our total revenue for the first quarter of 2009. All of our approved products, except human hepatitis B immunoglobulin, recorded price increases
ranging from 3.5% to 49.2% . For the quarter ended March 31, 2009, the average price for our approved human albumin products, which contributed 58.2% to our total revenues, increased 3.5%, the average price for our approved human immunoglobulin for
intravenous injection products, which contributed 25.4% to our revenues, increased 14.7%, and the average price for our approved human tetanus immunoglobulin products, which contributed 4.9% to our revenue, increased 34.3%, as compared to the same
period in 2008. On July 1, 2008, the SFDA implemented the new 90-day quarantine period on plasma raw material. This new measure further tightens the raw material that is available for production, and has adversely impacted the already short supply
of plasma-based products. As a result, during the first quarter of 2009, the supply of plasma-based products remained very tight industry-wide.</P>
<P align=center>- 32 -<BR></P>
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<P align="justify">
The continuing price increase of our products since 2008 was primarily attributable to the government's stringent control on the quality standard of the plasma-based production industry, which resulted in a shortage in the supply of finished
products. We were able to adjust our production plan to take advantage of the limited market supply of plasma resources to realize higher profit margins. In addition, there is a shortage in the market supply for human albumin products which has
increased the value of our products in the market place. The plasma-based industry has been immune from the impact of the on-going global financial crisis as the demand for our products has out-paced supply. As a result, our selling price, cost of
revenue and operating expenses during the first quarter of 2009 were not impacted by the global financial turmoil. With the acquisition of Dalin, and its operating subsidiary Qianfeng, the Company is better situated to serve its existing and new
customers with expanded production capacity and market coverage. Our management expects that our revenue growth will remain strong for the remainder of 2009. </P>
<P align="justify">
<I>Cost of Revenues</I>. Our cost of sales increased &#36;4,266,032, or 218.9%, to &#36;6,214,930 for the quarter ended March 31, 2009, from &#36;1,948,898 during the same period in 2008. This increase was mainly due to a 14.5% increase in foreign
exchange translation, in addition to an actual 204.4% increase in cost of revenues. The increase in cost of revenues is primarily due to our consolidation of Dalin and the increase in the cost of raw materials during the 2009 period. Cost of
revenues as a percentage of sales was 29.4% for the quarter ended March 31, 2009, as compared to 24.8% during the same period in 2008. The increase in cost of revenues as a percentage of sales is primarily due to the increase in raw material costs
in connection with the expansion of our donor base during the 2009 period. Our increased cost of sales reflects approximately 10% increase of donor compensation since beginning of 2008. </P>
<P align="justify">
<I>Gross Profit</I>. Gross profit increased by &#36;9,033,559, or 153.1%, to &#36;14,933,668 for the quarter ended March 31, 2009, from &#36;5,900,109 for the same period in 2008. As a percentage of sales revenue, our gross profit margin decreased
by 4.6% to 70.6% for the quarter ended March 31, 2009, from 75.2% for the same period in 2008. The decrease in our gross profit as a percentage of revenues is due primarily to the increase in our raw material costs, which was partially offset by the
general increase in the price of our products.</P>
<P align="justify">
<I>Operating Expenses</I>. Our total operating expenses increased by &#36;2,607,691, or 115.3%, to &#36;4,870,130 for the quarter ended March 31, 2009, from &#36;2,262,439 for the same period in 2008. The increase was primarily attributable to the
141.3% increase in our general and administrative expenses during the 2009 period, as well as the 17.2% increase in selling expense. As a percentage of sales revenue, total operating expenses decreased by 5.8% to 23.0% for the quarter ended March
31, 2009, from 28.8% for the same period in 2008.</P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Selling Expenses</U>. For the quarter ended March 31, 2009, our selling expenses increased to &#36;579,496, from &#36;494,529 for the quarter ended March 31, 2008, an increase of &#36;84,967, or 17.2% . As a
percentage of sales, our selling expenses for the quarter ended March 31, 2009 decreased by 3.6%, to 2.7%, from 6.3% for first quarter 2008. The increase in selling expenses is due primarily to our consolidation of Dalin's selling activities as
well as more efforts spent on broadening new hospital customers. The decrease in selling expenses as a percentage of sales is due to our expanded sales following the Dalin acquisition.</P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>General and Administrative Expenses</U>. For the three months ended March 31, 2009, our general and administrative expenses increased to &#36;3,822,907, from &#36;1,584,128 for the quarter ended March 31, 2008, a
&#36;2,238,779, or 141.0% increase. General and administrative expenses as a percentage of sales decreased by 2.1% to 18.1% for the first quarter of 2009, from 20.2% for the same period in 2008. The dollar increase was mainly due to an increase in
our personnel-related costs and extra depreciation and amortization expenses in connection with our acquisition of Dalin as result of fair value adjustments as well as additional professional service charge related to the acquisition of Dalin.
Non-cash employee compensation for the quarter ended March 31, 2009 increased to &#36;27,373, from $0 for the same period in 2008, primarily as a result of
our adoption of the 2008 Plan and the grants to employees, consultants and
directors made thereunder. The $27,373 compensation expense, which was included
in the General and Administrative Expenses, represents the amortization of the
compensation expense related to the grant of options to the independent
directors. </P>
<P align="center">
- 33 -<BR>
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<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Research and Development
Expenses</U><I>.</I> For the quarter ended March 31, 2009 and 2008, our research
and development expenses were $467,727 and $183,782, respectively, an increase
of $283,945 or 154.5% . As a percentage of revenues, our research and
development expenses for the quarter ended March 31, 2009 and 2008 were 2.2% and
2.3%, respectively. The dollar increase was due primarily to the consolidation
of Dalin and increased costs from continuing clinical trial on new products.</P>
<P align=justify><I>Change in Fair Value of Derivative Liability.</I> The
Company analyzes all financial instruments with features of both liabilities and
equity under FAS 150, &#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity,&#148; FAS 133 and EITF 00-19,
&#147;Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock.&#148; Before the adoption of EITF 07-5
&#147;Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity's Own Stock&#148;, the warrants issued in 2006 did not require bifurcation or
result in liability accounting. However, with the recent adoption of EITF 07-5,
due to the strike price of outstanding warrants is denominated in USD other than
the Company's functional currency, RMB, the denomination effect feature must be
bifurcated from its host instrument and accounted for separately as a derivative
liability. The Company has followed the criteria in EITF 07-05 and recorded the
fair value of these warrants as &#147;derivative liability&#148; in the accompanying
consolidated financial statements. The changes in the values of these warrants
are shown in the accompanying consolidated statements of income and other
comprehensive income. For the three months ended March 31, 2009 and 2008, the
Company recognized a loss in the change in fair value of derivative liability in
the amounts of $393,023 and $0, respectively. </P>
<P align=justify><I>Interest Expense (income), net.</I> Our net of interest
expense increased $347,880 to $370,853 for the quarter ended March 31, 2009,
from $22,973 for the same period in 2008. The increase in interest expense is
primarily due to financing related to the acquisition of Dalin. </P>
<P align=justify><I>Income Tax Expense. </I>Our provision for income taxes
increased $1,289,712, or 174.2%, to $2,030,194 for the quarter ended March 31,
2009, from $740,482 for the same period in 2008. Our effective tax rate for the
quarter ended March 31, 2009 and 2008 was 21.9% and 20.5%, respectively.</P>
<P align=justify><I>Net Income before Non-Controlling Interest. </I>Our net
income before non-controlling interest increased $4,384,597, or 152.6%, to
$7,258,400 for the quarter ended March 31, 2009, from $2,873,803 for the same
period in 2008. Income before taxes and non-controlling interest as a percentage
of revenues was 34.3% and 36.6% for the quarter ended March 31, 2009 and 2008,
respectively. The increase is due directly to an increase in the selling prices
of our products and the consolidation of Dalin during the quarter ended March
31, 2009.</P>
<P align=justify><B><I>Comparison of Fiscal Years Ended December 31, 2008 and
2007</I></B></P>
<P align=justify>The following table sets forth key components of our results of
operations for the fiscal years ended December 31, 2008 and 2007, both in
dollars and as a percentage of our net sales.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1; border-top-style:solid; border-top-width:1"><FONT size=2><B>Fiscal Years
      Ended December 31</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>$</B>&nbsp;</FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>Percentage</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="1%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style:none; border-bottom-width:medium"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style:none; border-bottom-width:medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style:none; border-bottom-width:medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style:none; border-bottom-width:medium"><FONT size=2>&nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp; &nbsp;<B>2007</B> </FONT></TD>
    <TD align=center width="2%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Increase</B> </FONT></TD>
    <TD align=center width="2%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: none; border-bottom-width: medium"><FONT size=2><B>Increase</B> </FONT></TD>
    <TD align=center width="2%" style="border-bottom-style: none; border-bottom-width: medium" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT size=2><B>(Decrease)</B> </FONT></TD>
    <TD align=center width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=center width="1%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium"><FONT size=2><B>(Decrease)</B>
    </FONT></TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-right-style: none; border-right-width: medium"><FONT size=2>Revenue </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style: none; border-width: medium"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"><FONT size=2>&nbsp;46,751,160
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium"><FONT size=2>&nbsp;32,398,669
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium"><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style:none; border-right-width:medium"><FONT size=2>&nbsp;14,352,491
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style:none; border-left-width:medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>44.3% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium"><FONT size=2>Cost of revenue </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium"><FONT size=2>14,040,602 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><FONT size=2>9,945,921 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium"><FONT size=2>4,094,681 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>41.2% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-right-style: none; border-right-width: medium"><FONT size=2>Gross profit </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-style: none; border-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium"><FONT size=2>32,710,558
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: none; border-top-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>22,452,748
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: none; border-top-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>10,257,810
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-top-style: none; border-top-width: medium">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>45.7% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-right-style: none; border-right-width: medium"><FONT size=2>Gross profit as a percentage of revenue
    </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium" >&nbsp;</TD>
    <TD align=right width="10%" style="border-left-style: none; border-left-width: medium"><FONT size=2>70.0% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>69.3% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>0.7% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=left width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Operating expenses </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-top-style: none; border-top-width: medium">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>12,374,787
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>9,695,333
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>2,679,454
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>27.6% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Other expense </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>449,656 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>511,577 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(61,921</FONT></TD>
    <TD align=left width="2%" >) </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>(12.1%</FONT></TD>
    <TD align=left width="2%" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Income before taxes and
      noncontrolling interest </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>19,886,115
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>12,245,838
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>7,640,277
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>62.4% </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Income taxes </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>4,596,603 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>2,074,560 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>2,522,043 </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>121.6% </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff><FONT size=2>Net income before
      noncontrolling interest</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;15,289,512
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;10,171,278
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff><FONT
      size=2>$</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>&nbsp;5,118,234
      </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff><FONT size=2>50.3% </FONT></TD>
    <TD align=left width="2%"
  bgColor=#e6efff>&nbsp;</TD></TR></TABLE>
<P align=center>- 34 -</P>
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<P align="justify">
<I>Revenues</I>.<I> </I>Our revenues are derived primarily from the sales of human albumin and various types of immunoglobulin. Our revenues increased 44.3%, or &#36;14,352,491, to &#36;46,751,160 for the fiscal year ended December 31, 2008,
compared to revenues of &#36;32,398,669 for the fiscal year ended December 31, 2007. The increase in revenues during fiscal year 2008 is primarily attributable to a general increase in the price of plasma based products, which was partially offset
by a decrease in our sales volume except for one of our products. Among the factors that contributed to the growth in revenue, foreign exchange translation accounted for 12.5% of the increase. All of our approved products, except human rabies
immunoglobulin, recorded price increases ranging from 29.7% to 227.7% . For the fiscal year ended December 31, 2008, the average price for our approved human albumin products, which contributed 57.8% to our total revenues, increased 29.7%, the
average price for our approved human immunoglobulin for intravenous injection, which contributed 22.0% to our revenues, increased 102.8%, and the average price for our approved human tetanus immunoglobulin, which contributed 3.2% to our revenue,
increased 76.3%, as compared to the same period in 2007. During fiscal year 2008, the SFDA implemented the new 90-day quarantine period on plasma raw material effective July 1, 2008. This new measure further tightens the raw material that is
available for production, and has adversely impacted the already short supply of plasma-based products. As a result, volume in sales for our human albumin, human hepatitis B immunoglobulin, human rabies immunoglobulin and human tetanus
immunoglobulin products decreased by 7.4%, 41.7%, 27.1% and 30.3%, respectively, while the sales volume for approved our human immunoglobulin for intravenous use increased by 39.2%, respectively, for the fiscal year ended December 31 2008, as
compared to the same period in 2007.</P>
<P align="justify">
Price increase of our products between 2007 and 2008 was primarily attributable to the government's stringent control on the quality standard of the plasma-based production industry, which resulted in a shortage in the supply of finished
products. We were able to adjust our production plan to take advantage of the limited market supply of plasma resources to realize higher profit margins. In addition, there is a shortage in the market supply for human albumin products which has
increased the value of our products in the market place. According to the SFDA spokeswoman, Ms. Yan Jiang Ying in a September 2007 press conference, there is a critical shortage in the market supply of human albumin due to the shortage of plasma raw
material. According to Ms. Yan, the overall market supply of human albumin was 117, 127 and 48 metric tons during 2005, 2006 and the first 8 months of 2007, respectively. Our sales of human albumin products for 2005, 2006 and 2007 were 4.2, 6.0 and
5.9 metric tons, respectively, which we believe, in light of the SFDA supply data, represents a steady increase in our market share for the periods 2005, 2006 and 2007 from 3.6%, to 4.7% and to 8.2%, respectively. The plasma-based industry has been
immune from the impact of the on-going global financial crisis as the demand for our products has out-paced supply. As a result, our selling price, cost of revenue and operating expenses during the fiscal year 2008 were not impacted by the global
financial turmoil.</P>
<P align="justify">
<I>Cost of Revenues</I>.<I> </I>Our cost of sales increased &#36;4,094,681, or 41.2%, to &#36;14,040,602 for the year ended December 31, 2008, from &#36;9,945,921 during the same period in 2007. This increase was mainly due to a 12.2% increase in
foreign exchange translation, in addition to the actual 28.9% increase in cost of revenues. The increase in cost of revenues is primarily due to the increase in cost of raw material. The raw material cost as a percentage of total cost of revenues is
76% in 2008, as compared to the 73% in 2007. Cost of revenues as a percentage of sales was 30.0% for the fiscal year ended December 31, 2008, as compared to 30.7% during the same period in 2007. The decrease in cost of revenue as a percentage of
sales is primarily due to the favorable selling price increase, as well as our management's ability to maintain efficiencies in our production process.<B> </B> </P>
<P align="justify">
<I>Gross Profit</I>.<I> </I>The gross profit increased by &#36;10,257,810, or 45.7%, to &#36;32,710,558 for the fiscal year ended December 31, 2008 from &#36;22,452,748 for the same period in 2007. As a percentage of sales revenue, our gross profit
increased by 0.7% to 70.0% for the fiscal year ended December 31, 2008, from 69.3% for the same period in 2007. The increase in our gross profit as a percentage of revenues is due primarily to the increase in selling prices, as well as our
management's ability to maintain efficiencies in our production process.</P>
<P align="justify">
<I>Operating Expenses</I>. Our total operating expenses increased by &#36;2,679,454, or 27.6%, to &#36;12,374,787 for the fiscal year ended December 31, 2008, from &#36;9,695,333 for the same period in 2007. As a percentage of sales revenue, total
expenses decreased by 3.4% to 26.5% for the fiscal year ended December 31, 2008 from 29.9% for the same period in 2007. The increase was primarily attributable to the 65.2% increase in our general and administrative expenses during the 2008 period,
which was offset by the 50.1% decrease in selling expense.</P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Selling Expenses</U>. For the fiscal year ended December 31, 2008, our selling expenses decreased to &#36;2,212,073, from &#36;4,434,721 for the fiscal year ended December 31, 2007, a decrease of &#36;2,222,648, or
50.1% . As a percentage of sales, our selling expenses for the fiscal year ended December 31, 2008 decreased by 9.0%, to 4.7%, from 13.7% for the fiscal year ended December 31, 2007. The substantial decrease in selling expenses is the reflection of
the
normalization of the marketing strategy that initiated on the third quarter of 2007. Specifically, we awarded sales bonuses of &#36;0.36 million to sales personnel for their outstanding achievement in generating revenue in 2007. Moreover, we
aggressively launched marketing efforts by holding more conferences in conjunction with our distributors in most major cities, at an additional cost of approximately &#36;1.4 million for the year ended December 31, 2007. In connection with these
marketing efforts, our sales force also incurred additional expenses of approximately &#36;0.3 million. With the marketing efforts in 2007, the Company was able to obtain higher sales with a substantial lower level of selling expenses in 2008.</P>
<P align="center">
- 35 -<BR>
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<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>General and Administrative Expenses</U>. For the fiscal year ended December 31, 2008, our general and administrative expenses increased to &#36;7,684,493, from &#36;4,651,434 for the fiscal year ended December 31,
2007, a &#36;3,033,059, or 65.2% increase. General and administrative expenses as a percentage of sales increased by 2.0% to 16.4% for the fiscal year 2008 from 14.4% for the fiscal year 2007. The dollar and percentage increase was mainly due to the
increase of personnel cost of &#36;0.9 million, increase of professional expenses related to the costs of being a public reporting company of &#36;0.2 million and write off of &#36;0.9 million bad debt.</P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Research and Development Expenses</U><I>.</I> For the fiscal years ended December 31, 2008 and 2007, our research and development expenses were &#36;1,166,494 and &#36;609,178, respectively, an increase of
&#36;557,316 or 91.5% . As a percentage of revenues, our research and development expenses for the fiscal year ended December 31, 2008 and 2007 were 2.5% and 1.9%, respectively. The dollar and percentage increase was primarily due to the cost of
research activities and the clinical trial on our new products during the period.</P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Non-cash Employee Compensation</U>. Effective May 9, 2008, our board of directors adopted the 2008 Plan under which a total of 5,000,000 shares of our common stock may be issued. During the year ended December 31,
2008, we granted an aggregate of 937,500 immediately vested options to purchase shares of our common stock to our employees and consultants under the 2008 Plan and granted ten-year options to purchase an additional 60,000 shares of common stock,
with one-half scheduled to vest on January 24, 2009 and the remaining half scheduled to vest on July 24, 2009, to our three independent directors. Non-cash employee compensation for the year ended December 31, 2008 increased to &#36;1,311,727, from
&#36;0 for the same period in 2007, primarily as a result of our adoption of the 2008 Plan and grants to employees and consultants made thereunder. The &#36;1,311,727 compensation expense represents the 937,500 shares of options fully vested on June
1, 2008 and the amortization of the compensation expense of options to purchase 30,000 shares that will vest on January 24, 2009.</P>
<P align="justify">
<I>Income Tax Expense. </I>Our provision for income taxes increased &#36;2,522,043, or 121.6%, to &#36;4,596,603 for the year ended December 31, 2008, from &#36;2,074,560 for the same period in 2007. Our effective tax rate for the year ended
December 31, 2008 was 23.1%, and our 2007 effective tax rate was 16.9% .</P>
<P align="justify">
<I>Net Income before Minority Interest. </I>Our net income before minority interest increased &#36;5,118,234, or 50.3%, to &#36;15,289,512 for the year ended December 31, 2008, from &#36;10,171,278 for the same period in 2007. Income before taxes
and minority interest as a percentage of revenues was 32.7% and 31.4% for the year ended December 31, 2008 and 2007, respectively. The increase is due directly to an increase in the selling prices of our products and the reduction of the selling
expenses during the year ended December 31, 2008.<B> </B> </P>
<P align="justify">
<B>Liquidity and Capital Resources</B><BR>
</P>
<P align="justify">
As of March 31, 2009, we had cash and cash equivalents of &#36;34.0 million, primarily consisting of cash on hand and demand deposits. The following table provides detailed information about our net cash flow for all financial statement periods
presented in this prospectus. To date, we have financed our operations primarily through cash flows from operations, augmented by short-term bank borrowings and equity contributions by our stockholders. We had six bank loans outstanding as of March
31, 2009 for the amount of approximately &#36;16,950,050 (RMB 115,700,000). The following table sets forth a summary of our cash flows for the periods indicated: </P>
<P align="center">
- 36 -</P>

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</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left colSpan=13>
    <p align="center"><FONT size=2><B>Cash
      Flow</B> </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center colSpan=13><FONT size=2>(all amounts in U.S. dollars)
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; &nbsp; &nbsp;
      &nbsp; &nbsp;<B>For the Fiscal Year Ended</B> </FONT></TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>For the Three-Month
      Period Ended</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-right-style: none; border-right-width: medium; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>December 31,</B>
      </FONT></TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="23%" colSpan=4 style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>March 31,</B>
    </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: none; border-bottom-width: medium">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>2008</B> </FONT></TD>
    <TD align=center width="2%" style="border-right-style: solid; border-right-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-right-style: none; border-right-width: medium"><FONT size=2><B>2007</B> </FONT></TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>2009</B> </FONT></TD>
    <TD align=center width="2%" style="border-right-style: solid; border-right-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>2008</B>
      </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-right-style: none; border-right-width: medium; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>(unaudited)</B> </FONT></TD>
    <TD align=center width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>(unaudited)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Net cash provided by operating
      activities </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>20,020,039
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>12,650,904
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>7,082,292
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2,018,879
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Net cash provided by (used in) investing
      activities </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>(21,666,504</FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >) </TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>(9,210,814</FONT></TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >) </TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>10,388,563 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>(1,359,682</FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >) </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Net cash provided by (used in)
      financing activities </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>4,785,780
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
    size=2>(3,122,278</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">) </TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>7,647,822
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
size=2>(698,850</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">) </TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Effects of Exchange Rate Change in Cash
    </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>665,268 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>424,001 </FONT></TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>72,655 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>182,249 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Net Increase in Cash and Cash
      Equivalents </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>3,804,583
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>741,813
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>25,191,332
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>142,596
</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Cash and Cash Equivalents, Beginning
</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>5,010,033 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>4,268,220 </FONT></TD>
    <TD align=left width="2%" style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>8,814,616 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>5,010,033 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Cash and Cash Equivalents, End
      </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>8,814,616
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-right-style: none; border-right-width: medium; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>5,010,033
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>34,005,948
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>5,152,629
    </FONT></TD>
    <TD align=left width="2%"
  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR></TABLE>
<P align=justify><B><I>Operating activities</I></B><BR></P>
<P align=justify>Net cash provided by operating activities was $7.1 million for
the quarter ended March 31, 2009, as compared to $2.0 million net cash provided
by operating activities for the same period in 2008. The increase in net cash
provided by operating activities was mainly due to the increase in consolidated
net income of $4.4 million, to $7.3 million for the quarter ended March 31,
2009, as compared to $2.9 million in the same period of 2008. For the quarter
ended March 31, 2009, our non-cash activities of $2.0 million and the increase
in customer deposit provided $2.9 million in net cash, which was offset by a
$3.5million increase in inventory. </P>
<P align=justify>Net cash provided by operating activities was $20.0 million for
the fiscal year ended December 31, 2008, as compared to $12.7 million net cash
provided by operating activities for the same period in 2007. The increase in
net cash provided by operating activities was mainly due to the increase in net
income of $3.8 million to $12.0 million for the fiscal year ended December 31,
2008, as compare to $8.2 million in the same period of 2007. For the year ended
December 31, 2008, the non-cash activities of $6.7 million and the increase in
other payables and taxes payable provided $2.7 million and 3.6 million,
respectively, in net cash, which was offset by the $4.7 million increase in
inventory.</P>
<P align=justify><B><I>Investing activities</I></B><BR></P>
<P align=justify>Net cash provided by investing activities for the quarter ended
March 31, 2009 was $10.4 million, as compared to $1.4 million net cash used in
the same period of 2008. The increase of net cash provided by investing was
mainly attributable to the acquisition of Dalin's existing cash acquired. </P>
<P align=justify>Net cash used for investing activities for the fiscal year
ended December 31, 2008 was $21.7 million, as compared to $9.2 million in the
same period of 2007. The increase of net cash used for investing activities was
mainly attributable to advances for potential acquisition of $14.2 million,
payment for unconsolidated affiliate of $3.2 million, and the additional capital
expenditures in plant and equipment for production and plasma collecting
operations to support continued strong growth in our business.</P>
<P align=justify><B><I>Financing activities</I></B><BR></P>
<P align=justify>Net cash provided by financing activities for the year ended
March 31, 2009 totaled $7.6 million as compared to $0.7 million used in
financing activities in the same period of 2008. The increase of the cash
provided by financing activities was mainly attributable to the proceeds from
long-term loans of $7.6 million, which was offset by the repayment of short-term
bank loan of $0.7 million.</P>
<P align=justify>Net cash provided by financing activities for the year ended
December 31, 2008 totaled $4.8 million as compared to $3.1 million used in
financing activities in the same period of 2007. The increase of the cash
provided by financing activities was mainly attributable to the proceeds from
long-term loans of $5.8 million, which was offset by the repayment of short-term
bank loan of $0.7 million.</P>
<P align=justify>With the bank credit facilities that are available to us and
other financing activities, we expect that cash on hand, funds generated from
our operations and funds generated from companies that we may acquire in the
future will be
sufficient to satisfy our current and future commitments for at least the next twelve months. We do not believe that we have any significant short term liquidity problems. In addition, we have an approximately &#36;5.8 million additional bank
facility that we can draw down in the event that unforeseen liquidity requirements arise. The company believes that it will be able to secure the large majority of the financing required for the two above mentioned acquisitions from domestic bank
facilities and available cash resources.</P>
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<P align="justify">
<B>Critical Accounting Policies</B><BR>
</P>
<P align="justify">
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes
thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an
understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management's difficult,
subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most
significant estimates and judgments used in the preparation of our financial statements. </P>
<P align="justify">
<B><I>Fair Value of Financial Instruments</I></B><BR>
</P>
<P align="justify">
Statement of Financial Accounting Standards (&#147;SFAS&#148;) 107, &#147;Disclosures about Fair Value of Financial Instruments&#148; requires disclosure of the fair value of financial instruments held by the Company. SFAS 107 defines financial
instruments. The Company considers the carrying amount of cash, receivables, payables including accrued liabilities and short term loans to approximate their fair values because of the short period of time between the origination of such instruments
and their expected realization and if applicable, their stated rates of interest are equivalent to interest rates currently available. SFAS 157, &#147;Fair Value Measurements&#148;, adopted January 1, 2008, which defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The three levels are defined as follow: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of
the financial instruments.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Level 3: inputs to the valuation methodology are unobservable and significant to the fair value.</LI>
</UL>
<P align="justify">
<B><I>Revenue Recognition</I></B><BR>
</P>
<P align="justify">
We recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or
determinable, which are generally considered to be met upon delivery and acceptance of products at the customer site. Sales are presented net of any discounts given to customers. As a policy, we do not accept any product returns and based on our
records, product returns, if any, are immaterial. Sales revenue represents the invoiced value of goods, net of a value-added tax, or VAT. All products produced by us and sold in the PRC are subject to a Chinese VAT at a rate of 6% of the gross sales
price or at a rate approved by the Chinese local government. Products distributed by Shandong Medical are subjected to a 17% VAT. </P>
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<P align="justify">
<B><I>Inventories</I></B><BR>
</P>
<P align="justify">
Due to its unique nature, our principal raw material, human blood plasma is subject to various quality and safety control issues which include, but are not limited to, contaminations and blood born diseases. In addition, limitations of current
technology pose biological hazards inherent in plasma that have yet to be discovered, which could result in a widespread epidemic due to blood infusion. In the event that human plasma is discovered to contain pathogens or infectious agents or other
bio-hazards, we would be required to write down our inventory to net realizable value. We determine the net realizable value of our inventories on the basis of anticipated sales proceeds less estimated selling expenses. At each balance sheet date,
we evaluate inventories that may be worth less than current carrying amounts. Total inventories amounted to &#36;26.7 million and &#36;15.0 million as of March 31, 2009 and December 31, 2008, respectively. In order to ensure that the growing demand
for our products is met, as well as the 90-day quarantine period requirement on plasma raw material implemented by the PRC government, we have been gradually increasing our inventory level of raw materials. We strictly follow the production
processes required by government regulations resulting in the relatively high level of work-in-progress customary to our industry. </P>
<P align="justify">
<B><I>Impairment of Long-Lived Assets</I></B><BR>
</P>
<P align="justify">
We review periodically the carrying amounts of long-lived assets including property, plant and equipment, and intangible assets with finite useful lives, to assess whether they are impaired. We evaluate these assets for impairment whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable such as a change of business plan, technical obsolescence, or a period of continuous losses. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the asset exceeds the fair value of the asset. In determining estimates of future cash flows, significant judgment in terms of projection of future cash flows and assumptions is required.</P>
<P align="justify">
<B><I>Use of Estimates</I></B><BR>
</P>
<P align="justify">
The preparation of consolidated financial statements in accordance with US GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, we review our estimates and
assumptions, including those related to the recoverability of the carrying amount and the estimated useful lives of long-lived assets, valuation allowances for accounts receivable and realizable values for inventories. Changes in facts and
circumstances may result in revised estimates. </P>
<P align="justify">
<B><I>Contingencies</I></B><BR>
</P>
<P align="justify">
In the normal course of business, we are subject to contingencies, including, legal proceedings and claims arising out of the business that relate to a wide range of matters, including among others, product liability. We recognize a liability for
such contingency if we determine that it is probable that a loss has occurred and a reasonable estimate of the loss can be made. We may consider many factors in making these assessments, including past history and the specifics of each matter. As we
have not become aware of any product liability claim since operations commenced, we have not recognized a liability for any product liability claims. </P>
<P align="justify">
<B>Recent Accounting Pronouncements</B><BR>
</P>
<P align="justify">
Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;) 141R, &#147;Business Combinations&#148; to replace SFAS 141, &#147;Business Combinations&#148;. SFAS 141R retains the fundamental
requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer
to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces SFAS 141's cost-allocation
process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved in stages
(sometimes referred to as a step acquisition) to recognize the identifiable
assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141R).</P>
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<P align="justify">
Effective January 1, 2009, the Company adopted SFAS 160, &#147;Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51&#148; Certain provisions of this statement are required to be adopted
retrospectively for all periods presented. Such provisions include a requirement that the carrying value of noncontrolling interests (previously referred to as minority interests) be removed from the mezzanine section of the balance sheet and
reclassified as equity. Further, as a result of adoption on SFAS 160, net income attributable to noncontrolling interests is now excluded from the determination of consolidated net income. </P>
<P align="justify">
Effective January 1, 2009, the Company adopted the provisions of EITF 07-5, &#147;Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock&#148;, which is effective for financial statements for fiscal years
beginning after December 15, 2008 and which replaced the previous guidance on this topic in EITF 01-6. Paragraph 11(a) of FAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the
Company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the FAS 133 paragraph 11(a) scope exception.</P>
<P align="justify">
In January 2009, the FASB issued FSP EITF 99-20-1, &#147;Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets.&#148; FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to remove its
exclusive reliance on &#147;market participant&#148; estimates of future cash flows used in determining fair value. Changing the cash flows used to analyze other-than-temporary impairment from the &#147;market participant&#148; view to a
holder's estimate of whether there has been a &#147;probable&#148; adverse change in estimated cash flows allows companies to apply reasonable judgment in assessing whether an other-than-temporary impairment has occurred. The adoption of FSP
EITF 99-20-1 did not have a material impact on the Company's consolidated financial statements because all of the Company's investments in debt securities are classified as trading securities. </P>
<P align="justify">
In April 2009, the FASB issued FSP FAS 157-4, &#147;Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly&#148; (FSP FAS 157-4). FSP FAS
157-4 amends SFAS 157 and provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value measurements. This FSP shall be applied prospectively with retrospective application not permitted. This FSP shall be effective for interim and annual periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting this FSP must also early adopt FSP FAS 115-2 and FAS 124-2, &#147;Recognition and Presentation of Other-Than-Temporary Impairments&#148; (FSP
FAS 115-2 and FAS 124-2). Additionally, if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, &#147;Interim Disclosures about Fair Value of Financial Instruments&#148; (FSP FAS 107-1 and APB 28-1) or FSP FAS 115-2 and FAS 124-2, it
must also elect to early adopt this FSP. Effective July 1, 2009, the Company adopted FSP FAS 157-4, management is currently evaluating this new FSP but does not believe that it will have a significant impact on the determination or reporting of the
financial results. </P>
<P align="justify">
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS 115, &#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; SFAS 124, &#147;Accounting for Certain Investments Held by Not-for-Profit
Organizations,&#148; and EITF Issue No. 99-20, &#147;Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,&#148; to make the
other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This FSP will replace the existing requirement that the entity's management assert it
has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before
recovery of its cost basis. This FSP provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected
cash flows, credit losses, and an aging of securities with unrealized losses. Although this FSP does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related
to a credit loss for a held-to-maturity
security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This FSP shall be effective for interim and annual periods
ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity elects to early adopt either FSP FAS 157-4
or FSP FAS 107-1 and APB 28-1, the entity also is required to early adopt this FSP. Effective July 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2, management is currently evaluating this new FSP but does not believe that it will have a
significant impact on the determination or reporting of the financial results. </P>
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<P align="justify">
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS No. 107, &#147;Disclosures about Fair Value of Financial Instruments,&#148; to require disclosures about fair value of financial instruments not measured on the balance
sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this FSP, fair values for these assets and liabilities were only disclosed annually. This FSP applies to all financial instruments within the
scope of SFAS 107 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This FSP shall be effective for interim periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2. This FSP does not require disclosures for earlier periods presented
for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. Effective July 1, 2009, the Company adopted FSP FAS 107-1 and APB 28-1
Management is currently evaluating the disclosure requirements of this new FSP. </P>
<P align="justify">
<B>Seasonality of our Sales</B><BR>
</P>
<P align="justify">
Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions. </P>
<P align="justify">
<B>Inflation</B><BR>
</P>
<P align="justify">
Inflation does not materially affect our business or the results of our operations.</P>
<P align="justify">
<B>Off-Balance Sheet Arrangements</B><BR>
</P>
<P align="justify">
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our investors. </P>
<P align="center">
<B>CORPORATE STRUCTURE AND HISTORY</B><BR>
</P>
<P align="justify">
<B>Our Corporate Structure</B><BR>
</P>
<P align="justify">
We are a biopharmaceutical company and, through our indirect Chinese subsidiaries, we are principally engaged in the research, development, production and manufacturing of plasma-based pharmaceutical products in China. Shandong Taibang, our 82.8%
majority owned subsidiary, operates from our manufacturing facility located in Shandong Province, Qianfeng, the 54% majority owned subsidiary of Dalin, our 90% majority owned subsdiary, operates from facilities in Guizhou Province and Huitian, our
35% minority-owned subsidiary operates its collection facilities in Xi'an Province. </P>
<P align="justify">
<B>Our Corporate History</B><BR>
</P>
<P align="justify">
China Biologic Products, Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food
Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003, merger between Shepherd and GRC Holdings, Inc. or GRC. In the merger, the company adopted the Articles of Incorporation and By-Laws of GRC and changed its
corporate name to GRC Holdings, Inc. On January 10, 2007, a Plan of Conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc.</P>
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<P align="justify">
<B><I>Our Acquisition of Logic Express</I></B><BR>
</P>
<P align="justify">
On July 19, 2006, we completed a reverse acquisition with Logic Express, whereby we issued to the shareholders of Logic Express 18,484,715 shares of our common stock in exchange for 100% of the issued and outstanding shares of capital stock of Logic
Express and its majority-owned Chinese operating subsidiary, Shandong Taibang. As a result of the reverse acquisition, Logic Express became our 100% owned subsidiary and the former shareholders of Logic Express became our controlling stockholders
with 96.1% of our common stock. Shandong Taibang became our 82.76% majority-owned indirect subsidiary and is the operating company for all of our commercial operations. Shandong Taibang is a sino-foreign joint venture company established on October
23, 2002 with a registered capital of RMB80 million (then approximately &#36;10.3 million).</P>
<P align="justify">
The reverse acquisition is considered to be a recapitalization (issuance of stock by Logic Express for our net monetary assets) in substance, rather than a business combination. Logic Express is treated as the continuing reporting entity that
acquired the Company.</P>
<P align="justify">
<B><I>Acquisition of Plasma Stations</I></B><BR>
</P>
<P align="justify">
In December 2006, our subsidiary, Shandong Taibang, acquired all the assets of five plasma stations in Shandong Province. We obtained the permit to operate the stations in January 2007. In April 2007, Shandong Taibang acquired certain assets of two
plasma stations in Guangxi Province. The two plasma stations obtained their operating permits in February and April 2007, respectively.</P>
<P align="justify">
We acquired the assets of these plasma stations through separate Shandong Taibang subsidiaries, specially formed for this purpose. The subsidiaries holding six of our new plasma stations are the Xia Jin Plasma Company, the Qi He Plasma Company, the
He Ze Plasma Company, the Huan Jiang Plasma Company, the Yang Gu Plasma Company, and the Zhang Qiu Plasma Company. The seventh plasma station is held in the Fang Cheng Plasma Company, which is 80% owned by Shandong Taibang and 20% owned by Lin Feng,
an unrelated third party. In January 2007, Shandong Taibang also signed a letter of intent to acquire certain assets from a third plasma station in Guangxi Province. However, we have not consummated this acquisition as the permit for this station is
in dispute, as described in &#147;Legal Proceedings.&#148;</P>
<P align="justify">
In June 2008, we received approval from the Guangxi Province Bureau of Health to set up a new plasma collection station in Pu Bei County, Guangxi Province. The new plasma collection station will be located in the Centralized Industry Zone of Pu Bei
County and when it becomes operational, it will replace CBP's existing Fang Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate Fang Cheng to a more strategic location to increase collection volumes.</P>
<P align="justify">
<B><I>Establishment of Shandong Medical</I></B><BR>
</P>
<P align="justify">
In September 2006, Shandong Taibang applied to establish a wholly owned subsidiary, Shandong Missile Medical Co., Ltd., or Shandong Medical, with registered capital of &#36;384,600, fully paid on March 1, 2007. On February 7, 2007, Shandong Medical
obtained a distribution license for biological products, except for vaccine, from the Shandong Food and Drug Administration, for a license period of five years from the date of obtaining the license. The registration of Shandong Medical was
ultimately approved by Shandong Provincial Department of Foreign Trade and Economic Cooperation on July 4, 2007 and Shandong Medical was formally registered on July 19, 2007. The scope of business is wholesale of biological products, except
vaccines, with a license period of 25 years from the date of registration.</P>
<P align="justify">
<B><I>Formation of Hong Kong Subsidiary</I></B><BR>
</P>
<P align="justify">
On December 12, 2008, we established Logic Holdings (Hong Kong) Limited, or Logic Holding, our wholly-owned Hong Kong subsidiary, for the purpose of being a holding company for our majority interest in Dalin. </P>
<P align="justify">
<B><I>Dalin Acquisition and Entrustment Agreement</I></B><BR>
</P>
<P align="justify">
We completed the acquisition of 90% interest in Dalin in April 2009 upon payment of 90% of the purchase price. We are obligated to pay the remaining 10% of the purchase price, RMB 19,440,000 (approximately &#36;2,847,960), on
or before April 9, 2010, the one-year anniversary of the local Administration for Industry and Commerce's approval of the equity transfer.</P>
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<P align="justify">
On April 6, 2009, Logic Express entered into an equity transfer and entrustment agreement, or Entrustment Agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of Biological Products, or the Shandong Institute, the holder of
the minority interests in Shandong Taibang, pursuant to which, Logic Express agreed to permit Shandong Taibang and the Shandong Institute to participate in the indirect purchase of Qianfeng's equity interests. Under the terms of the Entrustment
Agreement, Shandong Taibang agreed to contribute 18% or RMB 35,000,000 (approximately &#36;5,116,184) of the Dalin purchase price and the Shandong Institute agreed to contribute 12.86% or RMB 25,000,000 (approximately &#36;3,654,917) of the Dalin
purchase price. Logic Express is obligated to repay to Shandong Taibang and the Shandong Institute their respective investment amounts on or before April 6th, 2010, along with their pro rata share, based on their percentage of the Dalin purchase
price contributed, of any distribution on the indirect equity investment in Qianfeng payable to Logic Express during 2009. Logic Express has agreed that if these investment amounts are not repaid within five days of the payment due date, then Logic
Express is obligated to pay Shandong Taibang and the Shandong Institute liquidated damages equal to 0.03% of the overdue portion of the amount due until such time as it is paid. Logic Express has also agreed to pledge 30% of its ownership in
Shandong Taibang to the Shandong Institute as security for nonpayment. If failure to repay continues for longer than 3 months after the payment due date, then the Shandong Institute will be entitled to any rights associated with the pledged
interests, including but not limited to rights of disposition and profit distribution, until such time as the investment amount has been repaid. Logic Express also provided a guarantee that Shandong Taibang and the Shandong Institute will receive no
less than a 6% return based on their original investment amount.</P>
<P align="justify">
As part of our due diligence investigation into Dalin and Qianfeng, we discovered that our indirect interest in Qianfeng acquired under the equity transfer agreement may be diluted in the future, pending the outcome of a lawsuit brought by a
Qianfeng shareholder. The local AIC records show Dalin as a 54% shareholder of Qianfeng, however, the AIC records do not reflect a May 2007 issuance of Qianfeng's equity interests to certain investors, pursuant to a capital increase agreement.
Qianfeng received the consideration for the equity interests, but the increase in registered capital and the related issuance of the equity interest has not yet been registered with the local AIC, pending the outcome of a minority shareholder suit
against Qianfeng and its shareholders, alleging violation of the shareholder's right of first refusal in connection with the new equity issuance. For details regarding the Qianfeng shareholder suit see our disclosure under &#147;Legal
Proceedings&#148; herein. When the capital increase is registered with AIC, Dalin's equity interest in Qianfeng will be reduced to approximately 43.3%, and if the minority shareholder prevails in its suit against Qianfeng and its shareholders,
Dalin's interests in Qianfeng could be diluted to as low as 41.3% . Even if the minority shareholder were to prevail in its suit, the Company will be able to retain control over Qianfeng as a result of our right to appoint a majority of
Qianfeng's directors. Management does not expect this dispute to impact our ability to complete the acquisition. </P>
<P align="justify">
Qianfeng is one of the largest plasma-based biopharmaceutical companies in China and is the only manufacturer currently operating in Guizhou Province. With a population of 39 million, Guizhou Province has historically produced the highest volumes of
plasma collection in China, because a higher proportion of its population has been willing to engage in the collection process. Guizhou Province has a total of 19 plasma collection stations in operation, collecting approximately 1,200 tons of plasma
supply every year. Qianfeng owns seven of these plasma collection stations, of which six are currently in operation and collecting approximately 250 tons of plasma supply per year, with an annual capacity of 400 tons. We intend to employ more
advanced collection techniques at these stations to improve yields and generate additional plasma supply. We believe that Qianfeng currently controls approximately 9.5% of the market for plasma-based biopharmaceutical products in China. Qianfeng is
in compliance with Good Manufacturing Practices, or GMP, standards, and has been approved by the PRC's State Food and Drug Administration or the SFDA to produce six types of plasma-based products including Human Albumin, Human Immunoglobulin,
Human Intravenous Immunoglobulin, Human Hepatitis B Immunoglobulin, Human Tetanus Immunoglobulin and Human Rabies Immune Globulin. </P>
<P align="justify">
<B><I>Huitian Acquisition</I></B><BR>
</P>
<P align="justify">
We purchased a 35% interest in Huitian at a purchase price of RMB 44,000,000 (approximately &#36;6,446,000) in June 2009. Huitian is a manufacturer of plasma-based biopharmaceutical products in Shaanxi Province and is one of only 32 such
manufacturers in China who are government approved. Shaanxi Province, which has a population of 37 million, has had a historically high collection volume with approximately ten plasma collection stations in operation, collecting approximately 300
tons of plasma supply each year. Only four of the collection stations in Shaanxi Province are government approved and three of these are owned by Huitian. Huitian produces about 80 tons of
plasma-based products per year and has 200 tons of annual production capacity. Huitian believes that it currently controls approximately 1.2% of the market for plasma-based biopharmaceutical products in China; a factor which we believe provides
strong long-term growth potential. Huitian is in compliance with GMP standards and it is also approved by the SFDA for the production of Human Albumin, Human Immunoglobulin, Human Immunoglobulin for Intravenous Injection, and Human Hepatitis B
Immunoglobulin products. </P>
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<P align="center">
<B>OUR BUSINESS</B><BR>
</P>
<P align="justify">
<B><I>Overview</I></B><BR>
</P>
<P align="justify">
We are a biopharmaceutical company and through our indirect majority-owned Chinese subsidiary, Shandong Taibang and Qianfeng, we are principally engaged in the research, development, production and manufacturing of plasma-based pharmaceutical
products in China. Shandong Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province. The plasma-based biopharmaceutical manufacturing industry in China is highly restricted by both the provincial and central
governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma from human donors to finished products. Our principal products include our approved human albumin and immunoglobulin
products.  We also have a 35% interest in Huitian, a biopharmaceutical company based in Xi'an, Shaanxi Province, China. </P>
<P align="justify">
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.</P>
<P align="justify">
We sell our products to customers in the PRC, to hospitals directly or through distributors. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended
December 31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.</P>
<P align="justify">
We operate and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis. </P>
<P align="justify">
All our business has been conducted in Renminbi, the official currency of China.  Renminbi is still not a free floating currency. The value of Renminbi is subject to changes in the Chinese government's policies and depends to a large extent on
China's domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. dollars has generally been stable, and Renminbi
has appreciated against the U.S. dollar since July 2005. </P>
<P align="justify">
<B>Our Industry <br>
</B> <BR>
<B><I>Plasma Collection in China</I></B><BR>
</P>
<P align="justify">
The collection of human plasma in China is generally influenced by factors such as government regulations, geographical locations of collection stations, sanitary conditions of collection stations, living standards of the donors, and cultural and
religious beliefs. Until recently, only licensed Plasmapheresis stations owned and operated by the government could collect human plasma. Furthermore, each collection station was only allowed to supply plasma to the one manufacturer that had signed
the &#147;Quality Responsibility&#148; statement with them. However, in March 2006, the Ministry of Health promulgated certain &#147;Measures on Reforming Plasma Collection Stations,&#148; or the Blood
Collection Measures, whereby the ownership and management of PRC plasma stations are required to be transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the PRC government.
Plasma stations that did not complete their reform by December 31, 2006 risked revocation of their license to collect plasma.</P>
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<P align="justify">
The supply of plasma for plasma-based products in the PRC has been on the decline since 2003 from the historical high of annual supply of approximately 7,000 tons to approximately 4,000 tons. We believe that this decline is a direct result of the
government's industry reforms of the country's collection practices which led to the closure of many stations that did not meet the new industry standards. Based on reports promulgated by the PRC Ministry of Health, we estimate that the
current annual supply of plasma in China amounts to approximately 4,000 tons, as compared to 30,000 tons in the global market, with the six largest manufacturers of plasma products accounting for approximately 50% of the annual plasma collection. In
2008, revenues from the sale of plasma products in China amounted to approximately &#36;700 million and revenues from the sale of human albumin products amounted to about &#36;400 million. We expect that the plasma derivatives market is expect to
grow at 15% per year through 2011.</P>
<P align="justify">
We believe that these regulatory changes have improved the quality of blood and plasma by increasing cleanliness standards at blood collection stations and instituting measures which limit illegal selling of blood. As the operation of the plasma
stations become more regulated and the donor population expands, we believe that the overall quality of raw materials, such as human albumin will continue to increase, leading to a safer, more reliable finished product.<B> </B></P>
<P align="justify">
<B><I>Plasma-Based Products Industry in China</I></B><BR>
</P>
<P align="justify">
We produce approved human albumin and immunoglobulin products, with human plasma as the main ingredient. In addition to the low usage ratio of such products in China as compared to other more developed countries, there is a significant difference in
the make up and range of the plasma-based pharmaceutical products. Based on our analysis, in most developed countries like the United States, clotting factor products accounts for the majority of the plasma-based biopharmaceutical products, while in
China, human albumin products accounts for the vast majority of such products. Specifically, total clotting factor products and human albumin products, account for approximately 40% and 25%, respectively, of total the United States' annual
plasma-derived products, and account for approximately 8% and 62%, respectively, of China.</P>
<P align="justify">
<B>Our Business Strategy</B><BR>
</P>
<P align="justify">
Our mission is to become a first-class biopharmaceutical enterprise in China. To achieve this objective, we have implemented the following strategies:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">
<B><I>Securing the supply of plasma </I></B>&#150; Due to the shortage of plasma and the reform of the ownership of plasma stations, our immediate strategy is to negotiate and acquire plasma stations in order to secure our plasma supply. In June,
2006, we entered into letters of intent with five of the plasma stations in Shandong Province to acquire certain of their assets and we acquired those plasma stations in December 2006. Furthermore, in January 2007, we entered into three letters of
intent to acquire certain assets of three additional plasma stations in Guangxi Province, two of which we have acquired. See &#147;Raw Materials &#150; Plasma&#148; below. In June 2008, we received approval from the Guangxi Province Bureau of Health
to set up a new plasma collection station in Pu Bei County, Guangxi Province. The new plasma collection station will be located in the Centralized Industry Zone of Pu Bei County and when it becomes operational, it will replace CBP's existing Fang
Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate Fang Cheng to a more strategic location to increase collection volumes. During the construction period, Fang Cheng will still continue with its normal operations. With the
approval of the Centralized Industry Zone of Pu Bei County, once Fang Cheng becomes operational, we hope to expand its coverage area to secure higher collection volumes in the future.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">
<B><I>Acquisition of competitors and/or other biologic related companies </I></B>&#150; In addition to organic growth, acquisition is an important part of our expansion strategy. Although there are about 32 approved plasma- based biopharmaceutical
manufacturers in the market, we believe that there are only 26 manufacturers in operation, only about half of whom will be competitive. The top six manufacturers in China account for more than 50% market share. Furthermore, we believe that the
regulatory authorities are considering further reforming the industry and those smaller, less competitive manufacturers will face the possibility of having their manufacturing permits revoked by the regulators, making them potential targets for
acquisition. Also, if we are presented with appropriate
  opportunities, we may acquire additional companies, products or technologies
  in the biologic related sectors (including but not limited to medical,
  pharmaceutical and biopharmaceutical). </LI>
</UL>
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<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 12"><B><I>Further strengthening of research and development capability &#150;
  </I></B>We believe that, unlike other more developed countries like the U.S.,
  China's plasma-based biopharmaceutical products are at the initial stage of
  development. There are many other plasma-based products that are being used in
  the U.S. which are not currently being manufactured in China. We intend to
  strengthen our research and development capability so as to expand our product
  line to include higher-margin, technologically more advanced plasma-based
  biopharmaceutical products. We believe that our increased focus on research
  and development will give us a competitive advantage over our competitors
  <LI>
  <p style="margin-top: 0; margin-bottom: 12"><B><I>Market development and network expansion </I></B>&#150; Leveraging on the
  high quality and excellent safety record of our products, we intend (i) to
  enhance our product penetration with our existing customers by introducing new
  products and (ii) to extend the reach of our products from our current market
  to include other provinces where we envision significant market potential.
  </LI></UL>
<P align=justify><B>Our Products</B><BR></P>
<P align=justify>Our principal products are our approved human albumin and
immunoglobulin products. We are currently approved to produce 16
biopharmaceutical products in eight major categories as follows:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left width="50%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 5pt"><B>Approved Products <SUP>(1)(2)</SUP></B><sup>
    </sup>
    </TD>
    <TD align=left width="50%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 5pt"><B>Cure/Use</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Albumin: - 20%/10ml, 20%/25ml and
      20%/50ml </TD>
    <TD align=left width="50%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Shock caused by blood loss
      trauma or burn; raised intracranial pressure caused by hydrocephalus or
      trauma; Oedema or ascites caused by hepatocirrhosis and nephropathy;
      prevention and cure of low-density- lipoproteinemia; and Neonatal
      hyperbilirubinemia. </TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Hepatitis B Immunoglobulin &#150; 100
      International Units, or IU, 200IU, 400IU </TD>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Prevention of measles and
      contagious hepatitis. When applied together with antibiotics, its curative
      effect on certain severe bacteria or virus infection may be improved.
  </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Immunoglobulin &#150; 10%/3ml and
      10%/1.5ml </TD>
    <TD align=left width="50%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Original immunoglobulin
      deficiency, such as X chain low immunoglobulin, familiar variable immune
      deficiency, immunoglobulin G secondary deficiency; Secondary
      immunoglobulin deficiency: such as severe infection, newborn sepsis; and
      Auto-immune deficiency diseases, such as original thrombocytopenia purpura
      or kawasaki disease. </TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Immunoglobulin for Intravenous
      Injection &#150; 5%/50ml </TD>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Same as above </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Immunoglobulin-5g/vial </TD>
    <TD align=left width="50%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Same as above </TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Thymopolypeptides Injection &#150;
      20mg/2ml,5mg/2ml </TD>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Cure for various original and
      secondary T-cell deficiency syndromes, some auto-immune deficiency
      diseases and various cell immunity deficiency diseases, and assists in the
      treatment for tumors. </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Rabies Immunoglobulin &#150; 100IU, 200IU
      and 500IU </TD>
    <TD align=left width="50%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Mainly for passive immunity
      from bites or claws by rabies or other infected animals. All patients
      suspected of being exposed to rabies will be treated with a combined dose
      of rabies vaccine and human rabies immunoglobulin. </TD></TR>
  <TR vAlign=top>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Human Tetanus Immunoglobulin &#150; 250IU </TD>
    <TD align=left width="50%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 5pt">Mainly used for the prevention
      and therapy of tetanus. Particularly applied to patients who have allergic
      reactions to Tetanus Antitoxin. <SUP>(3)</SUP> </TD></TR></TABLE>
<P align=justify><SUP><FONT style="font-size: 8pt">1. &#147; %&#148; represents the degree of dosage
concentration for the product and each product has its own dosage requirement.
For example, Human Albumin 20%/10ml means 2g of Human Albumin is contained in
each 10ml packaging and Human Immunoglobulin 10%/3ml means 300mg of Human
Immunoglobulin is contained in each 3ml packaging. Under PRC law, each variation
in the packaging, dosage and concentration of medical products requires
registration and approval by the SFDA. During this process the altered product
is not commercially available for sale. For example, among our Human Albumin
products only Human Albumin 20%/10ml, 20%/25ml and 20%/50ml products are
currently approved and are commercially available.</FONT></SUP></P>
<P align=justify><SUP><FONT style="font-size: 8pt">2. &#147;IU&#148; means International Units, or IU. IU
is a unit used to measure the activity of many vitamins, hormones, enzymes, and
drugs. An IU is the amount of a substance that has a certain biological effect.
For each substance there is an international agreement on the biological effect
that is expected for 1 IU. In the case of Immunoglobulin, it means the number of
effective units of antibodies in each package. When exposed to an antigen, the
body views it as foreign material, and takes steps to neutralize the antigen.
Typically, the body accomplishes this by making antibodies, which are intended
to defend the body from invasion by potentially dangerous substances. These
antibodies can be beneficial, as is the case when the body learns to fight a
virus, or they can be harmful, in the instance of allergies. In a situation when
the body cannot effectively react with these antigens, injection of our product
will provide sufficient antibodies to neutralize the antigens.</FONT></SUP></P>
<P align=justify><SUP><FONT style="font-size: 8pt">3. &#147;Tetanus Antitoxin&#148; is a cheaper injection
treatment for tetanus. However it is not widely used because most people are
allergic to it.</FONT></SUP></P>
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<P align=justify>Human albumin is principally used to increase blood volume
while immunoglobulin is used for certain disease preventions and cures. Albumin
is also used to treat critically ill patients by replacing lost fluid and
maintaining adequate blood volume and pressure. Our approved human albumin and
immunoglobulin products use human plasma as the basic raw material. All of our
approved products are prescription medicines administered in the form of
injections.</P>
<P align=justify>Under PRC law, each variation in the packaging, dosage and
concentration of medical products requires registration and approval by the
SFDA. During this process the altered product is not commercially available for
sale. For example, among our human albumin products only Human Albumin 20%/10ml,
20%/25ml and 20%/50ml products are currently approved and are commercially
available. Accordingly, all references, in this prospectus, to our manufacture
and sale of human albumin relate to our approved human albumin products.</P>
<P align=justify>We have product liability insurance covering all of our
products in the amount of approximately $2,934,000 (RMB 20,000,000). However,
since our establishment in 2002, there has not been any product liability claims
nor has any legal action been filed against us by patients related to the use of
our products.</P>
<P align=justify><B>Raw Materials</B><BR></P>
<P align=justify><B><I>Plasma</I></B><BR></P>
<P align=justify>Plasma is the principal raw material for our biopharmaceutical
products. Until the end of 2006, all plasma collection stations were owned by
the PRC government. Following the mandated privatization of plasma stations
resulted from the Ministry of Health's Blood Collection Measures, we acquired
our stable of plasma collection stations. We believe that the acquisitions of
plasma stations will give us a controlled source of plasma and better control
over the quality and quantity produced. We will also be able to have increased
control over the cost of plasma. Finally, we believe that we will enjoy benefits
of economies of scale with respect to the administration and management expenses
of our several plasma stations. </P>
<P align=justify>We spent $14,000,000 and $9,200,000 on plasma in 2008 and 2007,
respectively. Currently we own five plasma collection stations in Shandong, two
in Guanxi and six in Guizhou. When our production requirements exceed the plasma
supply from the stations that we own or that we will acquire in the future, we
will procure the supply deficiency from the blood centers operated by the
regulators of Shandong and other Provinces.<B> </B></P>
<P align=justify>We currently maintain sufficient plasma supply for
approximately 90 days of production. In March 2007, the PRC Food and Drug
Administration implemented new measures on biopharmaceutical industry effective
as of July 1, 2008, requiring plasma raw material to be kept for at least three
months before being put into production. In view of the new measures, in due
course we will extend our plasma supply for approximately four months. We have
not experienced any interruptions to our production due to shortage of
plasma.</P>
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<P align=justify><B><I>Other Raw Materials and Packaging
Materials</I></B><BR></P>
<P align=justify>Other raw materials used in the production of our
biopharmaceutical products include: reagents, consumables and packaging
materials. The principal packaging materials we use include glass bottles for
our injection products, external packaging and printed instructions for our
biopharmaceutical products. We acquire our raw materials and packaging materials
from our approved suppliers in China and overseas. We select our suppliers based
on quality, consistency, price and delivery of the raw materials which they
supply.</P>
<P align=justify>We have not experienced any shortage of supply on these raw
materials and packaging materials and there has not been any significant problem
with the quality of materials supplied by these suppliers.</P>
<P align=justify><B>Our Major Suppliers</B><BR></P>
<P align=justify>The table below lists our major suppliers as of December 31,
2008, showing the cumulative dollar amount of raw materials purchased from them
during the fiscal year ended December 31, 2008, and the percentage of raw
materials purchased from each supplier as compared to procurement of all raw
materials.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left width="5%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Percentage of</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left width="5%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Cumulative</B> </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Total</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left width="5%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Amount Purchased</B> </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Purchases</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left width="5%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>During Fiscal Year</B> </TD>
    <TD align=center width="20%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>During Fiscal</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Rank</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center>
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Supplier's name</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="20%">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>2008 <I>(US$)</I></B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="20%">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Year 2008</B> </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">1
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Chongqing Sanda Weiye Pharmaceutical Products </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="20%"
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">569,653 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="20%"
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">15.6% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">2 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Zibo
      Zhong Bao Kang Medical Equipment Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
      width="20%">
    <p style="margin-left: 10pt; margin-right: 10pt">381,277 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="20%">
    <p style="margin-left: 10pt; margin-right: 10pt">10.4%
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">3
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Liao Cheng Tiantan Plasma Station </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="20%"
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">380,920 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right width="20%"
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">10.4% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">4 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Tai'an
      City Ruifeng Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">377,375 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">10.3%
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">5
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Shandong Medical Bottling Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">218,558 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">6.0% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">6 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Pall
      Corporation(Beijing) </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">155,938 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">4.3%
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">7
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Shin Tai Yong Feng Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">144,170 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">3.9% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">8 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Beijing Zhongtianbaiyi Technology Development Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">133,498 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">3.7%
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">9
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">Wenzhou City Jiacheng Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">133,482 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">3.7% </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">10 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left>
    <p style="margin-left: 10pt; margin-right: 10pt">Tai'an
      Shengrong Stainless Steel Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">129,264 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right>
    <p style="margin-left: 10pt; margin-right: 10pt">3.5%
    </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff width="5%">
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">&nbsp; &nbsp;<B>Total</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">2,624,135 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=right
    bgColor=#e6efff>
    <p style="margin-left: 10pt; margin-right: 10pt">71.8% </TD></TR></TABLE>
<P align=justify>Prior to our acquisition of the assets of Qi He, Xiajin and
Zhang Qiu, we had entered into material supply agreements with them for the
purchase of raw materials. We have replaced these material supply agreements
with plasma processing agreements, dated January 2, 2007, between Shandong
Taibang and each of Qi He, Xia Jin and Zhang Qiu, pursuant to which we formally
appointed each of these stations as our agent to purchase, collect, examine and
deepfreeze plasma on behalf of Shandong Taibang, subject to rules and
specifications that meet the State Province Food and Drug Administration's
requirements for quality, packaging and storage. Pursuant to the plasma
processing agreements, the stations must only collect plasma from healthy donors
within their respective districts and in accordance with a time table set by
Shandong Taibang. The plasma must: be negative HbsAg, anti-HCV, anti-HIV and
reaction of serum to RPR; contain an ALT &#8804;25 units (ALT), plasma protein &#8805;55g/l;
contain no virus pollution or visible erythrolysis, lipemia, macroscopic red
blood cell or any other irregular finding. In addition, the plasma must be
packaged in 25 separate 600g bags, boxed with a packing list and labeled to be
consistent with computer records and must be stored at -20&#176;C as soon as possible
after collection to ensure that it will congeal within 6 hours. Shandong Taibang
is fully responsible for the overall technical guidance and quality supervision.
Shandong Taibang pays each of the stations a rate of RMB15 (approximately $2.0)
per bag of plasma collected, with the payment for each batch due within 10 days
after the delivery of the following batch of plasma. Each of the plasma
processing agreements with Qi He, Xia Jin and Zhang Qiu, will all expire on
December 31, 2011.</P>
<P align=center>- 48 -</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_49></A>
<P align=justify><B>Our Major Customers</B></P>
<P align=justify>Due to the nature of our products and the current regulations,
all of our customers are located in China. We have established relationships
with most of our key customers since our establishment in 2002. For the fiscal
year ended December 31, 2008, our top five customers, based on sales revenue and
the percentage of their contribution to our revenues, were as follows:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10pt">&nbsp; </TD>
    <TD align=right width="12%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1"><B>Revenues During</B> </TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD>
    <TD align=right width="12%" style="border-top-style: solid; border-top-width: 1"><B>Percentage of Total</B> </TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 10pt">&nbsp; </TD>
    <TD align=right width="12%" style="border-left-style: solid; border-left-width: 1"><B>Fiscal Year 2008</B> </TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" >&nbsp;</TD>
    <TD align=right width="12%"><B>Sales During</B> </TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left>
    <p style="margin-left: 10pt"><B>Customer</B>
</TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right
      width="12%"><B><I>(US$)</I></B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right
      width="12%"><B>Fiscal Year 2008</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Handan Zhiying Medical Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right width="12%"
    bgColor=#e6efff>2,915,461 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>6.2% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left>
    <p style="margin-left: 10pt">Zibo KangHua
      Medical Supply Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right
      width="12%">1,422,967 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">3.1%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Linyi Luoxin Medical Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right width="12%"
    bgColor=#e6efff>1,411,582 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>3.0% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left>
    <p style="margin-left: 10pt">HeZe Mudan Medical
      Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right
      width="12%">931,538 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">2.0%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10pt">Wuhan JiuZhengShiJi Medical Company </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right width="12%"
    bgColor=#e6efff>887,338 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%"
    bgColor=#e6efff>1.9% </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
     bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left>
    <p style="margin-left: 10pt"><B>Total</B> </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=right
      width="12%">7,568,886 </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=right width="12%">16.2%
    </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="2%"
    >&nbsp;</TD></TR></TABLE>
<P align=justify><B>Sales, Marketing and Distribution </B></P>
<P align=justify>Because all of our products are prescription drugs, we can only
sell to hospitals and inoculation centers directly or through approved
distributors. For the years ended December 31, 2008 and 2007, direct sales to
distributors represented approximately 65.6% and 58.3%, respectively, of our
revenues.</P>
<P align=justify>Our five largest customers in the aggregate accounted for
approximately 16.2% and 14.9% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our largest customer accounted for
approximately 6.2% and 5.3% of our total revenues for the years ended December
31, 2008 and 2007, respectively.</P>
<P align=justify>As part of our effort to ensure the quality of our
distributors, we conduct due diligence to verify whether potential distributors
have obtained necessary permits and licenses and facilities (such as cold
storage) for the distribution of our biopharmaceutical products. We also assess
the distributors' financial condition before appointing them as distributors. We
normally enter into annual supply contracts with our hospital customers and
regional distributors. Certain of our regional distributors are appointed on an
exclusive basis within a specified area. The supply contracts normally set out
the quantity and price of products. For distributors, they also contain
guidelines for the sale and distribution of our products, including restrictions
on the geographical area to which the products could be sold. We provide our
distributors with training in relation to our products and on sales techniques.
We have implemented a coding system for our products for easy tracking.
Depending on the relationship and the creditability of the distributors, we
generally grant a credit period of no longer than 30 days to distributors with
some exceptions. For hospitals and clinics, we generally grant a credit period
of no longer than 90 days. We have bad debt credit of $0.1 million for 2008 and
bad debt expense of $0.2 million for 2007. The $0.1 million bad debt credit for
2008 is due to recovery of bad debt previously reserved.</P>
<P align=justify>Our current key market is in Shandong province, representing
approximately 48.1% and 42.0% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our strategy is to focus our market marketing
efforts in Jiangsu, Zhejiang, Henan and the northeastern part of China.</P>
<P align=justify>Our marketing and after-sales services department currently
employs approximately 56 employees.</P>
<P align=justify>We believe that due to the unique nature of our products, the
key emphasis on our marketing efforts centers on product safety, brand
recognition, timely availability and pricing. As all of our products are
prescription medicines, we are not allowed to advertise our products in the mass
media. For the years ended December 31, 2008 and 2007, total sales and marketing
expenses amounted to approximately $2.2 million and $4.4 million, respectively,
representing approximately 4.7% and 13.7%, respectively, of our revenues.</P>
<P align=center>- 49 - </P>
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<P align=justify><B>Our Research and Development Efforts</B><BR></P>
<P align=justify>Shandong Taibang's predecessor, the Shandong Institute, was
established in 1971. The Shandong Institute is the research arm established by
and directly administrated by the Shandong Provincial health department. It was
the only entity approved for the research, development and production of
biological and plasma-based biopharmaceutical products in Shandong Province, the
second largest province in China. Since 1998, it promoted GMP management in the
production process of blood products and became one of the first blood products
manufacturing enterprises to obtain GMP Certification in China. In 2002, the
Shandong Institute transferred all of its business and the licenses necessary to
carry on its business to our subsidiary, Shandong Taibang. In 2005 and 2006, we
were awarded the advanced high-tech enterprise certification by the Department
of Science and Technology of Shandong Province and the Ministry of Science and
Technology of China, respectively. In 2007, we were admitted as a member of the
Shandong Institute of Medicine and awarded the &#147;Advanced Enterprise&#148; accolade by
the Shandong Blood Center.</P>
<P align=justify>We employ a market driven approach to initiate research and
development projects including both product and production technique
development. We believe that the key to the industry revolves around (i) safety
of products and (ii) maximizing the yield per unit volume of plasma. Our
research and development efforts are focused around the following areas:</P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">Broaden the breadth and depth of our portfolio of plasma-based
  biopharmaceutical products;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">Enhance the yield per unit volume of plasma through new collection
  techniques;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">Maximize manufacturing efficiency and safety;
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">Promote product safety through implementation of new technologies; and
  <LI>
  <p style="margin-top: 0; margin-bottom: 12">Refine production technology for existing products. </LI></UL>
<P align=justify>Our research center is located on the same premises as the
factory, which is located in Tai'an City, Shandong Province. The research center
is equipped with specialized equipment including advanced testing and analytical
equipment, such as atomic absorptimeter, fully automated blood coagulation
analyzer, high performance liquid chromatograph, gas chromatograph,
radioimmunoassay analyzer, ultraviolet-visible spectrophotometer, and protein
chromatograph, most of which have been imported from the US, Japan, Italy,
Germany and Australia. Our research and development department is comprised of
about 30 researchers. All of them hold degrees in areas such as medicine,
pharmacy, biology, and biochemistry. Our research center carries out development
and registration of our products.</P>
<P align=justify>All the products we currently manufacture have been developed
in-house. The following table outlines our research and development work in
progress:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Products Currently in</B> <B>Development</B> </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Cure/Use</B> </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt"><B>Status of Product</B> <B>Development</B> </TD>
    <TD align=center width="10%" style="border-style: solid; border-width: 1"><B>Stage **</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Albumin- 12.5g/vial* </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Shock caused by blood loss
      trauma or burn; raised intracranial pressure caused by hydrocephalus or
      trauma; Oedema or ascites caused by hepatocirrhosis and nephropathy;
      prevention and cure of low-density- lipoproteinemia; and Neonatal
      hyperbilirubinemia </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Awaiting approval by the SFDA.
    </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: solid; border-width: 1">9 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Hepatitis B <br>
    Immunoglobulin (PH4) for <br>
    Intravenous
      Injection </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Same as Human Albumin. </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Approved to commence clinical trial. </TD>
    <TD align=center width="10%" style="border-style: solid; border-width: 1">8 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Immunoglobulin for
    <br>
    Intravenous
      Injection &#150; 10% </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Same as Human Albumin </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">A technical feasibility study
      and our laboratory study on the manufacturing procedure is about to begin. </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: solid; border-width: 1">2 </TD></TR>
  </TABLE>
<p align="center">-50-<BR>
</p>
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</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Prothrombin Complex Concentrate </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Use for coagulopathie such as Hemophilia B and
      increase concentration of coagulation factor VII, IX and X. </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Approved to commence clinical trial. </TD>
    <TD align=center width="10%" style="border-style: solid; border-width: 1">8 </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Coagulation Factor VIII </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Use for coagulopathie such as
      Hemophilia A and increase concentration of coagulation factor VIII. </TD>
    <TD align=left width="30%" bgColor=#e6efff style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Clinical research sample and
      report submitted; in the process of onsite random sampling. </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: solid; border-width: 1">5 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Human Fibrinogen </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">Cure for lack of fibrinogen and increase human
      fibrinogen concentration. </TD>
    <TD align=left width="30%" style="border-style: solid; border-width: 1; text-align:justify">
    <p style="margin-left: 10pt; margin-right: 10pt">We have commenced laboratory studies of a
      manufacturing procedure. </TD>
    <TD align=center width="10%" style="border-style: solid; border-width: 1">2 </TD></TR></TABLE>
<P align=justify style="margin-top: 0"><FONT size=1>_________________<br>
</FONT><FONT style="font-size: 8pt">* Under PRC law, each variation in the packaging,
dosage and concentration of medical products requires registration and approval
by the SFDA. During this process the altered product is not commercially
available for sale. For example, among our Human Albumin products only Human
Albumin 20%/10ml, 20%/25ml and 20%/50ml products are currently approved and are
commercially available. Our Human Albumin 12.5g/vial product is at Stage 9 of
the drug approval process, i.e. we are awaiting the SFDA's approval.
Accordingly, all references, in this prospectus, to our manufacture and sale of
Human Albumin relates to our approved Human Albumin products.</FONT></P>
<P align=justify><FONT style="font-size: 8pt">** These stages refer to the stages in the
regulatory approval process for our products disclosed under the heading
&#147;Regulation&#148; in this prospectus.</FONT></P>
<P align=justify>For the fiscal years ended December 31, 2008 and 2007, total
research and development expenses amounted to approximately $1.2 million and
$0.6 million, respectively, representing approximately 2.5% and 1.9%,
respectively, of our revenues.</P>
<P align=justify><B>Our Competition</B><BR></P>
<P align=justify>We are subject to intense competition. There are both local and
overseas pharmaceutical enterprises that are engaged in the manufacture and sale
of potential substitute or similar biopharmaceutical products as our products in
the PRC. These competitors may have more capital, better research and
development resources, manufacturing and marketing capability and experience
than we do. In our industry, we compete based upon product quality, product
cost, ability to produce a diverse range of products and logistical
capabilities.</P>
<P align=justify>We believe that we have strengthened our position in the
marketplace with our recent acquisition of a 90% equity interest in Dalin and
its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest
in Huitian, Xi'an-based biopharmaceutical company. In accordance with terms of
the Dalin equity transfer agreement, as of January 1, 2009, we were entitled to
all the rights and privileges of a Dalin shareholder, including the right to
receive a pro rata share of the profits generated by Qianfeng, and pursuant to
the terms of the Huitian equity transfer agreement, we are now entitled to all
the rights and privileges of a 35% shareholder in Huitian, including the right
to receive our pro rata share of the profits generated. Our profitability may be
adversely affected if (i) competition intensifies; (ii) competitors drastically
reduce prices; or (iii) competitors develop new products or product substitutes
having comparable medicinal applications or therapeutic effects which are more
effective and /or less costly than those produced by us. </P>
<P align=justify>Our profitability may be adversely affected if (i) competition
intensifies; (ii) competitors drastically reduce prices; or (iii) competitors
develop new products or product substitutes having comparable medicinal
applications or therapeutic effects which are more effective and /or less costly
than those produced by us.</P>
<P align=justify>Other approved biopharmaceutical manufacturers in the PRC are
entitled to produce many of the products produced by us. There are currently
about 32 approved manufacturers of plasma-based pharmaceutical products in
China. Many of these manufacturers are essentially producing the same type of
products that we produce: human albumin and various types of immunoglobulin.
However, due to recent Ministry of Health regulations, we believe that it is
difficult for new manufacturers to enter into the industry. We believe that our
major competitors in the albumin and immunoglobulin market in China are Hua Lan
Biological Engineering, Shanghai Institute of Biological Products, Shanghai RAAS
Blood Products Co. Ltd., Chengdu Ronsheng Pharmaceuticals, and Sichuan Yuanda
Shuyang Pharmaceutical Co.</P>
<P align=center>- 51 -<BR></P>
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<P align="justify">
In addition, competition from imported products and China's admission as a member of the WTO creates increased competition. The PRC became a member of the WTO in December 2001. Competition in the biopharmaceutical industry in the PRC will
intensify generally in two respects. With lower import tariffs, we anticipate that imported biopharmaceutical products manufactured overseas may become increasingly competitive with domestically produced products in terms of pricing. We also believe
that well-established foreign biopharmaceutical manufacturers may set up production facilities in the PRC and compete with domestic manufacturers directly. With the expected increased supply of competitively priced biopharmaceutical products in the
PRC, we may face with increased competition from foreign biopharmaceutical products, including the types of products manufactured by US manufacturers and other manufacturers.</P>
<P align="justify">
According to a 2006 Hua Yuan Medicine Net survey of the profit ranking of companies in the Chinese biological products industry, we are ranked the 20<SUP>th</SUP> in 2006 and 25<SUP>th</SUP> in 2005, and in the plasma products area, we were ranked
5<SUP>th</SUP> in 2006. We believe that we have maintained the same ranking in 2008 based on our analysis data regarding the approval for sales of plasma-derived products published by China National Institute for the Control of Pharmaceutical and
Biological Products throughout of the year. Our past financial performance is attributable to our market position in the industry. Furthermore, while each of the plasma products related companies have their own product composition which include 3
main categories namely human albumin, human immunoglobulin and lyophilized human factor, we are currently developing lyophilized human factor products which we expect to launch in 2009. We will continue to meet challenges and secure our market
position by enhancing our existing products, introducing new products to meet customer demand, delivering quality products to our customers in a timely manner and maintaining our established industry reputation.</P>
<P align="justify">
<B>Our Intellectual Property</B><BR>
</P>
<P align="justify">
Pursuant to a Trademark License Agreement with the Shandong Institute, we hold the exclusive license to a Trademark Registration Certificate (No.3375484) issued by the PRC Industry and Commerce Administration Trademark Bureau. The class of goods on
which the trademark has been approved to use include: drug for human beings, serum, microorganism products for medicine and veterinary medicine, plasma, medical blood, and medical biological product. The registration will expire in June 2014, the
Shandong Institute has allowed us to use the trademark for free until May 2011. We expect to develop and register our own trademark before the termination of this license.<B> </B> </P>
<P align="justify">
In addition, we have registered the following domain name: <U>www.chinabiologic.com</U> and <U>www.ctbb.com.cn</U>.</P>
<P align="justify">
<B>Regulations</B><BR>
</P>
<P align="justify">
Due to the nature of our products, we are supervised by various levels of the PRC Ministry of Health and/or Food and Drug Administration. Such supervision includes the safety standards regulating our source supplies (mainly plasma), our
manufacturing process through the issuance of our GMP Certification and the inspection of our finished products.</P>
<P align="justify">
<B><I>Plasma Collection</I></B><BR>
</P>
<P align="justify">
Substantially all plasma donations for commercialized plasma-based biopharmaceutical products are done through plasmapheresis donation stations. Plasmapheresis donation means donors give only selected blood components &#151;platelets, plasma, red
cells, infection-fighting white cells called granulocytes, or a combination of these, depending on donors blood type and the needs of the community. Plasmapheresis stations in China are commonly used to collect plasma. In China, current regulations
only allow an individual donor to donate blood in 14-day intervals, with a maximum quantity of 580ml (or about 600 gram) per donation.</P>
<P align="justify">
The following are the regulatory requirements to establish a plasmapheresis station in China:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">meet the overall plan in terms of the total number, distribution, and operational scale of plasmapheresis stations;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">have the required professional health care technicians to operate a station;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">have the facility and a hygienic environment to operate a station;</LI>
</UL>
<P align="center">
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<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">have an identification system to identify donors;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">have the equipment to operate a station; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">have the equipment and quality control technicians to ensure the quality of the plasma collected.</LI>
</UL>
<P align="justify">
As a result of the overhaul by the four ministries of the State Council in May 2004, we estimate that the number of collection stations (including plasma stations) that meet the standards imposed by the PRC has been reduced from approximately 156 to
approximately 120. Plasma stations are customarily owned and managed by the PRC health authorities. In March 2006, the Ministry of Health promulgated the Blood Collection Measures whereby the ownership and management of the plasma stations must be
transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the government. For those plasma stations which do not complete their reform by December 31, 2006, their license to
collect plasma will be revoked.</P>
<P align="justify">
Set out below are some of the safety features at China's collection stations:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">Collection stations can only source plasma from donors within the assigned district approved by the provincial health authorities.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Collection stations must perform a health check on the donor. Once the donor passes the health check, a &#147;donor permit&#148; is issued to the donor. The standards of the health check are established by the health authorities at the State Council
level.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">The design and printing of the &#147;donor permit&#148; is administrated by the provincial health authorities, autonomous region or municipality government, as the case maybe. The &#147;donor permit&#148; cannot be altered, copied or assigned.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Before donors can donate plasma, the station must verify their identities and the validity of their &#147;donor permits.&#148; The donors must pass the verification procedures before they are given a health check and blood test. For those donors who
have passed the verification, health check and blood test and whose plasma were donated according to prescribed procedures, the station will setup a record.</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">All collection stations are subject to the regulations on transmittable diseases prevention. They must strictly adhere to the sanitary requirements and reporting procedures in the event of an epidemic situation.</LI>
</UL>
<P align="justify">
The operation of plasma collection stations is strictly regulated by the PRC government.</P>
<P align="justify">
<B><I>Importation of Blood Products</I></B><BR>
</P>
<P align="justify">
According to current Chinese regulations, the following blood products are banned from importation to China:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">Plasma &#150; frozen, liquid and freeze-dried Human Plasma;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Immunoglobulin &#150; Human Normal Immunoglobulin, Specific Immunoglobulin, Human Anti-Tetanus Immunoglobulin, Human Anti-hemophilia Globulin, Human Anti-HBs Immunoglobulin, Human Anti- D(Rho) Immunoglobulin and Immunoglobulin For Intravenous
Administration;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Factor VIII &#150; Cryoprecipitated Factor VIII and Factor VIII Concentrate (only Bayer is allowed, under a special arrangement with PRC government, to import this product into PRC, commencing November 2007);</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Factor IX Concentrate;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Human Fibrinogen;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Platelet Concentrate;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Human Prothrombin Complex;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">Whole blood or blood components.</LI>
</UL>
<P align="center">
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<P align=justify><B><I>Production of Plasma-based Products</I></B><BR></P>
<P align=justify>The manufacture and sale of plasma-based biopharmaceutical
products is strictly regulated by the PRC government. For example, under PRC
law, each variation in the packaging, dosage and concentration of medical
products requires registration and approval by the SFDA. During this process the
altered product is not commercially available for sale. For example, among our
human albumin products only Human Albumin 20%/10ml, 20%/25ml and 20%/50ml
products are currently approved and are commercially available. Accordingly, all
references, in this prospectus, to our manufacture and sale of human albumin
relate to our approved human albumin products. The table below shows the PRC
approval process for the manufacture and sale of new medicines: </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left colSpan=2 style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: none; border-bottom-width: medium">
    <p style="margin-left: 10pt"><br>
    Stage (Estimated Time Period) </TD>
    <TD align=left style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style: none; border-bottom-width: medium">
    <p style="margin-left: 10pt">&nbsp; &nbsp; &nbsp;<br>
    Activities </TD></TR>
  <TR>
    <TD align="center" style="border-left-style: solid; border-left-width: 1; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp; </TD>
    <TD style="border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp; </TD>
    <TD style="border-right-style: solid; border-right-width: 1; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff style="border-style: solid; border-width: 1" width="8%">1 </TD>
    <TD align=justify width="20%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Planning Stage (1 month) </TD>
    <TD align=justify bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Prior to the development of
      potential new products, our Research &amp; Development department will
      engage in a comprehensive review of existing medical literature, patent
      status and market information, including expected product demand and other
      competition, in order to determine the feasibility of development and
      production of a new product offering. Although this typically takes about
      1 month to complete, this stage precedes development efforts for a new
      product, which could take several months or even years to complete. For
      products with lengthy development periods, we may be required to
      periodically revisit this stage to confirm the feasibility of continued
      development efforts. </TD></TR>
  <TR vAlign=top>
    <TD align=center style="border-style: solid; border-width: 1" width="8%">2 </TD>
    <TD align=justify width="20%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Feasibility study and
      assumption clarification (2 months) </TD>
    <TD align=justify style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">If we determine that
    development, ownership and marketing of a potential new product is possible
    and potentially advantageous, we proceed with development efforts. However,
    potential new products are typically developed in a laboratory or small
    batch setting, and in order to obtain approval for potential new products
    and to market new products, we must develop a plan for testing and producing
    the new product. The first step in developing such plan is a feasibility
    study and assumption clarification. This study is conducted following or
    during development of a new product, and involves a review and study of the
    feasibility of our technical, production and financial capabilities,
    production conditions and financial forecasts. We also review the
    feasibility of preparing and conducting a clinical study, or a Clinical
    Trial program, during this stage.&nbsp;
  </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff style="border-style: solid; border-width: 1" width="8%">3 </TD>
    <TD align=justify width="20%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Develop scope and technique for
      testing the new medicine (6 months) </TD>
    <TD align=justify bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">If following completion of
    a Stage 2 study we make a determination that producing and testing a
    potential new product is feasible and potentially advantageous, we will
    develop the scope and techniques for testing the potential new product. This
      involves confirming the sourcing of materials needed for production and
      marketing of the potential new product and development of the method of
      production, dosage design and prescription selections. During this stage,
      we will also develop a clinical research sample. </TD></TR>
  <TR vAlign=top>
    <TD align=center style="border-style: solid; border-width: 1" width="8%">4 </TD>
    <TD align=justify width="20%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Preparation of a virus
      inactivation report and submission to the NICPBP for preliminary review
      <SUP>(4-6</SUP> months) </TD>
    <TD align=justify style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">If following development of
      testing methods for the potential new product we determine that testing
      can be successfully completed, we will prepare and finalize the virus
      inactivation method for the potential new product. We are then required to
      prepare a report with details on the production method and procedures and
      basis of quality evaluation for preliminary review by the NICPBP. NICPBP
      staff usually makes an onsite visit during this stage to supervise testing
      and re-testing of the virus inactivation process. Tested samples will be
      sent back to the NICPBP central office in Beijing for evaluation. </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff style="border-style: solid; border-width: 1" width="8%">5 </TD>
    <TD align=justify width="20%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">R&amp;D test product
      information submitted to the SFDA for preliminary assessment (4-6 months)
    </TD>
    <TD align=justify bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Before the NICPBP can determine
      that our clinical research sampling and virus inactivation method and
      procedures are successful, we are required to submit our clinical research
      sampling and virus inactivation method and procedures to the SFDA via the
      provincial FDA for preliminary assessment. We also develop the parameters
      for a Clinical Trial program at this stage. Our program usually requires the
      establishment of a committee comprised of our Research and Development
      staff whose responsibility it will be to communicate with the hospitals
      and doctors who are invited to participate in the trial. <br>
    After our
      submission of information to the SFDA we will become subject to random
      onsite sampling by the SFDA as they review our reports and procedures
      regarding testing of the potential product. The SFDA will usually inform
      us of the exact sampling date and SFDA staff will randomly select certain
      samples during their visit for additional testing. The SFDA will then
      provide us with their preliminary assessment of our new product and our
      related procedures. Depending on the results of its preliminary assessment
      the SFDA may recommend that we alter certain aspects of our reports and
      proposed Clinical Trial programs, or even repeat our Stage 3 and Stage 4
      trials and resubmit related reports. The SFDA review process typically
      takes 4-6 months, but this process could take longer if we are required to
      amend or repeat our trials or if we amend our reports in order to obtain
      more a favorable preliminary assessment. </TD></TR></TABLE>
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  <TR vAlign=top>
    <TD align=left width="8%" style="border-style: solid; border-width: 1">
    <p align="center" style="margin-left: 10pt; margin-right: 10pt">6 </TD>
    <TD align=justify width="20%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Formal
      application to the NICPBP for test of virus inactivation and for&nbsp;CDE
      certification of Clinical Trial (6-7 months) </TD>
    <TD align=justify style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Once we receive a favorable or
      satisfactory preliminary assessment from the SFDA, the NICPBP will
      continue the process begun at Stage 4. The NICPBP will conduct tests of
      virus inactivation based on defined medical literature and on our
      prescribed procedures and method of production. If the tests are
      successful, the NICPBP will transfer the application to the CDE for review
      of our prescribed procedures and method of production and the CDE may
      request additional information before making a determination. If the CDE
      is satisfied with our procedures and method of production it will certify
      the new product for production for Clinical Trial. </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="8%" style="border-style: solid; border-width: 1">
    <p align="center" style="margin-left: 10pt; margin-right: 10pt">7&nbsp; </TD>
    <TD align=justify width="20%"  bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">SFDA review of
      Clinical Trial&nbsp;program for approval (1 month)&nbsp;</TD>
    <TD align=justify bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Following provision of the CDE
      product certification, we must submit our Clinical Trial program
      (developed at Stage 5 and 6) to the SFDA for formal approval. The SFDA may
      request additional information regarding our proposed Clinical Trial
      program. If the SFDA rejects our Clinical Trial program or requires
      changes to any of our procedures and methods, we may be required to amend
      our Clinical Trial program, which may require repeating several of the
      processes previously conducted. The criteria for SFDA approval for
      Clinical Trial programs are based on Good Clinical Practice which is
      publicly available in the PRC. </TD></TR></TABLE>
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  <TR vAlign=top>
    <TD align=center width="8%" style="border-style: solid; border-width: 1">8 </TD>
    <TD align=justify width="20%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Clinical Trial: Phases 1 to 4
      (3 years for a new drug and 2 years for a generic drug) </TD>
    <TD style="border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1; border-bottom-color:#000000" align=justify>
    <p style="margin-left: 10pt; margin-right: 10pt">Following approval of our Clinical Trial program by the
      SFDA, we will begin Clinical Trials of the potential new product. There
      are four phases to the clinical trial process and any failure of the
      potential new product at any of the Clinical Trial phases, could cause a
      significant delay in approval of the new product, or termination of the
      new product launch: <U><br>
    Phase 1</U>: Basic clinical pharmacology and human
      safety evaluation studies are conducted by the Company. Prior to
      determining the effectiveness of our potential new product, we must
      determine that certain pharmacological and safety standards are met by our
      potential new product. These standards are set in stage 4 or according to
      medical literature. If the clinical trial indicates that such standards
      are met, we then move on to Phase 2 of the trials. If the Phase 1
      standards are not met, we may be required to conduct further R&amp;D on
      the potential new product, alter the new product formulation and amend the
      Clinical Trial program, which could require that we repeat several of the
      stages referenced above. <U><br>
    Phase 2</U>: A preliminary exploration of the
      product's therapeutic efficacy is conducted by the Company. If we
      determine at this stage that the potential new product is not effective,
      we may conduct further R&amp;D on the potential new product, alter the new
      product formulation and amend the Clinical Trial program, which would
      require that we repeat several of the stages referenced above. <U><br>
    Phase
      3</U>: If we determine that the potential new product meets the required
      standards of Phases 1 and 2 above, we must then submit a report of the
      Clinical Trial results to the SFDA together with an application for trial
      production of the product. If the SFDA rejects application for trial
      production or otherwise requires a repeat of our Clinical Trials, we may
      be required to repeat all or a portion of our Clinical Trial program,
      which may require repeating several of the processes previously conducted.
      <U><br>
    Phase 4</U>: If we receive SFDA approval to conduct a trial production
      of the new product, we will then conduct a larger test of approximately
      2,000 samples. We will conduct this test while also conducting a new drug
      post- marketing study. </TD></TR>
  <TR vAlign=top>
    <TD align=center bgColor=#e6efff width="8%" style="border-style: solid; border-width: 1">9 </TD>
    <TD align=justify width="20%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Application to the SFDA for
      official production permit and product certification (8-9 months) </TD>
    <TD align=justify bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">The trial production of the
      potential new product will be monitored by an SFDA inspector who will also
      make onsite visits and assess the results of the trial production. We will
      also be required to prepare and submit to the SFDA a report of the trial
      production results by gathering statistical information obtained during
      the trial period. <br>
    The CDE will also conduct a final review of the trial
      production for the potential new product. Upon satisfactory completion of
      the trial production, the CDE will inform the SFDA. The SFDA will then
      issue a permit to us for official production, the issuance of which is
      announced on the SFDA's website, and copied to the NICPBP and the
      provincial FDA. The SFDA will also issue the new product a Good
      Manufacturing Practice, or GMP, certification. The provincial FDA will
      follow with the issuance of a provincial production permit for the new
      product. <br>
    Although the SFDA's criteria for final approval of new products
      are not publicly available in the PRC, if a manufacturer makes the
      adjustments to its methods and procedures recommended by the SFDA earlier
      on in the product approval process, it is likely that the SFDA will
      approve the new product for production. </TD></TR>
  <TR vAlign=top>
    <TD align=center width="8%" style="border-style: solid; border-width: 1">10 </TD>
    <TD align=justify width="20%" style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Commercial Production </TD>
    <TD align=justify style="border-style: solid; border-width: 1">
    <p style="margin-left: 10pt; margin-right: 10pt">Following issuance of state and
      provincial production permits and certifications, we may begin production
      of the new product. </TD></TR></TABLE>
<P align=justify><B><I>Pricing </I></B></P>
<P align=justify>In addition, there are regulations regarding the retail price,
rather than regulations of wholesale prices, of our products. According to the
&#147;Regulations on controlling blood products&#148; promulgated by the State Council in
1996,
the price (retail) setting standard and regulatory functions reside with regional offices of the Pricing Bureau and the Ministry of Health. Presently, there are retail pricing guidelines for hospitals which sell our human albumin and immunoglobulin
products to patients as prescribed by the relevant regulators in each region. The retail pricing guidelines are established based on, amongst other things, the regional living standards and the cost of production of the manufacturers. The hospitals
cannot sell the products to patients at prices exceeding the highest retail price prescribed by the relevant regulators. There is no pricing guideline on the ex-factory price to the hospital and the distributors. The highest retail price guideline
is revised occasionally.</P>
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<P align="justify">
<B>Our Properties and Facilities</B><BR>
</P>
<P align="justify">
All land in China is owned by the government. Individuals and companies are permitted to acquire land use rights for specific purposes. Industrial land use rights are granted for a period of 50 years. This period may be renewed at the expiration of
the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.</P>
<P align="justify">
In July 2003, Shandong Taibang obtained certain land use rights from the PRC municipal government to 43,663 square meters consisting of manufacturing facilities, warehouses and office buildings in Tai'an City, Shandong Province. Shandong Taibang is
required to make payments totaling approximately &#36;20,015 (RMB138,848) per year to the local state-owned entity, for the 50 year life of the rights or until the Shandong Institute completes its privatization process. We recorded &#147;land use
rights&#148; equal to &#147;other payable &#150; land use rights&#148; totaling &#36;325,390 and &#36;305,571 as of December 31, 2008 and 2007, respectively, determined using present value of annual payments over 50 years.</P>
<P align="justify">
The Company's 48.6% indirectly owned subsidiary, Qianfeng, entered into a lease agreement on June 1, 2006 with a group of individuals in an area located next to its production facility, to lease and use the space for processing industrial
wastes for 10 years. The annual lease amount is approximately &#36;1,529 (RMB 10,438).</P>
<P align="justify">
We believe that all of our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.</P>
<P align="justify">
Some of our properties are leased from third parties. We have entered into formal lease agreements with two of them. The remaining leases are on a verbal basis. In all cases, the lessors have not been able to provide copies of documentation
evidencing their rights to use the leased property. In most cases, the leased properties are small operating spaces we leased for our sales offices in different parts of China. In the event of any future dispute over the ownership of the leased
properties, we believe we could easily and quickly find replacement premises so that the operations would not be affected.<B> </B> </P>
<P align="justify">
<B>Legal Proceedings</B><BR>
</P>
<P align="justify">
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise
from time to time that may harm our business. Except as disclosed below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating
results.</P>
<P align="justify">
<B><I>Transfers of Equity Interests</I></B><BR>
</P>
<P align="justify">
Mr. Zu Ying Du was one of the original equity holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement, among the original equity holders, Mr. Du was obligated to make a capital contribution of RMB 20 million (or
approximately &#36;2.6 million) for a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed to repay Beijing Chen Da for his
loan of the capital contribution amount. Mr. Du disputes that the money was due and owing. A Beijing court found that Beijing Chen Da had given money to Mr. Du but found that the loan agreement failed to comply with Chinese law. A notice was issued
on July 5, 2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a stay of the Beijing action pending their investigation into money laundering relating to the 20 million RMB loan to Zu Ying Du.</P>
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<P align="justify">
Subsequently, Beijing Chen Da entered into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB 20 million debt. This agreement
was signed by Mr. Du's brother who held a power of attorney from Mr. Du. Mr. Du disputes the legitimacy of this transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued his brother in the
court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently
the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei
Jingzhou Intermediate Court.</P>
<P align="justify">
Missile Engineering, another original equity holder wholly controlled by Mr. Du, was obligated to contribute RMB 32.8 million (or &#36;4.2 million) for a 41% interest in Shandong Taibang by means of cash, equipment and patent technology. It was
obligated to obtain new drug certificate and production license of its patent technology from the government within a stipulated period in order to be recognized as a valid capital contribution, or in the alternative, make a cash payment. The patent
technology was valued as RMB 26.4 million (or approximately &#36;3.4 million). However, Missile Engineering failed to obtain the new drug certificate and production license within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders resolution on September 26, 2004, Missile Engineering agreed to sell its 41% interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB 26.4 million in cash. Missile Engineering disputes this transaction and sued the brother of Mr. Du in the court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the
power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei Jingzhou Intermediate Court.</P>
<P align="justify">
In June 10, 2005, Beijing Chen Da also sold its equity interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a share transfer agreement, which became effective on September 2, 2005, upon approval by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our subsidiary.</P>
<P align="justify">
In 2006, Missile Engineering applied for arbitration before the China International Economic and Trade Arbitration Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing Investments Limited, of the equity interests in
Shandong Taibang formerly owned by Missile Engineering. The equity transfer had been approved by the Shandong Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile Engineering later voluntarily withdrew
this application and instead applied for administrative reconsideration of the equity transfer, but this application was rejected by the Ministry of Commerce in 2007. Missile Engineering applied with the District Court of Lixia District, Jinan City,
Shandong province requesting revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by Missile Engineering. Missile Engineering later voluntarily withdrew the action. In April 2007, Logic Express initiated an arbitration
proceeding before the Shandong Tai'an Arbitration Committee, to establish that Logic Express is the lawful shareholder of Shandong Taibang. The parties to that proceeding were Logic Express Ltd. and Shandong Taibang Biological Products Co.,
Ltd. The Arbitration Committee's decision on September 6, 2007 confirmed that Logic Express had legitimate ownership as a result of the transfer of Shandong Taibang. Up-Wing started an action in the Intermediate Court of Tai'an City,
Shandong province requesting the court to establish that Up-Wing is the lawful shareholder of Shandong Taibang. The Intermediate Court of Tai'an City, Shandong province on December 20, 2007 rejected the application on the basis that the same
matter had been tried by the arbitration panel.</P>
<P align="justify">
Up-Wing filed a defamation case in the District Court of Hi-technology and Industry Development District, Tai'an City, Shandong province claiming defamation against Mr. Du and the 21<SUP>st</SUP> Century Economic Report Newspaper. Judgment in
favor of Up-Wing was rendered on July 22, 2008 ordering the newspaper and Mr. Du to publish an apology to Up-Wing.</P>
<P align="justify">
Mr. Du and Missile Engineering have filed two actions in the Intermediate Court of Wuhan City, Hubei province, against the following defendants, Du Hai Shan, his brother, Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have
requested that the Wuhan Intermediate Court to restore the equity interests originally held by the plaintiffs, 25% equity interest held by Mr. Du and 41% equity interest held by Missile Engineering. The Wuhan Intermediate Court has issued a
preliminary order attaching 66% of the equity of Shandong Taibang pending the outcome of the case.</P>
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<P align="justify">
Dr. Du has alleged that Mr. Lam, the current CEO of our subsidiary Taibang, was formerly known as Lin Zepin and that the individual, Lin Zepin, was court martialed for smuggling in Fujian in 1999. Dr. Du alleges that Lin Zepin was released from
prison in 2003. Mr. Lam denies these statements and has provided an affidavit stating that he was never know as Lin Zepin and has not been convicted of any crime. If it were determined that Mr. Lam, the CEO of Taibang, was formerly known as Lin
Zepin and was in fact convicted of a crime, our business and results of operations could be adversely affected.</P>
<P align="justify">
Failure to resolve these disputes in our favor may adversely affect our business and operations. </P>
<P align="justify">
<B><I>Bobai County Collection Station</I></B><BR>
</P>
<P align="justify">
In January 2007, the Company's PRC subsidiary, Shandong Taibang, advanced &#36;413,697 (RMB3.0 million) to Feng Lin, the 20% minority shareholder in Fang Cheng Plasma Company, the Company's majority owned subsidiary, for the purpose of
establishing or acquiring a plasma collection station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan Plasma Collection Co., Ltd. (&#147;Bobai&#148;) in Bobai County, Guangxi and on January 18, 2007, Shandong Taibang signed a
letter of intent to acquire the assets of the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr. Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co., Ltd. (&#147;Hua Lan&#148;) filed suit in the District
Court of Hong Qi District, Xin Xiang City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang established and/or sought to operate the Bobai Plasma Collection Station using a permit for collecting and supplying human plasma
in Bobai County, that was originally granted to Hua Lan by the government of the Guangxi region, without Hua Lan's permission. The establishment and registration of Bobai was never realized as a result of this law suit. On January 29, 2007, on
Hua Lan's motion, the District Court entered an order to freeze funds in the amount of approximately &#36;386,100 (RMB3,000,000) held by the defendants in the case, including approximately &#36;65,750 (RMB500,000) in funds held in Shandong
Taibang's bank account in Tai'an City. A hearing was held on June 25, 2007 and judgment was entered against the defendants along with a &#36;226,780 (RMB1,700,000) joint financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the judgment against the three defendants and increased the amount of the joint financial judgment to approximately &#36;405,954 (RMB3,000,000). </P>
<P align="justify">
In January 2008, Hua Lan enforced the judgment granted by the High Court to freeze the Company's bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Tai'an City District Court to seek recovery of any losses in
connection with Hua Lan's claim and to request that the Tai'an City District Court preserve Hua Lan's property or freeze up to approximately &#36;411,300 (RMB 3 million) of Hua Lan's assets to secure the return of such funds to the
Company. The intermediate court in Tai'an City accepted the application on February 14, 2008 but the matter is still pending. Pending the outcome of the proceedings, Shandong Taibang increased its loss contingency reserve during its fourth quarter of
2007 from approximately &#36;75,593 (RMB566,667) to &#36;133,400 (RMB1,000,000) to cover its share of the enforcement of this judgment. During the fourth quarter of 2008, full amount of the judgment, including Feng Lin and Keliang Huang's
portions of the judgment and the related fees, approximately &#36;456,222 (RMB 3,109,900) has been withdrawn from Shandong Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of the judgment, approximately
&#36;304,143 (RMB2,073,234), as receivable as a result of the withdraw. As of December 31, 2008, the Company determined that it is unlikely that the Company will be able to recover such receivable from those two individuals and wrote off the
receivable as bad debt expense. </P>
<P align="justify">
In light of the foregoing, it is unlikely that the Company's planned acquisition of the assets of Bobai will go forward.</P>
<P align="justify">
<B><I>Dispute among Qianfeng Shareholders over Raising Additional Capital</I></B><I> </I></P>
<P align="justify">
On May 28, 2007, a 91% majority of Qianfeng's shareholders approved a plan to raise additional capital from private strategic investors through the issuance of an additional 20,000,000 shares of Qianfeng equity interests at RMB 2.80 per share.
The plan required all existing Qianfeng shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority holder of Qianfeng's shares, the Guizhou Jie'an Company, or Jie'an, did not
support the plan and did not agree to waive its right of first refusal. On May 29, 2007, the majority shareholders caused Qianfeng to sign an Equity Purchase Agreement with certain investors, pursuant to which the investors agreed to invest an
aggregate of RMB 50,960,000 (approximately &#36;7,475,832) in exchange for 18,200,000 shares, or 21.4%, of Qianfeng's equity interests. At the same time, Jie'an also subscribed for 1,800,000
shares, representing its 9% pro rata share of the 20,000,000 shares being offered. The proceeds from all parties were received by Qianfeng in accordance with the agreement. </P>
<P align="center">
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<font FACE="TimesNewRoman" SIZE="2">
<p ALIGN="LEFT">In June 2007, Jie'an brought suit in the High Court of Guizhou
province, China, against Qianfeng and the three other original Qianfeng
shareholders, alleging the illegality of the Equity Purchase Agreement. In its
complaint, Jie'an alleged that it had a right to acquire the shares waived by
the original Qianfeng shareholders and offered to the investors in connection
with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High
Court ruled against Jie'an and sustained the Equity Purchase Agreement, but on
November 2008, Jie'an appealed the Guizhou High Court judgment to the People's
Supreme Court in Beijing. On May 13, 2009, the People's Supreme Court sustained
the ruling of the High Court of Guizhou and denied Jie'an's right of first
refusal claim over shares with respect to which the original Qianfeng
shareholders waived their right of first refusal. The registration of the new
investors as Qianfeng's shareholders and the related increase in registered
capital of Qianfeng with the Administration for Industry and Commerce is still
pending. Qianfeng is evaluating whether it has the right to rescind the Equity
Purchase Agreement and the transactions contemplated by that agreement, or the
2007 Financing. If Qianfeng does not have such rescission right, Dalin's
interests in Qianfeng would be reduced to approximately 41.3%. However, we will
be able to retain control over Qianfeng due to our right to appoint a majority
of Qianfeng's directors. Meanwhile, Qianfeng has set aside amounts received from the
investors and Jie'an in the 2007 Financing as well as amounts of dividends to
which the investors and Jie'an will be entitled if Qianfeng does not have the
right to rescind the 2007 Financing. </p>
</font>
<P align="justify">
<B><I>Dispute over Qianfeng Technical Consulting Agreement</I></B><BR>
</P>
<P align="justify">
In 1997, Qianfeng entered into a Technical Cooperation Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide certain fractionation equipment and transfer processing know-how to Qianfeng. In August 2004, Sin filed a law suit against
Qianfeng with the Intermediate Court in Guiyang City, China, alleging non-payment of RMB 100,000 (approximately, &#36;14,670) for his fractionation equipment and RMB 5,000,000 (approximately, &#36;733,500) for the transfer of his technological
know-how. The Intermediate Court ruled in favor of Sin and found that Qianfeng owed Sin RMB 10,376,160 (approximately, &#36; 1,522,183), but Qianfeng appealed the Intermediate Court ruling to the Guizhou High Court. The Guizhou High Court agreed in
part with Qianfeng's grounds for appeal and reduced the amount of know-how transfer fee to RMB 1,970,413 (approximately, &#36;289,060). In May 2007, Sin appealed the Guizhou High Court's decision to the People's Supreme Court in
Beijing. The People's Supreme Court heard in April 2008, but had not issued its decision as of the date of this prospectus.  </P>
<P align="justify">
<B><I>Qianfeng Product Liability Claims</I></B></P>
<P align="justify">
In January 2008, Qianfeng, along with two local hospitals and a local blood center, was sued in the Zhuhui District Court in Hengyang, Hunan province, China, by a resident of Hunan province, for RMB 1,749,358 (approximately, &#36;256,631) in
damages, in connection with his alleged HIV contamination via blood transfusion during the plaintiff's treatment following an April 2006 traffic accident. The Zhuhui District Court awarded the plaintiff RMB 200,000 (approximately, &#36;29,340),
but found that the defendants were not responsible for his HIV contamination. All parties appealed to the Zhuhui Middle Court. On December 4, 2008, the Zhuhui Middle Court remanded the case to the lower court for retrial, on grounds that the HIV
contamination could not be directly linked to the plaintiff's treatment by the hospitals or to Qianfeng's products. There have been no further developments on this case as of the date of this prospectus. </P>
<P align="justify">
On November 10, 2006, Qianfeng and eight other defendants were sued in the Sigu District Court of Hengyang County, Hunan province, China, by a resident of Hunan province, for RMB 725,606 (approximately, &#36;106,446) in damages, in connection with
his alleged Hepatitis C contamination via blood transfusion and injection of plasma-based products, during the plaintiff's August 2004 treatment for hemophilia. On December 8, 2008, the Sigu District Court ruled in favor of the plaintiff and
held Qianfeng liable for 10% of the total RMB 18,293 (approximately, &#36;2,680) judgment against three of the defendants. All three defendants, including Qianfeng appealed the district court ruling to the Intermediate Court of the Hengyang County.
On May 4, 2009, the Intermediate Court ruled against the defendants and sustained the original district court ruling. As of result, Qianfeng is liable and obligated to pay the plaintiff RMB 18,293 (approximately, &#36;2,680 in damages and related
court fees. </P>
<P align="justify">
<B><I>Administration Interference</I></B></P>
<P align="justify">
Qianfeng is party to an administrative proceeding against the government of the Qiandongnan Autonomous Region, or the Qiandongnan Authorities, in Guizhou Province, China, in connection with the ownership of three of Qianfeng's eight plasma
stations in Guizhou Province. Qianfeng was authorized to acquire a total of eight plasma stations in Guizhou Province based on several national and provincial administrative authorizations issued by the PRC State Council and the Guizhou Ministry of
Health between 2006 and 2007, but to date, the governmental authorizations have not been fully implemented by the
Qiandongnan Authorities. In early 2007, Qianfeng submitted RMB 8,010,000
(approximately $1,173,465) to the local finance department of Sansui County,
Qiandongnan, for acquiring the Sansui Plasma Collection Station (&#147;Sansui&#148;), but
the local finance department refused to honor the purchase and returned the full
consideration to Qianfeng. Furthermore, subsequent local rulings published by
the Qiandongnan Authorities February 28, 2008 appear to authorize another
private company to acquire the Sansui and two other stations, the Zhengyuan
Plasma Collection Station and the Shibing Plasma Collection Station. In December
2008 Qianfeng filed an administrative review application with the People's
Government of Guizhou Province, or the Guizhou Provincial Government, but the
Guizhou Provincial Government has delayed making a final decision pending
further review of regulations regarding administrative authorizations. Qianfeng
has received verbal notification from staff in the Guizhou Provincial Government
that the Qiandongnan Authorities have withdrawn the local rulings authorizing
acquisition of the three plasma stations, but management has not received any
written confirmation of such withdrawal. As a result, Qianfeng has maintained
its application with the Guizhou Provincial Government for a formal
administrative ruling on its right to acquire all eight plasma stations in
Guizhou Province. In addition, Qianfeng has set aside the purchase price payable
for Sansui pending the outcome of the administrative review. </P>
<P align="center">
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<P align=justify><B>Our Employees</B><BR></P>
<P align=justify>As of March 31, 2009, we employed approximately 753 full-time
employees, including the recently established plasma companies and Shandong
Medical, of which approximately 113 were seconded to us by the Shandong
Institute.</P>
<P align=justify>We believe that we maintain a satisfactory working relationship
with our employees and we have not experienced any significant labor disputes or
any difficulties in recruiting staff for our operations.</P>
<P align=justify>As required by applicable Chinese law, we have entered into
employment contracts with most of our officers, managers and employees. We are
working towards entering into employment contracts with those employees who do
not currently have employment contracts with us.</P>
<P align=justify>The PRC enacted a new Labor Contract Law, which became
effective on January 1, 2008. We have updated our employment contracts and
employee handbook and are in compliance with the new law. We will work with the
employees and the labor union to insure that our employees obtain the full
benefit of the law. We do not anticipate that changes in the law will materially
impact our balance sheet and cash flows.</P>
<P align=justify>Our employees in China participate in a state pension plan
organized by Chinese municipal and provincial governments. We are required to
contribute to the plan at the rates ranging of the average monthly salary of
20%. The compensation expenses related to this plan were $220,493 and $171,802
for the fiscal years 2008 and 2007, respectively. Other major contributions
include medical insurance (7%), unemployment insurance (2%) and housing
provision fund (8%) for employees seconded from the Shandong Institute. In
addition, we are required by Chinese law to cover employees in China with
various types of social insurance. We have purchased social insurances for all
of our employees.</P>
<P align=center><B>MANAGEMENT</B><BR></P>
<P align=justify><B>Directors and Executive Officers</B><BR></P>
<P align=justify>The following sets forth the name and position of each of our
current executive officers and directors.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="45%"><B>NAME</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><B>AGE</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      width="45%">
    <p style="margin-left: 20"><B>POSITION</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium" width="45%">Siu Ling Chan </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium">45 </TD>
    <TD align=left width="45%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium">
    <p style="margin-left: 20">Chairwoman of the Board </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="45%">Chao Ming Zhao </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=center width="10%">35 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="45%">
    <p style="margin-left: 20">Chief
      Executive Officer and President </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium" width="45%">Yu-Yun Tristan Kuo </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">54 </TD>
    <TD align=left width="45%" bgColor=#e6efff style="border-style: none; border-width: medium">
    <p style="margin-left: 20">Chief Financial Officer </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="45%">Lin Ling Li </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=center width="10%">45 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
      width="45%">
    <p style="margin-left: 20">Director </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium" width="45%">Sean Shao </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">52 </TD>
    <TD align=left width="45%" bgColor=#e6efff style="border-style: none; border-width: medium">
    <p style="margin-left: 20">Director </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left width="45%">Jie Gan </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=center width="10%">40 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" align=left
      width="45%">
    <p style="margin-left: 20">Director </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: none; border-width: medium" width="45%">Tong Jun Lin </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-style: none; border-width: medium">45 </TD>
    <TD align=left width="45%" bgColor=#e6efff style="border-style: none; border-width: medium">
    <p style="margin-left: 20">Director </TD></TR></TABLE>
<P align=center>- 61 -</P>
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<P align="justify">
<B>Siu Ling Chan</B>. Ms. Chan has been our director since July 19, 2006. She has been our chairwoman since January 1, 2007 and served as our CEO from January 2007 to March 2007. Ms. Chan is also currently a director of our subsidiary Logic Express.
She was also appointed as the director of Shandong Taibang in April 2006. Prior to joining us, Ms. Chan worked from 1991 to 2005, as an administrator at the Fujian Academy of Social Sciences, and from 1989 to 1991 as a statistician at the Fujian
Pingtan Economy Committee. She received her diploma in Statistics from Xiamen University in 1989 and a diploma in management from the Fujian Party Committee School in 2004.</P>
<P align="justify">
<B>Chao Ming Zhao</B>. Mr. Zhao has been our Chief Executive Officer since June 1, 2008. Mr. Zhao was our Chief Financial Officer from November 2006 to until his appointment as our Chief Executive Officer, and has been the Chief Financial Officer of
our operating subsidiary, Shandong Taibang since September 2003. From February 2002 to June 2003, Mr. Zhao was the financial manager at EF English First (Fuzhou) School, where he was responsible for managing the school's accounting and its
internal control. He was a manager and auditor at Fujian (CFC) Group from July 1996 to January 2002, and was in charge of internal audit. Mr. Zhao is a certified accountant in the PRC and is an international registered internal auditor. Mr. Zhao
obtained his Bachelor's degree in Investment Economy Management from Fuzhou University in 1996 and received his MBA from the Chinese University of Hong Kong in 2006.</P>
<P align="justify">
<B>Yu-Yun Tristan Kuo</B>. Mr. Kuo has been our Chief Financial Officer since June 1, 2008 and has served as the Vice President-Finance of Shandong Taibang since September 2007. Mr. Kuo has more than 27 years of experience in accounting, financing
and information system for companies in the manufacturing, commodity trading and banking industries and has served in the capacity of CFO, CIO and Controller. Of these 27 years, Mr. Kuo has worked in the United States for 25 years and in Asia for 2
years. Prior to joining our company, Mr. Kuo worked for the Noble Group in Hong Kong as the IT Director from February through August 2007. Prior to that, Mr. Kuo served as the CFO of Cuisine Solution, Inc., a publicly traded company in Alexandria,
Virginia, from December 2002 to January 2007. Mr. Kuo also served as the Vice President of Information System for Zinc Corporation of America in Monaca, Pennsylvania from 2001 and 2007 and as Chief Information Officer and Controller of Wise Metals
Group in Baltimore, Maryland, the largest independent aluminum sheet producer in the U.S., from 1991 to 2001. Mr. Kuo obtained his Master's degree in Accounting from the Ohio State University and Bachelors degree in Economics from Soochow
University in Taipei.</P>
<P align="justify">
<B>Lin Ling Li</B>. Ms. Li has been a member of our board of directors since July 19, 2006. Since February 2006, Ms. Li has been the director of our subsidiary Logic Express, and since May 2004, she has been a director at Up-Wing Investment Limited,
a predecessor to Logic Express. Ms. Li was a technician at Fuzhou Fuxing Pharmaceutical Company from 1980 to 2000. From October 1998 to April 2006, she was a senior manager at Fuzhou Chengxin Dian Dang Company Limited, where she was involved in
financing, mortgage and loan industry. She holds a diploma in accounting from the Fujian Party Committee School of Finance and Accounting in October 1994.</P>
<P align="justify">
<B>Sean Shao</B>. Mr. Shao has been a member of our board of directors since July 24, 2008. He currently serves as an independent director of Agria Corporation, a China-based agricultural company listed in the U.S. He has served as the Chief
Financial Officer of Trina Solar Limited since August 2006, where he assisted them in listing on the NYSE in December 2006. Prior to that, Mr. Shao served, from September 2005 to August 2006, as the Chief Financial Officer of ChinaEdu Corporation, a
Chinese educational service provider, and from August 2004 to September 2005, as the Chief Financial Officer of Watchdata Technologies Ltd., a Chinese security software company. Prior to that Mr. Shao served, from October 1998 to July 2004, as a
senior manager at Deloitte Touche Tohmatsu CPA Ltd., Beijing, and from December 1994 to November 1997, as an assistant manager at Deloitte &amp; Touche, Toronto. Mr. Shao received his Master's degree in Health Care Administration from the
University of California at Los Angeles in 1988 and his Bachelor's degree in Art from East China Normal University in 1982. Mr. Shao is an associate member of the American Institute of Certified Public Accountants. Mr. Shao also serves as a
director of China Information Security Technology, Inc., a provider of public security services in China.</P>
<P align="justify">
<B>Dr. Jie Gan</B>. Dr. Gan has been a member of our board of directors since July 24, 2008.<B> </B>She has served as an associate professor of finance in the School of Business and Management at Hong Kong University of Science and Technology
(HKUST) since 2002. Prior to joining HKUST, Dr. Gan served, from 2000 to 2002, as an assistant professor at the Columbia University, Graduate School of Business. Dr. Gan has also worked as a consultant for CRA International (formerly Charles River
Associates), one of the largest finance and economics consulting firms in the U.S., and her consulting experience spans company valuation, securities fraud and anti-trust, in a range of industries including financial services, consumer goods and
energy. Dr. Gan holds a Master Degree of Urban Economics from Beijing University and a PhD in Financial Economics from Massachusetts Institute of Technology and has been published in top academic journals such as the
Journal of Financial Economics and the Review of Financial Studies.</P>
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<P align=justify><B>Dr. Tong Jun Lin</B>. Dr. Lin has been a member of our board
of directors since July 24, 2008. He has served as an Associate Professor in the
Departments of Microbiology and Immunology and Pediatrics, Dalhousie University
since 2000 and has focused his research in immune response to microbial
pathogens. Dr. Lin received his MD (1984) and PhD (1990) degrees from the
Institute of Materia Medica at the Chinese Academy of Medical Sciences, and his
post-doctoral training at the University of Alberta (1993-1997), Duke University
(1997-1998) and Dalhousie University (1998-2000). He has published 43
peer-reviewed research articles in leading journals and is a member of the
American Association of Immunologists and the Canadian Society for
Immunologists. Dr. Lin is a recipient of the New Investigator Award from
Canadian Institutes of Health Research (2003-2008) and an Award of Excellence in
Medical Research from Dalhousie University (2004).</P>
<P align=justify>There are no agreements or understandings for any of our
executive officers or directors to resign at the request of another person and
no officer or director is acting on behalf of nor will any of them act at the
direction of any other person. To the best of our knowledge and belief, there
are no arrangements or understandings with any of our principal stockholders,
customers, suppliers, or any other person, pursuant to which any of our
directors or executive officers were appointed.</P>
<P align=justify>Directors are elected until their successors are duly elected
and qualified.</P>
<P align=justify><B>Significant Employees</B><BR></P>
<P align=justify>The following sets forth the name and position of each of our
current significant employees.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="45%"><B>NAME</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="10%"><B>AGE</B> </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left
      width="45%">
    <p style="margin-left: 20"><B>POSITION</B> </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff width="45%">Tung Lam </TD>
    <TD align=center width="10%" bgColor=#e6efff>46 </TD>
    <TD align=left width="45%" bgColor=#e6efff>
    <p style="margin-left: 20">Chief Executive Officer of
      Shandong Taibang </TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: medium none #000000; " align=left width="45%">Yun Hua Gao </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; " align=center width="10%">55 </TD>
    <TD style="BORDER-BOTTOM: medium none #000000; " align=left width="45%">
    <p style="margin-left: 20">Chief
      Technical Adviser of Shandong Taibang </TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-top-style: none; border-top-width: medium" width="45%">Dian Cong Liu </TD>
    <TD align=center width="10%" bgColor=#e6efff style="border-top-style: none; border-top-width: medium">54 </TD>
    <TD align=left width="45%" bgColor=#e6efff style="border-top-style: none; border-top-width: medium">
    <p style="margin-left: 20">Chief Technical Adviser of
      Shandong Taibang </TD></TR></TABLE>
<P align=justify><B>Tung Lam</B>. Mr. Lam has been the Chief Executive Officer
of our operating subsidiary, Shandong Taibang, since October 2003, and is
responsible for the entire operation. Prior to joining the Company, Mr. Lam
served, from November 1999 to August 2003, as the vice president of Fujian
Province Fei Yue Group, where he was in charge of management investment.</P>
<P align=justify><B>Yun Hua Gao</B>. Mr. Gao is the Chief Technical Advisor of
our operating subsidiary, Shandong Taibang. In 1975, Mr. Gao was assigned to the
Shandong Institute and has been involved in the research and development work of
plasma products. From January 2000 to October 2000, he was head of the
production department at Shandong Biological Products Institute, and from
November 2002 to April 2004, he served as manager of the production department.
He graduated from Shandong Medical University majoring in medicine in 1975.</P>
<P align=justify><B>Dian Cong Liu</B>. Mr. Liu is the Chief Technical Adviser of
our operating subsidiary, Shandong Taibang. Mr. Liu has spent many years in the
area of biopharmaceutical research. Mr. Liu joined the Shandong Institute in
1978, and served as manager of the institute's placenta product department from
1986 to 1992 and as department head for the institute's quality assurance
department from December 2000 to September 2002. Mr. Liu was one of our founding
employees in 2002. He obtained his Bachelor's degree in Medicine from Shandong Weifang Medical School in 1978. Mr. Liu has also been certified as pharmacist by
the Shandong Food and Drug Administration since 2003.</P>
<P align=justify><B>Board Composition and Committees</B><BR></P>
<P align=justify>Our Board is currently composed of five members, three of whom
are &#147;independent&#148; directors, as that term is defined in Rule 5605(a)(2) of the
Listing Rules of The Nasdaq Stock Market, Inc., or the NASDAQ Listing Rules. All
actions of the board of directors require the approval of a majority of the
directors in attendance at a meeting at which a quorum is present. Our directors
have a duty of to act in good faith with a view to our interests. In fulfilling
their duty of care to us, our directors must ensure compliance with our
Certificate of Incorporation. Board action requires the approval of a majority
of the directors in attendance at a meeting at which a
quorum is present. During 2008, our board met 6 times and except for two, who missed one meeting, no director missed more than 25% of the meetings of the board or any committee on which he or she sat. </P>
<P align=center>- 63 -</P>
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<P align="justify">
Our Board currently has three standing committees which, pursuant to delegated authority, perform various duties on behalf of and report to the Board: the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee.
Each of these Committees are comprised entirely of independent directors. From time to time, the Board may establish other committees. Each of the Compensation Committee and Corporate Governance and Nominating Committee were formed on August 7, 2008
and the Audit Committee was formed on July 24, 2008. During the fiscal year ended December 31, 2008, the audit committees met 3 times. Copies of the charters for each of our standing committees may be obtained from our website at
<U>http://www.chinabiologic.com</U>. </P>
<P align="justify">
<B><I>Compensation Committee</I></B><BR>
</P>
<P align="justify">
Our compensation committee consists of Mr. Tong Jun Lin, Dr. Jie Gan, and Mr. Sean Shao, each of whom is &#147;independent&#148; as that term is defined under the NASDAQ Listing Rules. Our compensation committee assists the Board in reviewing and
approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during
which his compensation is deliberated. Dr. Gan was appointed as Chair of the compensation committee.</P>
<P align="justify">
The compensation committee is responsible for, among other things: </P>
<UL style="text-align:justify;">
<LI>
approving and overseeing the compensation package for our executive officers;</LI>
<LI>
reviewing and making recommendations to the Board with respect to the compensation of our directors;</LI>
<LI>
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives, and setting the compensation level
of our chief executive officer based on this evaluation; and</LI>
<LI>
reviewing periodically and making recommendations to the Board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.</LI>
</UL>
<P align="justify">
The Compensation Committee has sole authority to retain and terminate outside counsel, compensation consultants retained to assist the Compensation Committee in determining the compensation of the Chief Executive Officer or senior executive
officers, or other experts or consultants, as it deems appropriate, including sole authority to approve the firms' fees and other retention terms. The Compensation Committee may also form and delegate authority to subcommittees and may delegate
authority to one or more designated members of the Compensation Committee. The Compensation Committee may from time to time seek recommendations from the executive officers of the Company regarding matters under the purview of the Compensation
Committee, though the authority to act on such recommendations rests solely with the Compensation Committee.</P>
<P align="justify">
<B><I>Corporate Governance and Nominating Committee</I></B><BR>
</P>
<P align="justify">
Our corporate governance and nominating committee consists of Mr. Tong Jun Lin, Dr. Jie Gan, and Mr. Sean Shao, each of whom is &#147;independent&#148; as that term is defined in the NASDAQ Listing Rules. The corporate governance and nominating
committee assists the Board of Directors in identifying individuals qualified to become our directors and in determining the composition of the Board and its committees. Dr. Lin was appointed as Chair of the corporate governance and nominating
committee.</P>
<P align="justify">
The corporate governance and nominating committee is responsible for, among other things: </P>
<UL style="text-align:justify;">
<LI>
identifying and recommending to the Board nominees for election or re-election to the board, or for appointment to fill any vacancy;</LI>
<LI>
reviewing annually with the Board the current composition of the Board in light of the characteristics of independence, age, skills, experience and availability of service to us;</LI>
<LI>
identifying and recommending to the Board the directors to serve as members of the Board's committees; and</LI>
<LI>
monitoring compliance with our code of business conduct and ethics.</LI>
</UL>
<P align="center">
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<A name="page_65"></A>

<P align="justify">
<B><I>Audit Committee and Audit Committee Financial Expert</I></B><BR>
</P>
<P align="justify">
Our board of directors established an audit committee on July 24, 2008 and appointed Mr. Sean Shao, Dr. Jie Gan, and Dr. Tong Jun Lin to serve as members of the committee, each of whom our board determined to be &#147;independent&#148; as that term
is defined by the NASDAQ Listing Rules. Mr. Shao was appointed as the Chair of the audit committee.</P>
<P align="justify">
Our audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit committee is responsible for, among other things:</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 12">selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">reviewing with our independent auditors any audit problems or difficulties and management's response;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">reviewing and approving all proposed related-party transactions;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">discussing the annual audited financial statements with management and our independent auditors;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant internal control deficiencies;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">annually reviewing and reassessing the adequacy of our audit committee charter;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">such other matters that are specifically delegated to our audit committee by our board of directors from time to time;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">meeting separately and periodically with management and our internal and independent auditors; and</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 12">reporting regularly to the full board of directors.</LI>
</UL>
<P align="justify">
Our board of directors has determined that Mr. Shao possesses the accounting or related financial management experience that qualifies him as financially sophisticated within the meaning of Rule 5605(c)(2)(A) of the NASDAQ Listing Rules and that he
is an &#147;audit committee financial expert&#148; as defined by the rules and regulations of the SEC.</P>
<P align="justify">
<B><I>Family Relationships</I></B><BR>
</P>
<P align="justify">
Ms. Siu Ling Chan is the wife of Mr. Tung Lam. There are no other family relationships among any of our officers and directors.<B><I> </I></B> </P>
<P align="justify">
<B><I>Involvement in Certain Legal Proceedings</I></B><BR>
</P>
<P align="justify">
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the
past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities
laws, except for matters that were dismissed without sanction or settlement.  Except as set forth in our discussion below in &#147;Transactions with Related Persons, Promoters and Certain Control Persons; Corporate Governance,&#148; none of our
directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the
SEC.<B> </B></P>
<P align="justify">
<B><I>Code of Ethics</I></B><BR>
</P>
<P align="justify">
On March 25, 2008, our board of directors adopted a code of ethics, which applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, and principal accounting officer. The code of
ethics is designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships; full, fair, accurate, timely and
understandable disclosure in reports and documents that we file with, or submit
to, the SEC, and in other public communications that we made; compliance with
applicable government laws, rules and regulations; the prompt internal reporting
of violations of the code to the appropriate person or persons; and
accountability for adherence to the code.</P>
<P align="center">
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<P align=justify>The Code of Ethics requires the highest standard of ethical
conduct and fair dealing of its senior financial officers, or SFO, defined as
the Chief Executive Officer and Chief Financial Officer. While this policy is
intended to only cover the actions of the SFO, we expect our other officers,
directors and employees will also review our code and abide by its provisions.
We believe that our reputation is a valuable asset and must continually be
guarded by all associated with us so as to cam the trust, confidence and respect
of our suppliers, customers and stockholders.</P>
<P align=justify>A copy of the Code of Ethics has been filed as Exhibit 14 of
our annual report on Form 10-KSB, filed on March 28, 2008.</P>
<P align=center><B>EXECUTIVE COMPENSATION </B></P>
<P align=justify><B>Summary Compensation Table &#150; 2008 and 2007 </B></P>
<P align=justify>The following table sets forth information concerning all cash
and non-cash compensation awarded to, earned by or paid to the named persons for
services rendered in all capacities during the noted periods. No other executive
officers received total annual salary and bonus compensation in excess of
$100,000.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-left: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2><B>Non-</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2><STRONG>Non-</STRONG>&nbsp;&nbsp;
      </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Equity</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><STRONG>qualified</STRONG>&nbsp;
      </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Incentive Plan</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><STRONG>Deferred</STRONG>&nbsp;
      </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Stock</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Option</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Compensation&nbsp;</B>
    </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
      size=2><STRONG>Compensation</STRONG></FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
      size=2><STRONG>&nbsp;All</STRONG>&nbsp;<STRONG>Other</STRONG> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2><B>Name</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Salary</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Bonus</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Awards&nbsp;</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
      size=2>&nbsp;<STRONG>Awards</STRONG></FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Earnings</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Earnings&nbsp;</B></FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
      size=2>&nbsp;&nbsp;&nbsp;<B>Compensation</B>&nbsp;</FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp;<STRONG>Total</STRONG>
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2><B>and</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>Year</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
    size=2><STRONG>($)</STRONG>&nbsp;</FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT
      size=2>&nbsp;&nbsp;&nbsp;<B>($)</B>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2><B>($)</B> </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1">
    <p style="margin-left: 5"><FONT size=2><B>Principal</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-left: 5"><FONT size=2><B>Position</B> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-right-style:solid; border-right-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff rowSpan=2 style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-left: 5"><FONT size=2>Stanley Wong, </FONT><BR><FONT size=2>former CEO
      <SUP>(1)</SUP> </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2008 </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$ 65,493
      </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$38,684
      </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$67,370
      </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$2,346
      </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$173,893
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2007 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$100,611 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$10,637 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$4,082 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$115,330 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left rowSpan=2 style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-left: 5"><FONT size=2>Chao Ming Zhao,
      </FONT><BR><FONT size=2>CEO and</FONT> <FONT size=2>former </FONT><BR><FONT size=2>CFO <SUP>(2)</SUP> </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2008 </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$148,208
    </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$34,377
</FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$154,954
    </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$337,539
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2007 </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$84,674 </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$16,126 </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$8,288 </FONT></TD>
    <TD align=right width="10%" style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$109,088 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff rowSpan=2 style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-left: 5"><FONT size=2>Yu-Yun
      </FONT><BR><FONT size=2>Tristan Kuo, CFO<SUP>(3)</SUP> </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2008 </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$179,805
    </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$20,582
</FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$101,055
    </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$301,442
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>2007 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>$43,950 </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-left-style: solid; border-left-width: 1; border-top-style:solid; border-top-width:1; border-bottom-style:solid; border-bottom-width:1">
    <p style="margin-right: 5"><FONT size=2>- </FONT></TD>
    <TD align=right width="10%" bgcolor="#E6EFFF" style="border-style:solid; border-width:1; ">
    <p style="margin-right: 5"><FONT size=2>$43,950 </FONT></TD></TR></TABLE>
_____________<BR>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(1) </FONT></TD>
    <TD><FONT style="font-size: 8pt">
      <P align=justify>Stanley Wong served as our CEO from March 2007 until June
      1, 2008.</P></FONT></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(2) </FONT></TD>
    <TD><FONT style="font-size: 8pt">
      <P align=justify>Chao Ming Zhao has served as our CEO since June 1, 2008
      and has also served as the Chief Financial Officer of our subsidiary
      Shandong Taibang since September 2003. He served as our CFO from November
      2006 until June 1, 2008.</P></FONT></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(3) </FONT></TD>
    <TD><FONT style="font-size: 8pt">
      <P align=justify>Yu-Yun Tristan Kuo has served as our Chief Financial
      Officer since June 1, 2008 and has served as the Vice President- Finance
      of Shandong Taibang since September 2007</P></FONT></TD></TR></TABLE>
<P align=center>- 66 - </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_67></A>
<P align=justify><B>Summary of Employment Agreements and Material Terms </B></P>
<P align=justify>Pursuant to an employment agreement which became effective
March 8, 2007, as consideration for his services as our Chief Executive Officer,
Mr. Wong received a monthly salary of $12,800, plus a bonus equals to one month
of salary payable at the end of each year and monthly round trip tickets from
Jinan to Hong Kong. Mr. Wong's employment agreement terminated upon his
resignation as or Chief Executive Officer on June 1, 2008. On May 9, 2008, we
entered into a consulting agreement with Mr. Wong, pursuant to which we agreed
to pay Mr. Wong a monthly fee of RMB 40,000 or its HK$ equivalent (approximately
$5,725), as consideration for performance of his duties as consultant. We also
agreed to grant Mr. Wong a ten-year non-qualified option under the 2008 Plan,
for the purchase of 50,000 shares our common stock, at an exercise price of
$4.00 per share. The term of the consulting agreement commenced on June 1, 2008,
and expired on December 31, 2008, in accordance with its terms.</P>
<P align=justify>Pursuant to an employment agreement, as consideration for his
services as our Chief Financial Officer and as a director, Chao Ming Zhao
received a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400), payable on December 31 of each year.
On May 9, 2008, we entered into a new employment agreement with Mr. Zhao,
pursuant to which we agreed to pay him an annual salary of RMB 1,060,000
(approximately $151,368) per annum, as consideration for performance of his
duties as Chief Executive Officer. We also agreed to pay Mr. Zhao an annual
bonus equal to one month's salary and Mr. Zhao may be eligible to receive
additional bonus compensation as may be awarded by our board of directors at
their sole discretion. We also agreed to grant to Mr. Zhao a ten-year nonstatutory stock option under the 2008 Plan, for the purchase of 115,000
shares of our common stock, at an exercise price of $4.00 per share. The stock
option immediately vested.</P>
<P align=justify>Pursuant to the terms of Mr. Yu-Yun Tristan Kuo's employment
agreement, dated May 9, 2008, we agreed to pay Mr. Kuo an annual salary of RMB
1,320,000 (approximately $188,900), as consideration for performance of his
duties as Chief Financial Officer. We also agreed to pay Mr. Kuo an annual bonus
equal to one month's salary and Mr. Kuo may be eligible to receive additional
bonus compensation as may be awarded by our board of directors at their sole
discretion. We also agreed to grant to Mr. Kuo a ten-year nonstatutory stock
option under the 2008 Plan, for the purchase of 75,000 shares of our common
stock, at an exercise price of $4.00 per share. The stock option immediately
vested. In addition, we agreed to pay Mr. Kuo, within a month of the completion
of a private placement financing by the Company, a cash bonus equal to one
percent of the gross proceeds raised via such financing, or at the sole
discretion of Mr. Kuo, the number of shares of our common stock equivalent to
such cash amount. Furthermore, we are obligated to grant Mr. Kuo, within a month
of our listing on NASDAQ, NYSE or AMEX, an option to purchase 50,000 shares of
our common stock pursuant to the 2008 Plan. The exercise price of such option
will be the fair market value at the date of the grant and the option will be
immediately vested and exercisable on the date of the grant.</P>
<P align=justify><B>Outstanding Equity Awards at Fiscal Year End</B><BR></P>
<P align=justify>Other than as set forth below, none of our executive officers
received unexercised options, stock that has not vested or equity incentive plan
awards that remained outstanding as of the end of the fiscal year ended December
31, 2008.</P>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" DIR="ltr" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Name</b></font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Number of</b> <b>securities</b>
    <b>underlying</b> <b>unexercised options</b> <b>exercisable </b></font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Number of</b> <b>securities</b>
    <b>underlying</b> <b>unexercised</b> <b>options</b> <b>unexercisable</b>
    </font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Equity incentive</b> <b>plan
    awards:</b> <b>Number of securities</b> <b>underlying</b> <b>unexercised
    unearned options</b> </font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p ALIGN="JUSTIFY" style="margin-left: 10; margin-right: 10">Option</b> <b>
    exercise</b> <b>price ($)</b></font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Option</b> <b>expiration date</b></font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Number of shares or</b> <b>
    units of stock that have not</b> <b>vested</b> </font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Market value</b> <b>of shares
    of</b> <b>units of stock that have not vested</b> <b>($)</b></font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Equity incentive</b> <b>plan
    awards:</b> <b>Number of</b> <b>unearned shares,</b> <b>units or other</b>
    <b>rights that have not vested</b> </font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" valign="bottom">
    <font FACE="Times New Roman" SIZE="2"><b>
    <p style="margin-left: 10; margin-right: 10">Equity incentive</b> <b>plan
    awards:</b> <b>Market or payout</b> <b>value of unearned shares, units or
    other rights that</b> <b>have not vested</b> <b>($)</b> </font></td>
  </tr>
  <tr>
    <td style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-left: 10; margin-right:10">Chao Ming Zhao</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">115,000</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">4.00</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">6/1/2018</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
  </tr>
  <tr>
    <td style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-left: 10; margin-right:10">Yu-Yun Tristan Kuo</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">75,000</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">4.00</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">6/1/2048</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1; border-bottom-style:solid; border-bottom-width:1">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
    <td WIDTH="8%" align="right" style="border-style:solid; border-width:1; ">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-right: 10; margin-left:10">-</font></td>
  </tr>
  </table>
<P align=center>- 67 -</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=--><A name=page_68></A><BR>
We use the Black-Scholes option pricing model to measure the
fair value of stock options, granted in 2008. The determination of the fair
value of stock-based compensation awards on the date of grant using an
option-pricing model is affected by our stock price as well as assumptions
regarding a number of complex and subjective variables, including the expected
volatility of our stock price over the term of the awards, actual and projected
employee stock option exercise behaviors, risk-free interest rate and expected
dividends.<P align=justify><B>Compensation of Directors </B></P>
<P align=justify>The following table sets forth certain information concerning
the compensation paid to our directors for services rendered to us during the
fiscal year ending December 31, 2008:</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; <STRONG>Fees</STRONG>
      </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2><B>Nonqualified</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2>&nbsp; <STRONG>earned</STRONG>
      </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Non-Equity</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Deferred</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><STRONG>or paid in</STRONG>
    </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Stock</B> </FONT></TD>
    <TD align=left width="2%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Option</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Incentive Plan </B></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" ><FONT size=2><STRONG>Compensation
      </STRONG></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" ><FONT size=2><STRONG>All
      Other</STRONG> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><STRONG>cash</STRONG></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Awards</B> </FONT></TD>
    <TD align=left width="2%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Awards</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><STRONG>Compensation
      </STRONG></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" ><FONT
      size=2><STRONG>Earnings</STRONG> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%"><FONT size=2><B>Compensation </B></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" ><FONT
      size=2><STRONG>Total</STRONG> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2><B>Name</B> </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT
    size=2><STRONG>&nbsp;($)</STRONG></FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>($)</B> </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Siu Ling Chan </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>103,648 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>67,370 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>171,018 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Lin Ling Li </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>103,648 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>67,370 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>171,018 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Sean Shao </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>10,516 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>36,940 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>47,456 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Jie Gan </FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>7,887 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>36,940 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>44,827 </FONT></TD>
    <TD align=left width="2%" style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1" ><FONT size=2>&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Tong Jun Lin </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>7,887 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>36,940 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD>
    <TD align=right width="7%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>44,827 </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>&nbsp;</FONT></TD></TR></TABLE>
<P align=justify>All directors receive reimbursements from us for expenses which
are necessarily and reasonably incurred by them for providing services to us or
in the performance of their duties. Our directors who are also our employees
receive compensation in the form of salaries, housing allowances, employee
insurance and benefits in kind. Our executive directors do not receive any
compensation in addition to their salaries in their capacity as directors or
other remunerations as members of our management team. However, we do pay their
expenses related to attending board meetings and participating in board
functions.</P>
<P align=justify>On July 19, 2006, we entered into director employment
agreements with Ms. Siu Ling Chan and Ms. Lin Ling Li, pursuant to which they
receive a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400) payable on December 31 of each year,
as consideration for their services as directors.</P>
<P align=justify>On July 24, 2008, we entered into independent director
agreements with Mr. Sean Shao, Dr. Jie Gan, and Dr. Tong Jun Lin. Under the
terms of the independent director agreements, we agreed to pay each an annual
salary of $18,000 as compensation for the services to be provided by them as
independent directors, except that Mr. Shao will receive an additional $6,000 as
compensation for his role as head of our Audit Committee. In addition, we agreed
to grant to each independent director an option to purchase 20,000 shares of our
common stock, with an exercise price of $4.00 per share, of which 10,000 shares
vested on January 25, 2009 and the remaining 10,000 shares will be vested on
July 25, 2009.</P>
<P align=center>- 68 - </P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
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<A name="page_69"></A>

<P align=center><B>TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN
CONTROL PERSONS; CORPORATE GOVERNANCE</B></P>
<P align=justify><B>Transactions with Related Persons </B></P>

<P align="justify">
The following includes a summary of transactions since the beginning of the 2008 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved that exceeded or exceeds the lesser of
&#36;120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item
11. &#147;Executive Compensation&#148;). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid
or received, as applicable, in arm's-length transactions.</P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 0">On May 9, 2008, we entered into a consulting agreement with Mr. Stanley Wong, our former Chief Executive Officer until June 1, 2008, pursuant to which we agreed to pay Mr. Wong a monthly fee of RMB 40,000 or its HK&#36; equivalent (approximately
&#36;5,725), as consideration for performance of his duties as consultant. We also agreed to grant Mr. Wong a ten-year non-qualified option under the 2008 Plan, for the purchase of 50,000 shares our common stock, at an exercise price of &#36;4.00
per share. The term of the consulting agreement commenced on June 1, 2008, and expired on December 31, 2008, in accordance with its terms.<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">During 2007, the Company advanced in total RMB 3,007,481 (approximately &#36;413,697) in cash to a 20% minority shareholder of one of the Company's plasma companies for the purchases of plasma collection license and certain equipments for its
Fang Cheng Plasma Company. However, the title transfer of those equipments, with the estimated value of approximately RMB 122,481 (approximately &#36;16,871), has not been realized. The Company determined that the likelihood of the minority
shareholder's ability to deliver the title of those equipments is minimal and made a provision for the amount of &#36;16,871 as of December 31, 2008. The Company also determined that the future cash flows expected to be generated from the Fang
Cheng plasma collection license had impaired as the plasma collected in 2008 did not warrant any carrying amount for the license. As a result, the Company recorded an impairment write-down of intangible assets for approximately RMB 2,885,000
(approximately &#36;415,873).<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">In 2007, the Company also prepaid &#36;516,456 to the same minority shareholder of one of the plasma companies. The prepayment is for the purpose of acquiring certain assets. Assets are expected to be received by January 2009. However, at December
31, 2008, the Company determined that the likelihood of recovering these advances and prepayment is minimal, due to the minority shareholder's ability to secure the title of the assets and the personal financial difficulty as a result of the
economic downturn, and made a provision for both amounts as bad debt expense as of December 31, 2008. The Company is currently negotiating with the shareholder in attempt to recover the fund. On April 6, 2009, our BVI subsidiary, Logic Express
entered into an equity transfer and entrustment agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of Biological Products, or the Shandong Institute, the holder of the minority interests in Shandong Taibang, pursuant to
which, Logic Express agreed to permit Shandong Taibang and the Shandong Institute to participate in the indirect purchase of Qianfeng's equity interests. Under the terms of the Entrustment Agreement, Shandong Taibang agreed to contribute 18% or
RMB 35,000,000 (approximately &#36;5,116,184) of the Dalin purchase price and the Shandong Institute agreed to contribute 12.86% or RMB 25,000,000 (approximately &#36;3,654,917) of the Dalin purchase price. Logic Express is obligated to repay to
Shandong Taibang and the Shandong Institute their respective investment amounts on or before April 6th, 2010, along with their pro rata share, based on their percentage of the Dalin purchase price contributed, of any distribution on the indirect
equity investment in Qianfeng payable to Logic Express during 2009. Logic Express has agreed that if these investment amounts are not repaid within five days of the payment due date, then Logic Express is obligated to pay Shandong Taibang and the
Shandong Institute liquidated damages equal to 0.03% of the overdue portion of the amount due until such time as it is paid. Logic Express has also agreed to pledge 30% of its ownership in Shandong Taibang to the Shandong Institute as security for
nonpayment. If failure to repay continues for longer than 3 months after the payment due date, then the Shandong Institute will be entitled to any rights associated with the pledged interests, including but not limited to rights of disposition and
profit distribution, until such time as the investment amount has been repaid. Logic Express also provided a guarantee that Shandong Taibang and the Shandong Institute will receive no less than a 6% return based on their original investment
amount.</LI>
</UL>
<P align="justify">
Except as set forth in our discussion above, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be
disclosed pursuant to the rules and regulations of the SEC.</P>
<P align="center">
- 69 -<BR>
</P>

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<A name="page_70"></A>

<P align="justify">
<B>Promoters and Certain Control Persons</B></P>

<P align="justify">
We did not have any promoters at any time during the past five fiscal years.</P>
<P align="center">
<B>CHANGE IN ACCOUNTANTS</B><BR>
</P>
<P align="justify">
None.<BR>
</P>
<P align="center">
<B>SELLING STOCKHOLDERS</B><BR>
</P>
<P align="justify">
This prospectus relates to the resale by the selling stockholders named below from time to time of up to a total of 3,582,803 shares of our common stock that are issuable to the selling stockholders pursuant to transaction described below which are
exempt from registration under the Securities Act.  All of the common stock offered by this prospectus is being offered by the selling stockholders for their own accounts.</P>
<P align="justify">
<B>June 2009 Private Placement</B><BR>
</P>
<P align="justify">
On June 10, 2009, we completed a private placement transaction with a group of accredited investors. Pursuant to the securities purchase agreement, we issued to the investors, or their designees, 3.8% senior secured convertible notes in the
aggregate principal amount of &#36;9,554,140, convertible into shares of our common stock and warrants to purchase up to 1,194,268 shares of our common stock at an exercise price of &#36;4.80 per share. The securities issued represented
approximately 13.41% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after closing date.</P>
<P align="justify">
As part of compensation for its services, Oppenheimer &amp; Co. Inc., or Opco, our placement agent in the transaction also received a three-year warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased
by first-time investors in the Company, at an exercise price of &#36;6.00 per share.</P>
<P align="justify">
The foregoing securities were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Rule 506 of Regulation D promulgated thereunder.
In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement.  The shares of our common stock issuable upon conversion or exercise of the convertible notes and warrants are being registered herein.</P>
<P align="justify">
<B>Selling Stockholders</B><BR>
</P>
<P align="justify">
The following table sets forth certain information regarding the selling stockholders and the shares offered by them in this prospectus. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholder and the percentage of ownership of that selling stockholder, shares of common stock underlying shares of convertible preferred stock, options or warrants held by that selling stockholder that are
convertible or exercisable, as the case may be, within 60 days of July 15, 2009 are included.  Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder. Each selling
stockholder's percentage of ownership in the following table is based upon 21,474,942 shares of common stock outstanding as of July 15, 2009. </P>
<P align="justify">
Except as specifically set forth in the footnotes to the table, none of the selling stockholders has held a position as an officer or director of the Company, nor has any selling stockholder had any material relationship of any kind with us or any
of our affiliates.  All information with respect to share ownership has been furnished by the selling stockholders. The shares being offered are being registered to permit public secondary trading of the shares and each selling stockholder may offer
all or part of the shares owned for resale from time to time. In addition, none of the selling stockholders has any family relationships with our officers, directors or controlling stockholders. Furthermore, except as specifically set forth in the
footnote to the table below, no selling stockholder is a registered broker-dealer or an affiliate of a registered broker-dealer. The selling stockholders who are also broker dealers are underwriters with respect to the shares that they are offering
for resale.</P>
<P align="justify">
For additional information, refer to &#147;Security Ownership of Certain Beneficial Owners and Management&#148; below. </P>
<P align="center">
- 70 -<BR>
</P>

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<P align=justify>The term &#147;selling stockholders&#148; also includes any transferees,
pledges, donees, or other successors in interest to the selling stockholders
named in the table below. To our knowledge, subject to applicable community
property laws, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such
person's name. We will file a supplement to this prospectus to name successors
to any named selling stockholders who are able to use this prospectus to resell
the securities registered hereby.</P>
<P align=justify>We will not receive any of the proceeds from the sale of any
shares by the selling stockholders. We have agreed to bear expenses incurred by
the selling stockholders that relate to the registration of the shares being
offered and sold by the selling stockholders, including the SEC registration fee
and legal, accounting, printing and other expenses of this offering.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Shares</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Shares</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Maximum</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Beneficially</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Percentage</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Beneficially</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Number of</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Owned</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Ownership</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Owned Prior to</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>Shares to be</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>After</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%"><FONT size=2><B>After</B> </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=center style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>Name of Selling Stockholder</B>
</FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>Offering</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2><B>Sold</B> </FONT></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2><B>Offering</B><SUP>(1</SUP></FONT><SUP>)</SUP></TD>
    <TD align=center width="2%" >&nbsp;</TD>
    <TD align=center width="1%" >&nbsp;</TD>
    <TD align=center width="10%" style="border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2><B>Offering</B><SUP>(2</SUP></FONT><SUP>)</SUP> </TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT size=2>Jayhawk Private Equity Fund, </FONT><FONT size=2>L.P. </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1"><FONT
    size=2>1,892,338</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff><SUP>(3)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">
    724,676</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">
    1,167,662</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff>&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-top-style: solid; border-top-width: 1">
    5.33%</TD>
    <TD align=left width="2%"  bgColor=#e6efff>&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT size=2>Jayhawk Private Equity
      Co-Invest Fund, L.P. </FONT></TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">118,198</TD>
    <TD align=left width="2%" ><SUP>(4)</SUP> </TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">45,627</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%">72,571</TD>
    <TD align=left width="2%" >&nbsp;</TD>
    <TD align=left width="1%" >&nbsp;</TD>
    <TD align=right width="10%"><FONT size=2>* </FONT></TD>
    <TD align=left width="2%" >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Essence International
      Investment LTD </FONT></TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT
    size=2>2,812,500</FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><SUP>(5)</SUP> </TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>2,812,500
    </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>- </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=left width="1%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD>
    <TD align=right width="10%" bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>* </FONT></TD>
    <TD align=left width="2%"  bgColor=#e6efff style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</TD></TR>
  <TR>
    <TD style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2></FONT><FONT size=2><B>Total</B> </FONT></TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>
    4,823,036</FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    3,582,803<FONT size=2>
      </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    1,240,233<FONT size=2>
      </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=left width="1%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD>
    <TD align=right width="10%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2></FONT><FONT size=2>* </FONT></TD>
    <TD align=left width="2%" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1" >&nbsp;</TD></TR></TABLE>
<P align=justify style="margin-top: 0">_______________________<br>
<font style="font-size: 8pt">* means less than 1%.</font><BR></P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(1) </FONT></TD>
    <TD colSpan=2><FONT style="font-size: 8pt">
      <P align=justify>Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to the shares of our common stock.</P></FONT></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(2) </FONT></TD>
    <TD colSpan=2><FONT style="font-size: 8pt">
      <font FACE="Times New Roman">
    <p align="justify">As of July 15, 2009, a total of 21,474,942 shares of our
    common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)
    (1). Warrants that are exercisable and notes that are convertible within 60
    days have been included in the denominator.</font></FONT></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%" rowSpan=2><FONT style="font-size: 8pt">(3) </FONT></TD>
    <TD colSpan=2>
      <font FACE="Times New Roman" style="font-size: 8pt">
    <p ALIGN="JUSTIFY">Consists of (i) 719,543 shares of our common stock owned
    as of July 15, 2009, (ii) 483,117 shares of our common stock issuable upon
    conversion of our 3.8% convertible notes issued in the 2009 financing; (iii)
    448,119 shares of common stock issuable upon the exercise of five-year
    warrants to purchase common stock at an exercise price of $2.8425 per share;
    and (iv) 241,559 shares of common stock issuable upon the exercise of
    three-year warrants to purchase common stock at an exercise price of $4.80
    per share. The General Partner of Jayhawk Private Equity Fund, L.P. is
    Jayhawk Private Equity GP, L.P., whose General Partner is Jayhawk Capital
    Management, LLC. Jayhawk Capital Management, LLC is controlled by Kent C.
    McCarthy.</font><font FACE="Sim Sun" LANG="JA" style="font-size: 8pt"> </font></TD></TR>
  <TR>
    <TD colSpan=2><FONT size=1>
      <P align=justify>&nbsp;</P></FONT></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(4) </FONT></TD>
    <TD colSpan=2>
      <font FACE="Times New Roman" style="font-size: 8pt">
    <p ALIGN="JUSTIFY">Consists of (i) 44,357 shares of our common stock owned
    as of July 15, 2009, (ii) 30,418 shares of our common stock issuable upon
    conversion of our 3.8% convertible notes issued in the 2009 financing; (iii)
    28,214 shares of common stock issuable upon the exercise of five-year
    warrants to purchase common stock at an exercise price of $2.8425 per share;
    and (iv) 15,209 shares of common stock issuable upon the exercise of
    three-year warrants to purchase common stock at an exercise price of $4.80
    per share. The General Partner of Jayhawk Private Equity Co-Invest Fund,
    L.P. is Jayhawk Private Equity GP, L.P., whose General Partner is Jayhawk
    Capital Management, LLC. Jayhawk Capital Management, LLC is controlled by
    Kent C. McCarthy.</font></TD></TR>
  <TR>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD width="5%"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD><FONT style="font-size: 8pt">&nbsp;</FONT></TD></TR>
  <TR>
    <TD vAlign=top width="5%"><FONT style="font-size: 8pt">(5) </FONT></TD>
    <TD colSpan=2><FONT style="font-size: 8pt">
      <P align=justify>Consists of (i) 1,875,000 shares of our common stock
      issuable upon conversion of our 3.8% convertible notes issued in the 2009
      financing; and (ii) 937,500 shares of common stock issuable upon the
      exercise of three-year warrants to purchase common stock at an exercise
      price of $4.80 per share. The General Partner of Essence International
      Investment LTD is DT Capital Management Limited which is controlled by
      Lixin Tian.</P></FONT></TD></TR></TABLE>
<P align=center><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</B></P>
<font FACE="Times New Roman" SIZE="2">
<p>The following table sets forth information regarding beneficial ownership of
our common stock as of July 15, 2009 (i) by each person who is known by us to
beneficially own more than 5% of our common stock; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group. </p>
<p>Unless otherwise specified, the address of each of the persons set forth
below is in care of China Biologic Products, Inc., No. 14 East Hushan Road, Tai</font><font FACE="Times New Roman" LANG="JA" SIZE="2">f</font><font FACE="Times New Roman" SIZE="2">an
City, Shandong, People's Republic of China 271000.</font><font FACE="Times New Roman" LANG="JA" SIZE="2">
</p>
</font>
<P align=center>- 71 -<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 8pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><FONT size=2>Amount and </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-top-style: solid; border-top-width: 1"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>Nature of </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=center style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1">
    <p style="margin-left: 10"><FONT size=2>Name &amp; Address of </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>&nbsp; </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>Beneficial </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1"><FONT size=2>Percent of </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center>
    <p style="margin-left: 10"><FONT
      size=2>Beneficial Owner </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="13%"><FONT size=2>Office, If Any </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="13%"><FONT size=2>Title of Class </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="13%"><FONT size=2>Ownership<SUP>(1)</SUP> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="13%"><FONT size=2>Class<SUP>(2)</SUP> </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:none; border-right-width:medium" align=left>
    <p style="margin-left: 10"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:none; border-left-width:medium" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center
      width="13%"><FONT size=2><B>Officers and Directors</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1" align=left width="13%"><FONT
      size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10"><FONT size=2>Siu Ling Chan </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>Chairwoman of the Board </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>Common stock $.0001 par
      value </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>6,912,624<SUP>(3)</SUP> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>31.9% </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Chao Ming Zhao </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Chief Executive Officer </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Common stock $.0001 par value </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>1,186,787<SUP>(4)</SUP>
      </FONT></TD>
    <TD align=center width="13%" style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>5.0% </FONT></TD></TR>
  <TR>
    <TD bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Yu-Yun Tristan Kuo
      </FONT></TD>
    <TD width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1" align="center"><FONT size=2>Chief
      Financial Officer </FONT></TD>
    <TD width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1" align="center"><FONT size=2>Common
      stock $.0001 par value </FONT></TD>
    <TD width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p align="center"><FONT
      size=2>75,000<SUP>(5)</SUP> </FONT></TD>
    <TD width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p align="center"><FONT size=2>0.3%
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Lin Ling Li </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>Director </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>Common stock $.0001 par value </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>6,912,624<SUP>(3)</SUP>
      </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>31.9% </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Sean Shao </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>Director
      </FONT></TD>
    <TD style="border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1; border-bottom-color:#000000" align=center width="13%"
    bgColor=#e6efff><FONT size=2>Common stock $.0001 par
      value </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>10,000
      <SUP>(6)</SUP> </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>0.0%
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Jie Gan </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>Director </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>Common stock $.0001 par value </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>10,000 <SUP>(6)</SUP>
      </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2>0.0% </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2>Tong Jun Lin </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>Director
      </FONT></TD>
    <TD style="border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1; border-bottom-color:#000000" align=center width="13%"
    bgColor=#e6efff><FONT size=2>Common stock $.0001 par
      value </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>10,000
      <SUP>(6)</SUP> </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-style: solid; border-width: 1"><FONT size=2>0.0%
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left style="border-style: solid; border-width: 1">
    <p style="margin-left: 10"><FONT size=2><B>All officers and</B> <B>directors as a group (7</B> <B>persons named
      above)</B> </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1">&nbsp;</TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2><B>Common stock</B> <B>$.0001 par value</B> </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2><B>15,117,035</B> </FONT></TD>
    <TD align=center width="13%" style="border-style: solid; border-width: 1"><FONT size=2><B>69.1%</B> </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left
      bgColor=#e6efff>
    <p style="margin-left: 10"><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=center width="13%"
    bgColor=#e6efff><FONT size=2><B>5% Securities Holders</B> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:solid; border-top-width:1" align=left width="13%"
    bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=left width="13%"
    bgColor=#e6efff><FONT size=2>&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=left>
    <p style="margin-left: 10"><FONT size=2>Siu
      Ling Chan </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=center
      width="13%"><FONT size=2>Chairwoman of the Board </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=center
      width="13%"><FONT size=2>Common stock $.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1" align=center
      width="13%"><FONT size=2>6,912,624<SUP>(3)</SUP> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1" align=center
      width="13%"><FONT size=2>31.9% </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <p style="margin-left: 10"><FONT size=2>Lin Ling Li </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Director
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>Common stock $.0001 par value
      </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT
      size=2>6,912,624<SUP>(3)</SUP> </FONT></TD>
    <TD align=center width="13%" bgColor=#e6efff style="border-left-style: solid; border-left-width: 1; border-right-style: solid; border-right-width: 1; border-bottom-style: solid; border-bottom-width: 1"><FONT size=2>31.9%
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left>
    <p style="margin-left: 10"><FONT size=2>Chao
      Ming Zhao </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><FONT size=2>Chief Executive Officer and Director </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><FONT size=2>Common stock $.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><FONT size=2>1,186,787 <SUP>(4)</SUP> </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><FONT size=2>5.0% </FONT></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-left: 10">IDG-Accel China Growth Fund II LP. <sup>(7)</sup>
    </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font size="2" face="Times New Roman">-</font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><FONT size=2 face="Times New Roman">Common stock $.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font FACE="Times New Roman" SIZE="2">
    1,448,216 </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font FACE="Times New Roman" SIZE="2">6.7%
    </font></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left>
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-left: 10">Patrick J. McGoven<sup>(8)</sup> </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><font size="2" face="Times New Roman">-</font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><FONT size=2 face="Times New Roman">Common stock $.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><font FACE="Times New Roman" SIZE="2">1,566,655 </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%"><font FACE="Times New Roman" SIZE="2">7.3% </font></TD></TR>
  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=left bgcolor="#E6EFFF">
    <font FACE="Times New Roman" SIZE="2">
    <p style="margin-left: 10">Quan Zhou<sup>(8)</sup> </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font size="2" face="Times New Roman">-</font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><FONT size=2 face="Times New Roman">Common stock $.0001 par value </FONT></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font FACE="Times New Roman" SIZE="2">
    1,566,655 </font></TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-left-style:solid; border-left-width:1; border-right-style:solid; border-right-width:1; border-top-style:solid; border-top-width:1" align=center
      width="13%" bgcolor="#E6EFFF"><font FACE="Times New Roman" SIZE="2">7.3%
    </font></TD></TR>
  </TABLE>
<p style="margin-top: 0"><FONT size=2>________________<br>
</FONT><FONT style="font-size: 8pt">*Less than 1% </FONT><BR>
</p>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(1) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to the shares of our common stock.</P></TD></TR>
  <TR>
    <TD width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(2) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">As of July 15, 2009, a total of 21,474,942 shares of our
      common stock are considered to be outstanding pursuant to SEC Rule
      13d-3(d)(1). For each Beneficial Owner above, any options exercisable
      within 60 days have been included in the denominator.</P></TD></TR>
  <TR>
    <TD width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(3) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">Includes 50,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.</P></TD></TR>
  <TR>
    <TD width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(4) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">Includes 115,000 shares underlying a ten-year
      nonstatutory stock option granted under the 2008 Plan, exercisable at
      $4.00 per share.</P></TD></TR>
  <TR>
    <TD width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(5) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">Includes 75,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.</P></TD></TR>
  <TR>
    <TD width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(6) </TD>
    <TD style="font-size: 8pt">
      <P align=justify style="margin-top: 0; margin-bottom: 0">Includes 10,000 shares underlying an option to purchase
      20,000 shares of our common stock, with an exercise price of $4.00 per
      share, of which 10,000 shares vested on January 25, 2009 and the remaining
      10,000 shares will be vested on July 25,
2009.</P></TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(7)</TD>
    <TD style="font-size: 8pt">
    <p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">Patrick J.
    McGoven and Quan Zhou are directors and executive officers of IDG-Accel
    China Growth Fund GP II Associates Ltd., which is the ultimate general
    partner of IDG-Accel China Growth Fund II LP. By virtue of acting together
    to direct the management and operations of the general partner of IDG-Accel
    China Growth Fund II LP., Patrick J. McGoven and Quan Zhou may be deemed to
    have shared voting and dispositive power with respect to the securities of
    the Company held by IDG-Accel China Growth Fund II LP. Each of Patrick J.
    McGoven and Quan Zhou disclaims beneficial ownership of the securities of
    the Company held by IDG-Accel China Growth Fund II LP. </TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD>
    <TD style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" style="font-size: 8pt">
    <p style="margin-top: 0; margin-bottom: 0">(8)</TD>
    <TD style="font-size: 8pt">
    <p ALIGN="JUSTIFY" style="margin-top: 0; margin-bottom: 0">Represents
    118,439 shares of common stock held by IDG-Accel China Investors II L.P. and
    1,448,216 shares of common stock held by IDG-Accel China Growth Fund II LP.
    Patrick J. McGoven and Quan Zhou are directors and executive officers of
    IDG-Accel China Growth Fund GP II Associates Ltd., which is the general
    partner of IDG-Accel China Investors II L.P. and IDG-Accel China Growth Fund
    II LP. By virtue of acting together to direct the management and operations
    of the general partner of IDG-Accel China Investors II L.P. and IDG-Accel
    China Growth Fund II LP., Patrick J. McGoven and Quan Zhou may be deemed to
    have shared voting and dispositive power with respect to the securities of
    the Company held by each of them. Each of Patrick J. McGoven and Quan Zhou
    disclaims beneficial ownership of the securities of the Company held by
    IDG-Accel China Investors II L. P. and IDG-Accel China Growth Fund II LP. </TD></TR></TABLE>
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<P align="center">
<B>DESCRIPTION OF SECURITIES TO BE REGISTERED</B></P>
<P align="justify">
In this offering, we are registering shares of our common stock, par value &#36;.0001 per share, issuable upon conversion or exercise of the convertible notes and warrants sold in the June 2009 private placement. </P>
<P align="justify">
<B>Capital Stock</B><BR>
</P>
<P align="justify">
We are currently authorized to issue 100,000,000 shares of common stock, par value &#36;.0001 per share, of which 21,474,942 shares were issued and outstanding as of July 15, 2009. Each common share entitles the holder to one vote on all matters
submitted to a vote of our stockholders. When a dividend is declared by the Board, all stockholders are entitled to receive a fixed dividend. All shares of our common stock issued by the company are of the same class, and have equal liquidation,
preference, and adjustment rights. Holders of outstanding shares of our common stock have no preemptive, conversion or redemptive rights. </P>
<P align="justify">
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing stockholders
will be diluted. </P>
<P align="justify">
<B>Warrants, Convertible Notes, and Registration Right</B><BR>
</P>
<P align="justify">
On July 19, 2006, we issued to the investors in the 2006 private placement warrants to purchase an aggregate of 1,070,000 shares of our Common Stock which are exercisable by the holders at &#36;2.8425 per share for a period of five years following
the closing of the private placement.  In the event the market price of our Common Stock exceeds 160% of the exercise price of the warrants at any time after 45 days following the effective date of the registration statement of which this prospectus
forms a part, then we may require the holder of such warrants to exercise any unexercised warrants so long as this registration statement remains effective and certain other conditions are met. The warrants may not be exercised &#150; including
pursuant to these forced exercise provisions -- if it would result in the holder beneficially owning more than (i) 4.9999% of our outstanding Common Stock (which provision may be waived by the holder thereof with upon notice to us 61 days prior to
such exercise); or (ii) 9.9999% of our outstanding Common Stock (which provision may not be waived by any party). In the event we issue shares of our Common Stock or any type of securities convertible or exercisable into shares of our Common Stock
at a price below &#36;2.8425, the exercise price of the warrants shall be adjusted downwards on a &#147;weighted average&#148; basis.  In connection with the 2006 private placement, we issued to Lane Capital Markets, LLC, the placement agent for the
transaction, warrants for the purchase of 214,000 shares of our common stock in the aggregate, for its services as placement agent. A total of 1,244,000 warrants remain unexercised under the 2006 private placement as of July 15, 2009. </P>
<P align="justify">
On June 10, 2009, we issued to the investors in the 2009 private placement warrants to purchase an aggregate of 1,194,268 shares of our Common Stock which are exercisable by the holders at &#36;4.80 per share for a period of three years following
the closing of the private placement. The warrants are also subject to customary adjustments for stock splits, dividends, recapitalizations, and other antidilution events. In connection with the 2009 private placement, we also issued to Oppenheimer
&amp; Co. Inc., or Opco, a three-year warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased by first-time investors in the Company, at an exercise price of &#36;6.00 per share. Opco also received
certain registration rights with respect to the common stock underlying its warrant, which rights include: one demand to register such shares for resale, provided that we are eligible to use a registration statement on Form S-3; an unlimited number
of piggyback registration rights; &#147;cashless exercise&#148; rights with respect to the warrant; and customary anti-dilution provisions.  We will have the right to repurchase any shares underlying Opco's warrant to be included in a
registration statement, at 95% of the difference between the market price per share at the time of such repurchase and the applicable exercise price per share for such shares. All 1,194,268 of these warrants remain unexercised as of July 15, 2009.
</P>
<P align="justify">
On June 10, 2009, we also issued to the investors in the 2009 private placement senior secured convertible notes in the aggregate principal amount of &#36;9,554,140.  The notes carry interest of 3.8% per annum.  The notes are convertible into shares
of our common stock at the conversion rate of &#36;4.00 per share, subject to customary adjustments for any recapitalizations, stock combinations, stock dividends, stock splits and other antidilution events. Pursuant to the terms of the notes, the
investors have rights to participate in any future offerings by the Company until June 10, 2010, except for underwritten public offerings, equity compensation grants, issuances of stock upon the conversion or exchange of convertible securities
outstanding on the closing of the 2009 private placement, and certain acquisitions. Investors also have a right of first refusal to participate in the purchase of any securities of the
Company proposed to be transferred by a controlling stockholder or another investor in the June 2009 private placement occurring on or before June 10, 2010. Any investors that do not exercise their right of first refusal may exercise a customary
right of co-sale. The Company may not register any transfers subject to these rights unless the transferors comply with certain notice procedures provided in the terms of the notes.  If these rights are not exercised, the transferors may transfer
their securities on the proposed terms for 60 calendar days from the expiration of these rights. </P>
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<P align="justify">
In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement. If we do not file the required registration statement in a timely manner, or if we fail to file a pre-effective amendment to such registration statements and respond
in writing to any comments made by the SEC within a pre-defined period, then the investors have the right, by providing four weeks' written notice to require us, to redeem all or a portion of the notes held by them at a redemption price,
payable in cash, equal to the outstanding principal amount of the note, plus an amount equal to two years of interest payments (compounded semi-annually) on such principal amount, less any amount of interest actually and previously paid on such
outstanding principal amount. The notes are also redeemable upon an event of default, a change of control, liquidation, dissolution or wind-up of the affairs of the Company or any subsidiary, the amendment, alteration or repeal of any provision of
the Certificate of Incorporation or bylaws of the Company or any subsidiary in a manner that materially adversely affects the rights or preferences of the investor (including but not limited to increasing or decreasing the authorized number of
members of the board of directors of the Company or any subsidiary without the consent of the investors), or the failure to complete any of the post-closing conditions of the Dalin/Huitian Acquisitions within six months of the closing date. </P>
<P align="justify">
<B>Preferred Stock</B><BR>
</P>
<P align="justify">
We are currently authorized to issue up to 10,000,000 shares of preferred stock, par value &#36;.0001 per share, in one or more classes or series within a class as may be determined by our board of directors, who may establish the number of shares
to be included in each class or series, may fix the designation, powers, preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof. Any preferred stock so issued by the board of
directors may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of us, or both. Moreover, under certain circumstances, the issuance of preferred stock or the existence of
the un-issued preferred stock might tend to discourage or render more difficult a merger or other change in control. We currently have no shares of preferred stock outstanding. </P>
<P align="justify">
<B>Transfer Agent and Registrar</B><BR>
</P>
<P align="justify">
Our independent stock transfer agent and registrar for our common stock is Securities Transfer Corporation. Their mailing address is 2591 Dallas Parkway, Suite #102, Frisco, Texas, 75034, and their telephone number is (469) 633-0101. </P>
<P align="center">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B><BR>
</P>
<P align="justify">
As of July 15, 2009, we had outstanding 21,474,942 shares of common stock.</P>
<P align="justify">
<B>Shares Covered by this Prospectus</B><BR>
</P>
<P align="justify">
All of the 3,582,803 shares of common stock being registered in this offering may be sold without restriction under the Securities Act, so long as the registration statement of this prospectus is a part is, and remains, effective.</P>
<P align="justify">
<B>Rule 144</B><BR>
</P>
<P align="justify">
Under Rule 144, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time
of, or at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we
provide current information at the time of sale. </P>
<P align="justify">
Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to
additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of: </P>
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<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 0">1% of the total number of securities of the same class then outstanding, which will equal approximately 214,749 shares immediately after this offering; or<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.</LI>
</UL>
<P align="justify">
<I>provided,</I> in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. </P>
<P align="justify">
However, since our shares are quoted on the Over-the-Counter Bulletin Board, which is not an &#147;automated quotation system,&#148; our stockholders will not be able to rely on the market-based volume limitation described in the second bullet
above. If, in the future, our securities are listed on an exchange or quoted on NASDAQ, then our stockholders would be able to rely on the market-based volume limitation. Unless and until our stock is so listed or quoted, our stockholders can only
rely on the percentage based volume limitation described in the first bullet above. </P>
<P align="justify">
Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144. All but the 3,582,803 of our issued and outstanding shares covered in this prospectus may currently be sold in reliance
on Rule 144. The selling stockholders will not be governed by the foregoing restrictions when selling their shares pursuant to this prospectus. </P>
<P align="justify">
<B>Lock-Up Agreements</B><BR>
</P>
<P align="justify">
One of our controlling stockholder entered into a share pledge agreement in connection with the June 2009 private placement, pursuant to which, she agreed that, so long as at least 50% of the original principal amount of the Notes remains
outstanding for the two year period following the closing, she will not dispose of more than 500,000 shares of the Company's common stock in any one year period or more than 1,000,000 shares of the Company's common stock throughout the
two-year term. She also agreed to provide the investors in the private placement with the right of first refusal during the two-year term with respect to any transfer of her securities. This lock-up provision will expire on June 10, 2011. </P>
<P align="center">
<B>PLAN OF DISTRIBUTION</B><BR>
</P>
<P align="justify">
The selling stockholders may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are
traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated
prices. </P>
<P align="justify">
The selling stockholders will sell our shares at prevailing market prices or at privately negotiated prices. The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein: </P>
<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 0">ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">purchases by a broker-dealer as principal and resale by the broker-dealer for its account;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">an exchange distribution in accordance with the rules of the applicable exchange;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">privately negotiated transactions;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;</LI>
</UL>
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<UL style="text-align:justify;">
<LI>
<p style="margin-top: 0; margin-bottom: 0">through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">sales pursuant to Rule 144;<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">a combination of any such methods of sale; and<br>
&nbsp;</LI>
<LI>
<p style="margin-top: 0; margin-bottom: 0">any other means permitted by applicable law.</LI>
</UL>
<P align="justify">
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or
other successors in interest will be the selling beneficial owners for purposes of this prospectus. </P>
<P align="justify">
In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in
the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). </P>
<P align="justify">
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. </P>
<P align="justify">
Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the
purchase of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. </P>
<P align="justify">
The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule. </P>
<P align="justify">
Any underwriters, agents or broker-dealers, and any selling stockholders who are affiliates of broker-dealers, that participate in the sale of the common stock or interests therein may be &#147;underwriters&#148; within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are &#147;underwriters&#148; within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. We know of no existing arrangements between any of the selling stockholders and any other stockholder, broker, dealer,
underwriter, or agent relating to the sale or distribution of the shares, nor can we presently estimate the amount, if any, of such compensation. See &#147;Selling Stockholders&#148; for description of any material relationship that a stockholder
has with us and the description of such relationship. </P>
<P align="justify">
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealers or underwriters and any applicable commissions or
discounts with respect to a particular offer will be set forth in an accompanying
prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus. </P>
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<P align="justify">
In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold
unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with. </P>
<P align="justify">
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, we will
make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may
indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act. </P>
<P align="justify">
We have agreed to pay certain fees and expenses incurred by us incident to the registration of the shares. Such fees and expenses are estimated to be &#36;71,824. We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus. </P>
<P align="justify">
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144 of the Securities Act. </P>
<P align="center">
<B>LEGAL MATTERS</B><BR>
</P>
<P align="justify">
The validity of the securities offered by this prospectus will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP, Washington, D.C. </P>
<P align="center">
<B>EXPERTS</B><BR>
</P>
<P align="justify">
Our audited consolidated financial statements as of December 31, 2008<B> </B>and 2007 and for each of the two years in the period ended December 31, 2008 included in this prospectus and elsewhere and in the registration statement have been so
included in reliance upon the report of Moore Stephens Wurth Frazer &amp; Torbet, LLP, independent auditors, appearing in this registration statement, and their authority as experts in accounting and auditing. </P>
<P align="center">
<B>INTERESTS OF NAMED EXPERTS AND COUNSEL</B></P>
<P align="justify">
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in China Biologic or any of its parents or subsidiaries. Nor was any such
person connected with China Biologic or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee. </P>
<P align="center">
<B>DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES </B> </P>
<P align="justify">
Our Bylaws provide for the indemnification of our directors and officers, past, present and future, under certain circumstances, against attorney's fees, judgments, fines and other expenses incurred by them in any litigation to which they become a
party arising from their association with or activities on behalf of us. We will also bear expenses of such litigation for any of our directors, officers, employees or agents upon such persons promise to repay us therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup. </P>
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<P align="justify">
Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934 may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise,
we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the
successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. </P>
<P align="justify">
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification. </P>
<P align="center">
<B>WHERE YOU CAN FIND MORE INFORMATION</B><BR>
</P>
<P align="justify">
We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For
further information with respect to us and the common stock offered in this offering, we refer you to the registration statement and to the attached exhibits. With respect to each such document filed as an exhibit to the registration statement, we
refer you to the exhibit for a more complete description of the matters involved. </P>
<P align="justify">
You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our
registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. </P>
<P align="justify">
Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SEC's website at www.sec.gov, which contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC. </P>
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<A name="page_79"></A>

<IMG src="cbpos1x79x1.jpg" border=0 width="384" height="71">
<BR>
</p>
<P align="center">
<B><font size="4">CHINA BIOLOGIC PRODUCTS, INC.</font></B></P>
<P align="center">
<B><font size="3">3,582,803 Shares of Common Stock </font> </B></P>
<P align="center">
<B><font size="3">PROSPECTUS</font></B><font size="3"><BR>
</font>
</P>
<P align="center">
<B>_______, 2009</B><BR>
</P>

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<P align=center><B>PART II </B></P>
<P align=center><B>INFORMATION NOT REQUIRED IN THE PROSPECTUS </B></P>
<P align=justify><B>Item 13. Other Expenses of Issuance and Distribution
</B></P>
<P align=justify>The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by us in connection with
the sale of common stock being registered. All amounts, other than the SEC
registration fee, are estimates. We will pay all these expenses. </P>
<TABLE
style="border-width:0; border-color:black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse"
borderColor=#aaaaaa cellSpacing=0 cellPadding=0 width="100%" border=1
TBLWIDTH="100%" BCL0BORDER="1">

  <TR vAlign=top>
    <TD align=left width="85%" style="border-style: none; border-width: medium"
     ><FONT size=2>&nbsp; </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"
     ><FONT size=2><B>Amount to be Paid</B> </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>SEC Registration Fee </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>$</FONT></TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium"
   ><FONT size=2>&nbsp;824.00 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" style="border-style: none; border-width: medium"
     ><FONT size=2>Printing Fees and Expenses </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" style="border-style: none; border-width: medium"
     ><FONT size=2>2,500.00 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>Legal Fees and Expenses </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>50,000.00 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" style="border-style: none; border-width: medium"
     ><FONT size=2>Accounting Fees and Expenses </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" style="border-style: none; border-width: medium"
     ><FONT size=2>10,000.00 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>Blue Sky Fees and Expenses </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-style: none; border-width: medium"
   ><FONT size=2>5,000.00 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" style="border-style: none; border-width: medium"
     ><FONT size=2>Transfer Agent and Registrar Fees </FONT></TD>
    <TD align=left width="1%" style="border-style: none; border-width: medium"
   >&nbsp;</TD>
    <TD align=right width="12%" style="border-style: none; border-width: medium"
     ><FONT size=2>2,000.00 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"
   ><FONT size=2>Miscellaneous </FONT></TD>
    <TD align=left width="1%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"
   >&nbsp;</TD>
    <TD align=right width="12%" bgColor=#e6efff style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-top-style: none; border-top-width: medium; border-bottom-style: solid; border-bottom-width: 1"
   ><FONT size=2>1,500.00 </FONT></TD>
    <TD align=left width="2%" bgColor=#e6efff style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD align=left width="85%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium"
     ><FONT size=2>Total </FONT></TD>
    <TD align=left width="1%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: none; border-bottom-width: medium"
     ><FONT size=2>$</FONT></TD>
    <TD align=right width="12%" style="border-left-style: none; border-left-width: medium; border-right-style: none; border-right-width: medium; border-bottom-style: solid; border-bottom-width: 1"
     ><FONT size=2>&nbsp;71,824.00 </FONT></TD>
    <TD align=left width="2%" style="border-style: none; border-width: medium"
   >&nbsp;</TD></TR></TABLE>
<P align=justify><B>Item 14. Indemnification of Directors and Officers </B></P>
<P align=justify>China Biologic Products, Inc. is a Delaware corporation.
Section 102(b)(7) of the Delaware General Corporation Law or the DGCL, permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for any of the following:</P>
<UL style="TEXT-ALIGN: justify">
  <LI>
  <p style="margin-top: 0; margin-bottom: 0">any breach of the director's duty of loyalty to the corporation or its
  stockholders; <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">acts or omissions not in good faith or which involve intentional
  misconduct or a knowing violation of law; <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">payments of unlawful dividends or unlawful stock repurchases or
  redemptions under Section 174 of the DGCL; or <br>
&nbsp;<LI>
  <p style="margin-top: 0; margin-bottom: 0">any transaction from which the director derived an improper personal
  benefit. </LI></UL>
<P align=justify>Under the DGCL, any repeal or modification of such provisions
will not adversely affect any right or protection of a director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.</P>
<P align=justify>Our certificate of incorporation provides that no director
shall be personally liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty by such director as a director, except for any (a)
breach of the director's duty of loyalty to the Corporation or its stockholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) pursuant to Section 174 or the DGCL; or (d) for any transaction from which the director derived an improper
benefit.</P>
<P align=justify>Under Section 145 of the DGCL, a corporation may indemnify any
individual made a party or threatened to be made a party to any type of
proceeding, other than an action by or in the right of the corporation, because
he or she is or was an officer, director, employee or agent of the corporation
or was serving at the request of the corporation as an officer, director,
employee or agent of another corporation or entity against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with such proceeding: (1) if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation; or (2) in the case of a criminal proceeding, he or
she had no reasonable cause to believe that his or her conduct was unlawful. A
corporation may indemnify any individual made a party or threatened to be made a
party to any threatened, pending or completed action or suit brought by or in
the right of the corporation because he or she was an officer, director,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, provided that such indemnification will be denied if the individual
is found liable to the corporation unless, in such a case, the court determines
the person is nonetheless entitled to indemnification for such expenses. A
corporation must indemnify a present or former director or officer who
successfully defends himself or herself in a proceeding to which he or she
was a party because he or she was a director or officer of the corporation against expenses actually and reasonably incurred by him or her. Expenses incurred by an officer or director, or any employees or agents as deemed appropriate by the board of
directors, in defending civil or criminal proceedings may be paid by the corporation in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of such director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. The Delaware law regarding indemnification and expense advancement is not exclusive of any other rights which may be granted by our
restated certificate of incorporation or restated bylaws, a vote of stockholders or disinterested directors, agreement or otherwise.
</P>
<P align=center>II-1
</P>
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<A name="page_81"></A>

<P align="justify">
Our restated bylaws provide that we must indemnify our former and present directors and officers against any and all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by any such director or officer in
connection with any threatened, pending or completed action, suit or proceeding, to the fullest extent permitted by the laws of Delaware. We have undertaken to pay any expenses reasonably incurred by a director or officer in defending a civil or
criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount, if it is ultimately determined that he or
she is not entitled to be indemnified by us. The provision of indemnification to persons under our restated bylaws does not limit or restrict in any way our power to indemnify them in any other way permitted by law. The Company has also entered into
separate agreements with certain directors indemnifying them to the fullest extent permitted by the foregoing. The Company has purchased director and officer liability insurance, as permitted by its bylaws. </P>
<P align="justify">
Insofar as indemnification by us for liabilities arising under the Exchange Act may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Exchange Act and will be governed by the final adjudication of such issue. </P>
<P align="justify">
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted.  We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification. <B> </B></P>
<P align="justify">
<B>Item 15. Recent Sales of Unregistered Securities</B><BR>
</P>
<P align="justify">
On June 10, 2009, we completed a private placement transaction with a group of accredited investors. Pursuant to the securities purchase agreement, we issued to the investors, or their designees, 3.8% senior secured convertible notes in the
aggregate principal amount of &#36;9,554,140, convertible into shares of our common stock and warrants to purchase up to 1,194,268 shares of our common stock at an exercise price of &#36;4.80 per share. The securities issued represented
approximately 13.41% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after closing date. For details regarding the Purchase Agreement and the related transaction documents, see our Current Report on Form
8-K filed on June 5, 2009 and the exhibits thereto.</P>
<P align="justify">
As compensation for its services, Oppenheimer &amp; Co. Inc., or Opco, our placement agent in the transaction will receive a cash fee equal to 6.1% of the gross proceeds received from the sale of the Securities. Opco will also receive a three-year
warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased by first-time investors in the Company, at an exercise price of &#36;6.00 per share. Opco also received certain registration rights with respect
to the common stock underlying its warrant, which rights include: one demand to register such shares for resale, provided that we are eligible to use a registration statement on Form S-3; an unlimited number of piggyback registration rights;
&#147;cashless exercise&#148; rights with respect to the warrant; and customary anti-dilution provisions. We will have the right to repurchase any shares underlying Opco's warrant to be included in a registration statement, at 95% of the
difference between the market price per share at the time of such repurchase and the applicable exercise price per share for such shares.</P>
<P align="justify">
In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement. If we not file the required registration statement in a timely manner, or if we fail to
file pre-effective amendment to such registration statements and respond in
writing to any comments made by the SEC within a pre-defined period, then the
investors have the right, by providing four weeks' written notice to require us,
to redeem all or a portion of the notes held by them at a redemption price,
payable in cash, equal to the outstanding principal amount of the note, plus an
amount equal to two years of interest payments (compounded semi-annually) on
such principal amount, less any amount of interest actually and previously paid
on such outstanding principal amount. The shares of our common stock underlying
warrants issued in connection with the 2009 private placement are being
registered herein. </P>
<P align="center">
II-2<BR>
</P>

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<P align=justify>The foregoing securities were issued pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act for the offer
and sale of securities not involving a public offering and Rule 506 of
Regulation D promulgated thereunder. The investors agreed, pursuant to the terms
and conditions of the securities purchase agreement, as applicable, that (a)
they had access to all of the Company's information pertaining to the investment
and were provided with the opportunity to ask questions and receive answers
regarding the offering, (b) they acquired the securities, as applicable, for
their own account for investment and not for the account of any other person and
not with a view to or for any distribution within the meaning of the Securities
Act and (c) they will not sell or otherwise transfer the securities, as
applicable, unless in compliance with state and federal securities laws. Each of
the investors represented, pursuant to the terms and conditions of the Purchase
Agreement, that they are accredited investors as defined in Rule 501(a) under
the Securities Act and that there was no general solicitation or advertising in
connection with the offer and sale of the Securities.</P>
<P align=justify><B>Item 16. Exhibits and Financial Statement
Schedules</B><BR></P>
<P align=justify>The following exhibits are included as part of this Form
S-1.</P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=bottom width="5%" bgColor=#FFFFFF style="border-bottom-style: solid; border-bottom-width: 1"><B>Exhibit</B>
    <br>
    <B>No.</B> </TD>
    <TD bgColor=#FFFFFF valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">
      <B>Description</B> </TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#FFFFFF style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD bgColor=#FFFFFF style="border-top-style: solid; border-top-width: 1">
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>2.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Share Exchange Agreement between the Company, Logic
      Express Limited and the selling stockholders signatory thereto, dated as
      of July 18, 2006 (incorporated by reference to Exhibit 2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>3.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Certificate of Incorporation of the Company (incorporated
      by reference to Exhibit 3.1 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>3.2 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended and Restated By-Laws, adopted on March 31, 2009
      (incorporated by reference to Exhibit 3.2 of the Annual Report on Form
      10-K filed by the Company on March 31, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Securities Purchase Agreement between the Company, Logic
      Express Limited, Shandong Taibang Biological Products Co., Ltd., and the
      selling stockholders and investors signatory thereto, dated as of July 18,
      2006 (incorporated by reference to Exhibit 4.1 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.2 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Registration Rights Agreement, between the Company and
      certain investors signatory thereto, dated as of July 18, 2006
      (incorporated by reference to Exhibit 4.2 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.3 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Stockholder Warrant to purchase Common Stock,
      dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.4 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Lane Warrant, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.4 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.5 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Share Escrow Agreement, between the Company, Lane, as
      investor representative, the Escrow Agent, and the selling stockholders
      signatory thereto, dated as of July 19, 2006 (incorporated by reference to
      Exhibit 4.5 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.6 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.6 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)</P></TD></TR></TABLE>
<P align=center>II-3<BR></P>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.7 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.8 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.9 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.10 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.11 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.12 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.13 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.14 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.15 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.16 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.17 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.18 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5,
      2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" bgcolor="#E6EFFF">
    <a href="exhibit51.htm" style="text-decoration: none">5.1*</a></TD>
    <TD bgcolor="#E6EFFF"><a href="exhibit51.htm" style="text-decoration: none">
    Opinion of Pillsbury Winthrop Shaw Pitman LLP</a></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.1. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.2. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K, filed by
      the Company on May 13, 2008)</P></TD></TR></TABLE>
<P align=center>II-4<BR></P>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.3. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Group Secondment Agreement, dated October 28, 2002,
      between Shandong Taibang Biological Products Co., Ltd. and the Shandong
      Institute (English Translation) (incorporated by reference to Exhibit 10.1
      of the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.4. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended and Restated Joint Venture Agreement, between
      Logic Express Limited and the Shandong Institute, dated as of March 12,
      2006 (English Translation) (incorporated by reference to Exhibit 10.2 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.5. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Letter of Intent for Equity Transfer, between Logic
      Express Limited and the Shandong Institute, dated as of June 10, 2006
      (English Translation) (incorporated by reference to Exhibit 10.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.6. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qihei Plasma Collection Station, dated
      as of December 30, 2005 (English Translation) (incorporated by reference
      to Exhibit 10.4 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.7. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xiajin Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.5 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.8. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang and
      the Zhangqiu Plasma Collection Station, dated as of December 30, 2005
      (English Translation) (incorporated by reference to Exhibit 10.6 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.9. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qi He An Tai Plasma Collection Co.,
      Ltd., dated as of January 2, 1007 (English Translation) (incorporated by
      reference to Exhibit 10.9 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.10. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xia Jin An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.10 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.11. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Zhang Qiu An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.11 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.12. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Zhang Qiu An Tai Plasma
      Collection Co., Ltd. and Zhang Qiu Plasma Collection Station, dated as of
      December 31, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.12 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.13. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of April 24, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.14. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Qi He An Tai Plasma
      Collection Co., Ltd. and Qi He County Plasma Collection Station, dated as
      of November 9, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.14 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.15. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Xia Jin An Tai Plasma
      Collection Co., Ltd. and Xia Jin County Plasma Collection Station, dated
      as of October 20, 2006 (English Translation) (incorporated
  by reference to Exhibit 10.15 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR></TABLE>
<P align=center>II-5<BR></P>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.16. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Liao Cheng An Tai
      Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station,
      dated as of November 3, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.16 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.17. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.18. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.19. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.20. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.21. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.22. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.23. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.24. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.25. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.26. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.27. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)</P></TD></TR></TABLE>
<P align=center>II-6<BR></P>
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<TABLE
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cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.28. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>(Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.29. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.30. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.31. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.32. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Tai'an Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.33. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Tai'an Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.34. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.35. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.36. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.37. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.38. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Director's Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8&nbsp;of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.39. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.40. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2&nbsp;of the current report
      on Form 8-K, filed by the Company on July 30, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.41 </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Securities Purchase Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 10.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.42 </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2&nbsp;of the Current Report
      on Form 8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%" bgColor=#FFFFFF>&nbsp;</TD>
    <TD width="5%" bgColor=#FFFFFF>&nbsp;</TD>
    <TD bgColor=#FFFFFF>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgcolor="#E6EFFF">10.43 </TD>
    <TD colSpan=2 bgcolor="#E6EFFF">
      <P align=justify>Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR></TABLE>
<P align=center>II-7<BR></P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>14 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>21 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Subsidiaries of China Biologic Products, Inc.
      (Incorporated by reference to Exhibit 21 to the registrant's quarterly
      report on Form 10-Q filed on May 15, 2009)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="exhibit231.htm" style="text-decoration: none">23.1*</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify><a href="exhibit231.htm" style="text-decoration: none">Consent of Moore Stephens Wurth Frazer and Torbet, LLP</a></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="exhibit51.htm" style="text-decoration: none">23.2*</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify><a href="exhibit51.htm" style="text-decoration: none">Consent of Pillsbury Winthrop Shaw Pittman LLP, included
      in Exhibit 5.</a></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="#POWER OF ATTORNEY" style="text-decoration: none">24*</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify>
      <a href="#POWER OF ATTORNEY" style="text-decoration: none">Power of Attorney (included on the signature page of this
      registration statement).</a></P></TD></TR></TABLE>
<P align=justify style="margin-top: 0">_________________________<br>
* Filed herewith</P>
<P align=justify><B>Item 17. Undertakings </B></P>
<P align=justify>(A) The undersigned registrant hereby undertakes: </P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement to: </P>
<P align=justify>(a) Include any prospectus required by Section 10(a)(3) of the
Securities Act, and </P>
<P align=justify>(b) Reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the &#147;Calculation of Registration Fee&#148;
table in the effective Registration Statement; and </P>
<P align=justify>(c) Include any additional or changed material information with
respect to the plan of distribution not previously disclosed in Registration
Statement; </P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial <I>bona fide</I> offering thereof. </P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering. </P>
<P align=justify>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) If the registrant is subject
to Rule 430C (&#167;230.430C of this chapter), each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A (&#167;230.430A of this chapter), shall be deemed to be part of
and included in the registration statement as of the date it is first used after
effectiveness. <I>Provided, however, </I>that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use. </P>
<P align=justify>(B) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. </P>
<P align=center>II-8 </P>


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<A name="page_88"></A>

<HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">

<!--$$/page=--><A name=page_89></A>
<P align=center><B>SIGNATURES</B><BR></P>
<P align=justify>Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Tai'an City, Shandong
Province, China, on the 24th day of July, 2009. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD align=left width="620">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; " align=left width="621">CHINA BIOLOGIC PRODUCTS, INC.</TD></TR>

  <TR vAlign=top>
    <TD align=left width="50%">&nbsp;</TD>
    <TD style="BORDER-BOTTOM: medium none #000000; ; border-top-style:none; border-top-width:medium" align=left width="50%">&nbsp;</TD></TR>

  <TR vAlign=top>
    <TD align=left width="620">
    <p align="right">By:&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: 1px solid #000000; ; border-top-style:none; border-top-width:medium" align=left width="621">/s/
      Chao Ming Zhao </TD></TR>
  <TR vAlign=top>
    <TD align=left width="620">&nbsp; </TD>
    <TD align=left width="621">Chao Ming Zhao </TD></TR>
  <TR vAlign=bottom>
    <TD align=center width="620"></TD>
    <TD align=center width="621" >
    <p align="left">Chief Executive Officer
      (Principal Executive Officer)&nbsp;&nbsp;</TD></TR>
  <TR>
    <TD width="620">&nbsp; </TD>
    <TD width="621">&nbsp; </TD></TR>
  <TR>
    <TD width="620">&nbsp; </TD>
    <TD width="621">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="620">
    <p align="right">By:&nbsp;&nbsp;&nbsp; </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="621">/s/ Y.
      Tristan Kuo </TD></TR>
  <TR vAlign=top>
    <TD align=left width="620">&nbsp; </TD>
    <TD align=left width="621">Y. Tristan Kuo </TD></TR>
  <TR vAlign=top>
    <TD align=left width="620"></TD>
    <TD align=left width="621">Chief Financial Officer (Principal Financial
      and Accounting Officer) </TD></TR></TABLE>
<P align=center><B><a name="POWER OF ATTORNEY">POWER OF ATTORNEY</a></B><BR></P>
<P align=justify>Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints Chao Ming Zhao and Y. Tristan Kuo, and each of them
individually, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof. </P>
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0>

  <TR vAlign=top>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="413">Signature </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=left width="414">Title
    </TD>
    <TD style="BORDER-BOTTOM: #000000 1px solid" align=center width="414">Date
    </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Siu Ling Chan</U> </TD>
    <TD align=left width="414">Chairwoman of the Board </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="33%">Siu Ling Chan </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="33%">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Chao Ming Zhao</U> </TD>
    <TD align=left width="414">Chief Executive Officer </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Chao Ming Zhao </TD>
    <TD align=left width="414">(Principal Executive Officer) </TD>
    <TD align=left width="414">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Yu-Yun Tristan Kuo</U> </TD>
    <TD align=left width="414">Chief Financial Officer </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Yu-Yun Tristan Kuo </TD>
    <TD align=left width="414">(Principal Financial and Accounting Officer)
</TD>
    <TD align=left width="414">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Lin Ling Li</U> </TD>
    <TD align=left width="414">Director </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Lin Ling Li </TD>
    <TD align=left width="414">&nbsp; </TD>
    <TD align=left width="414">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Sean Shao</U> </TD>
    <TD align=left width="414">Director </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Sean Shao </TD>
    <TD align=left width="414">&nbsp; </TD>
    <TD align=left width="414">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Jie Gan</U> </TD>
    <TD align=left width="414">Director </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Jie Gan </TD>
    <TD align=left width="414">&nbsp; </TD>
    <TD align=left width="414">&nbsp; </TD></TR>
  <TR>
    <TD width="413">&nbsp; </TD>
    <TD width="414">&nbsp; </TD>
    <TD width="414">&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413"><U>/s/ Tong Jun Lin</U> </TD>
    <TD align=left width="414">Director </TD>
    <TD align=center width="414">July 24, 2009 </TD></TR>
  <TR vAlign=top>
    <TD align=left width="413">Tong Jun Lin </TD>
    <TD align=left width="414">&nbsp; </TD>
    <TD align=left width="414">&nbsp; </TD></TR></TABLE>&nbsp;<A name="page_90"></A><HR noshade align="center" width="100%" size=5 color="black" style="page-break-after:always;">



<A name="page_98"></A>

<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=bottom width="5%" bgColor=#FFFFFF style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD bgColor=#FFFFFF valign="bottom" style="border-bottom-style: none; border-bottom-width: medium">
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=bottom width="5%" bgColor=#FFFFFF style="border-bottom-style: none; border-bottom-width: medium" colspan="2">
    <p align="center"><b>EXHIBIT INDEX</b></TD>
    </TR>

  <TR>
    <TD vAlign=bottom width="5%" bgColor=#FFFFFF style="border-bottom-style: none; border-bottom-width: medium">&nbsp;</TD>
    <TD bgColor=#FFFFFF valign="bottom" style="border-bottom-style: none; border-bottom-width: medium">
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=bottom width="5%" bgColor=#FFFFFF style="border-bottom-style: solid; border-bottom-width: 1; border-top-style:none; border-top-width:medium"><B>Exhibit</B>
    <br>
    <B>No.</B> </TD>
    <TD bgColor=#FFFFFF valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1; border-top-style:none; border-top-width:medium">
      <B>Description</B> </TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#FFFFFF style="border-top-style: solid; border-top-width: 1">&nbsp;</TD>
    <TD bgColor=#FFFFFF style="border-top-style: solid; border-top-width: 1">
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>2.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Share Exchange Agreement between the Company, Logic
      Express Limited and the selling stockholders signatory thereto, dated as
      of July 18, 2006 (incorporated by reference to Exhibit 2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>3.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Certificate of Incorporation of the Company (incorporated
      by reference to Exhibit 3.1 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>3.2 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended and Restated By-Laws, adopted on March 31, 2009
      (incorporated by reference to Exhibit 3.2 of the Annual Report on Form
      10-K filed by the Company on March 31, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.1 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Securities Purchase Agreement between the Company, Logic
      Express Limited, Shandong Taibang Biological Products Co., Ltd., and the
      selling stockholders and investors signatory thereto, dated as of July 18,
      2006 (incorporated by reference to Exhibit 4.1 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.2 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Registration Rights Agreement, between the Company and
      certain investors signatory thereto, dated as of July 18, 2006
      (incorporated by reference to Exhibit 4.2 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.3 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Stockholder Warrant to purchase Common Stock,
      dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.4 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Lane Warrant, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.4 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.5 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Share Escrow Agreement, between the Company, Lane, as
      investor representative, the Escrow Agent, and the selling stockholders
      signatory thereto, dated as of July 19, 2006 (incorporated by reference to
      Exhibit 4.5 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.6 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.6 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)</P></TD></TR></TABLE>
<P align=center>&nbsp;</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
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<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.7 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.8 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.9 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.10 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.11 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.12 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.13 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.14 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.15 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.16 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.17 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>4.18 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5,
      2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD width="5%" bgcolor="#E6EFFF">
    <a href="exhibit51.htm" style="text-decoration: none">5.1*</a></TD>
    <TD bgcolor="#E6EFFF"><a href="exhibit51.htm" style="text-decoration: none">
    Opinion of Pillsbury Winthrop Shaw Pitman LLP</a></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.1. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.2. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K, filed by
      the Company on May 13, 2008)</P></TD></TR></TABLE>
<P align=center>&nbsp;</P>
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style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
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  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.3. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Group Secondment Agreement, dated October 28, 2002,
      between Shandong Taibang Biological Products Co., Ltd. and the Shandong
      Institute (English Translation) (incorporated by reference to Exhibit 10.1
      of the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.4. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended and Restated Joint Venture Agreement, between
      Logic Express Limited and the Shandong Institute, dated as of March 12,
      2006 (English Translation) (incorporated by reference to Exhibit 10.2 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.5. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Letter of Intent for Equity Transfer, between Logic
      Express Limited and the Shandong Institute, dated as of June 10, 2006
      (English Translation) (incorporated by reference to Exhibit 10.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.6. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qihei Plasma Collection Station, dated
      as of December 30, 2005 (English Translation) (incorporated by reference
      to Exhibit 10.4 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.7. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xiajin Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.5 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.8. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang and
      the Zhangqiu Plasma Collection Station, dated as of December 30, 2005
      (English Translation) (incorporated by reference to Exhibit 10.6 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.9. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qi He An Tai Plasma Collection Co.,
      Ltd., dated as of January 2, 1007 (English Translation) (incorporated by
      reference to Exhibit 10.9 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.10. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xia Jin An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.10 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.11. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Zhang Qiu An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.11 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.12. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Zhang Qiu An Tai Plasma
      Collection Co., Ltd. and Zhang Qiu Plasma Collection Station, dated as of
      December 31, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.12 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.13. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of April 24, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.14. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Qi He An Tai Plasma
      Collection Co., Ltd. and Qi He County Plasma Collection Station, dated as
      of November 9, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.14 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.15. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Xia Jin An Tai Plasma
      Collection Co., Ltd. and Xia Jin County Plasma Collection Station, dated
      as of October 20, 2006 (English Translation) (incorporated
  by reference to Exhibit 10.15 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)</P></TD></TR></TABLE>
<P align=center>&nbsp;</P>
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  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.16. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Liao Cheng An Tai
      Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station,
      dated as of November 3, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.16 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.17. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.18. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.19. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.20. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.21. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.22. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.23. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.24. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.25. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.26. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.27. </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)</P></TD></TR></TABLE>
<P align=center>&nbsp;</P>
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cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD colSpan=2>
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.28. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>(Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.29. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.30. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.31. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.32. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Tai'an Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.33. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Tai'an Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.34. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.35. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.36. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.37. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.38. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Director's Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8&nbsp;of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.39. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.40. </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2&nbsp;of the current report
      on Form 8-K, filed by the Company on July 30, 2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.41 </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Securities Purchase Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 10.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>10.42 </TD>
    <TD bgColor=#e6efff colSpan=2>
      <P align=justify>Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2&nbsp;of the Current Report
      on Form 8-K filed by the Company on June 5, 2009).</P></TD></TR>
  <TR>
    <TD width="5%" bgColor=#FFFFFF>&nbsp;</TD>
    <TD width="5%" bgColor=#FFFFFF>&nbsp;</TD>
    <TD bgColor=#FFFFFF>&nbsp;</TD>
  <TR>
    <TD vAlign=top width="5%" bgcolor="#E6EFFF">10.43 </TD>
    <TD colSpan=2 bgcolor="#E6EFFF">
      <P align=justify>Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).</P></TD></TR></TABLE>
<P align=center>&nbsp;</P>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>
<!--$$/page=-->
<TABLE
style="BORDER-COLOR: black; FONT-SIZE: 10pt; BORDER-COLLAPSE: collapse; "
cellSpacing=0 cellPadding=0 width="100%" border=0 BCLLIST>

  <TR>
    <TD vAlign=top width="5%">&nbsp;</TD>
    <TD>
      &nbsp;</TD></TR>

  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>14 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>21 </TD>
    <TD bgColor=#e6efff>
      <P align=justify>Subsidiaries of China Biologic Products, Inc.
      (Incorporated by reference to Exhibit 21 to the registrant's quarterly
      report on Form 10-Q filed on May 15, 2009)</P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="exhibit231.htm" style="text-decoration: none">23.1*</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify><a href="exhibit231.htm" style="text-decoration: none">Consent of Moore Stephens Wurth Frazer and Torbet, LLP</a></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="exhibit51.htm" style="text-decoration: none">23.2*</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify><a href="exhibit51.htm" style="text-decoration: none">Consent of Pillsbury Winthrop Shaw Pittman LLP, included
      in Exhibit 5.</a></P></TD></TR>
  <TR>
    <TD width="5%">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="5%" bgColor=#e6efff>
    <a href="#POWER OF ATTORNEY" style="text-decoration: none">24 *</a></TD>
    <TD bgColor=#e6efff>
      <P align=justify>
      <a href="#POWER OF ATTORNEY" style="text-decoration: none">Power of Attorney (included on the signature page of this
      registration statement).</a></P></TD></TR></TABLE>
<p align="justify" style="margin-top: 0">_________________________<br>
* Filed herewith</p>
<HR style="PAGE-BREAK-AFTER: always" align=center width="100%" color=black
noShade SIZE=5>

<p align="center"><font size="3"><b>CHINA BIOLOGIC PRODUCTS, INC.<br>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS<br>
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008</b></font></p>
<table height="153" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="90%" height="2">
    <p align="justify"></td>
    <td vAlign="top" width="2%" height="2">
    <p align="justify"></td>
    <td vAlign="top" width="7%" height="2" nowrap>
    <p align="center"></td>
  </tr>
  <tr>
    <td vAlign="top" height="12">
    <p align="justify"><font size="2"><b>Contents</b></font></td>
    <td vAlign="top" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" height="12" nowrap>
    <p align="center"><font size="2"><b>Page(s)</b></font></td>
  </tr>
  <tr style="font-size: 1px">
    <td style="border-bottom: 1px solid black" vAlign="top" height="3">
    <font size="2">&nbsp; </font></td>
    <td vAlign="top" height="3">
    <p align="justify"></td>
    <td style="border-bottom: 1px solid black" vAlign="top" height="3" nowrap>
    <font size="2">&nbsp; </font></td>
  </tr>
  <tr>
    <td vAlign="top" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" height="12" nowrap>
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">Consolidated Balance Sheets as of March
    31, 2009 (unaudited) and December 31, 2008</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="15" nowrap>
    <p align="center"><font size="2">F-2</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="12" nowrap>
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top" height="15">
    <p align="justify"><font size="2">Consolidated Statements of Income and
    Other Comprehensive Income for the three months ended March 31, 2009 and
    2008 (unaudited)</font></td>
    <td vAlign="top" height="15">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" height="15" nowrap>
    <p align="center"><font size="2">F-3</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="12" nowrap>
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">Consolidated Statements of Changes in
    Equity</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="15" nowrap>
    <p align="center"><font size="2">F-4</font></td>
  </tr>
  <tr>
    <td vAlign="top" height="13">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" height="13">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" height="13" nowrap>
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top" height="15">
    <p align="justify"><font size="2">Consolidated Statements of Cash Flows for
    the three months ended March 31, 2009 and 2008 (unaudited)</font></td>
    <td vAlign="top" height="15">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" height="15" nowrap>
    <p align="center"><font size="2">F-5</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="12">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="12" nowrap>
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">Notes to the Consolidated Financial
    Statements (unaudited)</font></td>
    <td vAlign="top" bgColor="#e9f1f8" height="15">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8" height="15" nowrap>
    <p align="center"><font size="2">F-6 &#150;&nbsp; F-32</font></td>
  </tr>
</table>
<p align="center">F-1</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">CONSOLIDATED BALANCE SHEETS <br>
AS OF MARCH 31, 2009 AND DECEMBER 31, 2008</font></p>
<div align="center">
  <center>
  <table style="border-collapse: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
    <tr style="font-size: 1px">
      <td vAlign="bottom" width="70%" height="2"></td>
      <td vAlign="bottom" width="3%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="1%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="10%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="3%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="1%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="10%" height="2">
      <p align="center"></td>
      <td vAlign="bottom" width="1%" height="2">
      <p align="center"></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="30"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="30">
      <p align="center"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" colSpan="2" height="30">
      <p align="center"><font size="2"><b>March 31,<br>
      2009</b></font></td>
      <td vAlign="bottom" height="30">
      <p align="center"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" colSpan="2" height="30">
      <p align="center"><font size="2"><b>December 31,<br>
      2008</b></font></td>
      <td vAlign="bottom" height="30">
      <p align="center"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="center"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" colSpan="2" height="15">
      <p align="center"><font size="2"><b>(Unaudited)</b></font></td>
      <td vAlign="bottom" height="15">
      <p align="center"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" colSpan="2" height="15">
      <p align="center"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="center"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="center"><font size="2"><u>ASSETS</u></font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      CURRENT ASSETS:</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Cash</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">$</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">34,005,948</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">$</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">8,814,616</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Notes receivable</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">468,800</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Accounts receivable, net of allowance for doubtful accounts
      of $1,275,437 and $1,268,052 as of March 31, 2009 and December 31, 2008,
      respectively</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">383,781</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">313,087</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Accounts receivable - related party</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">631,803</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Dividend receivable</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">147,055</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">147,256</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other receivables</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">845,780</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">356,957</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other receivables - related party</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">797,138</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Inventories</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">26,700,002</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">14,949,196</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Prepayments and deferred expense</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">1,133,535</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">614,704</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total current assets</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">65,113,842</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">25,195,816</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">PLANT
      AND EQUIPMENT, net</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom-color:inherit" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">27,583,288</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">19,299,364</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
      <td style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-color:inherit; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-top: 1px solid; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
      <td style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-color:inherit; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-color:inherit; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">OTHER
      ASSETS:</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Investment in unconsolidated affiliate</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">6,565,312</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">6,533,977</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Refundable deposit for potential acquisition</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">14,181,800</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Prepayments - non-current</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,519,925</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">955,874</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Intangible assets, net</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">21,636,063</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">1,002,561</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Goodwill</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">13,692,473</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total other assets</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">46,413,773</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">22,674,212</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
      <font size="2">Total assets</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">$</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">139,110,903</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">$</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">67,169,392</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt" align="center">
      <font size="2"><u>LIABILITIES AND SHAREHOLDERS' EQUITY</u></font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      CURRENT LIABILITIES:</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Accounts payable</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">$</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">3,502,387</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">$</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">2,481,889</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Notes payable</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">29,300</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">29,340</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Short term loans - bank</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">7,720,550</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Short term loan - holder of noncontrolling interest</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">772,223</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">773,277</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other payables and accrued liabilities</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">12,978,381</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">3,962,931</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other payable - land use right</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">29,281</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">1,683</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other payable - holder of noncontrolling interest</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">1,333,795</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Other payable - related party</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">2,563,643</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Accrued interest - related party</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">305,966</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Distribution payable to holder of noncontrolling interest</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,166,692</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">3,252,354</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Customer deposits</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">6,390,937</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">1,091,792</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Taxes payable</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">5,211,498</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,060,010</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Long term bank loan-current maturities</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">439,500</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Investment payable</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">17,510,836</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">3,275,501</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total current liabilities</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">62,954,989</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">18,928,777</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">OTHER
      LIABILITIES:</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Non-current other payable - land use right</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">324,546</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">323,707</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Long term loan-bank, net of current maturities</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">8,790,000</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">5,868,000</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total other liabilities</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">9,114,546</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">6,191,707</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-bottom-style: none; border-bottom-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
      <font size="2">Total liabilities</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">72,069,535</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">25,120,484</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
      <td style="border-top: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-top: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
      <td style="border-top: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-top: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-style: none; border-width: medium"></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      WARRANT LIABILITIES</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; ; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; ; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      <p align="right"><font size="2">2,061,049</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; ; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; ; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium; border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      COMMITMENTS AND CONTINGENCIES</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium">
      </td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"></td>
      <td style="border-top: 1px solid; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-top: 1px solid; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"></td>
      <td style="border-top: 1px solid; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td style="border-top: 1px solid; border-bottom-style:none; border-bottom-width:medium" vAlign="bottom" height="15">
      </td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      EQUITY:</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Common stock, $0.0001 par value, 100,000,000 shares
      authorized, 21,434,942 shares issued and outstanding at March 31, 2009 and
      December 31, 2008</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">2,143</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">2,143</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Paid-in-capital</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">9,988,956</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">10,700,032</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Statutory reserves</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">9,750,637</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">6,989,801</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Retained earnings</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">15,960,158</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" height="15">
      <p align="right"><font size="2">15,392,253</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Accumulated other comprehensive income</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,177,935</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,159,298</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total shareholders' equity</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">39,879,829</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid" vAlign="bottom" height="15">
      <p align="right"><font size="2">37,243,527</font></td>
      <td vAlign="bottom" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      NONCONTROLLING INTEREST</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">25,100,490</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-bottom: 1px solid" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">4,805,381</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" height="15">
      <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
      <font size="2">Total equity</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">64,980,319</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: medium none; " vAlign="bottom" height="15">
      <p align="right"><font size="2">42,048,908</font></td>
      <td vAlign="bottom" height="15" style="border-bottom-style: none; border-bottom-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-right-style: none; border-right-width: medium">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td style="border-top: medium none; border-bottom: medium none; ; border-left-style:none; border-left-width:medium; border-right-style:none; border-right-width:medium" vAlign="bottom" bgColor="#e9f1f8" height="15">
      &nbsp;</td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-style: none; border-width: medium">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
      <font size="2">Total liabilities and equity</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">$</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">139,110,903</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <font size="2">$</font></td>
      <td style="border-top: medium none; border-bottom: 3pt double" vAlign="bottom" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">67,169,392</font></td>
      <td vAlign="bottom" bgColor="#e9f1f8" height="15" style="border-top-style: none; border-top-width: medium"><font size="2">&nbsp;</font></td>
    </tr>
  </table>
  </center>
</div>
<p><font size="2">The accompanying notes are an integral part of these
consolidated statements.</font></p>
<p align="center">F-2</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME <br>
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 <br>
(Unaudited)</font></p>
<table style="border-right-width: 0px; border-top-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="70%">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">REVENUES</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,148,598</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,849,007</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">COST OF
    SALES</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">6,214,930</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,948,898</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">GROSS
    PROFIT</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">14,933,668</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,900,109</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    OPERATING EXPENSES<b>:</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Selling expenses</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">579,496</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">494,529</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">General and administrative expenses</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,822,907</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,584,128</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Research and development expenses</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">467,727</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">183,782</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Total operating expenses</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,870,130</font></td>
    <td style="border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,262,439</font></td>
    <td style="border-left: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">INCOME
    FROM OPERATIONS</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">10,063,538</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,637,670</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Equity in income of unconsolidated affiliate</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(40,247</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Change in fair value of warrant liabilities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">393,023</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Interest expense (income), net</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">370,853</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">22,973</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Other expense (income), net</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">51,315</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">412</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Total other expenses (income), net</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">774,944</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">23,385</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">INCOME
    BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,288,594</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,614,285</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    PROVISION FOR INCOME TAXES</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,030,194</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">740,482</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">NET
    INCOME BEFORE NONCONTROLLING INTEREST</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,258,400</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,873,803</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Less:
    Net income attributable to noncontrolling interest</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,000,082</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">606,003</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">NET
    INCOME ATTRIBUTABLE TO CONTROLLING INTEREST</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,258,318</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,267,800</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">OTHER
    COMPREHENSIVE INCOME<b>:</b></font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation adjustments</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,637</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">942,699</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Comprehensive income attributable to noncontrolling interest</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">427,302</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">184,467</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    COMPREHENSIVE INCOME</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,704,257</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,394,966</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">BASIC
    EARNINGS PER SHARE<b>:</b></font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Weighted average number of shares</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Earnings per share</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">0.11</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">DILUTED
    EARNINGS PER SHARE<b>:</b></font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Weighted average number of shares</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,964,168</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Earnings per share</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0.10</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
</table>
<p><font size="2">The accompanying notes are an integral part of these
consolidated statements.</font></p>
<p align="center">F-3</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY</font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="14%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="6%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="6%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="6%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="5">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="5">
    <p align="center"><font size="2"><b>Retained earnings</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Accumulated <br>
    other</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="5">
    <p align="center"><font size="2"><b>Common stock</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Additional</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Statutory</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>comprehensive</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Noncontrolling</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Shares</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Par value</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>paid in capital</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>reserves</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Unrestricted</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>income</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>interest</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>Total</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">&nbsp;</td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: 1px solid black" vAlign="bottom" colSpan="2">
    <font size="2">&nbsp; </font></td>
    <td vAlign="bottom">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">BALANCE,
    December 31, 2007</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,143</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,388,305</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,934,703</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,461,680</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,313,348</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,181,338</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">26,281,517</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Stock based compensation</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,267,800</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">606,003</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,873,803</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared to noncontrolling interest shareholders</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">(385,080</font></td>
    <td vAlign="bottom"><font size="2">)</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">(385,080</font></td>
    <td vAlign="bottom"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Adjustment to statutory reserve</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">352,954</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(352,954</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">)</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation adjustments</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">942,699</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">184,467</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,127,166</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">BALANCE,
    March 31, 2008 (unaudited)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,143</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,388,305</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,287,657</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">8,376,526</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,256,047</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,586,728</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">29,897,406</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Stock based compensation</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,311,727</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,311,727</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,717,871</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,697,838</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">12,415,709</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared to noncontrolling interest shareholders</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(2,596,965</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(2,596,965</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Adjustment to statutory reserve</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,702,144</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(2,702,144</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation adjustments</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">903,251</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">117,780</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,021,031</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">BALANCE,
    December 31, 2008</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,143</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">10,700,032</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,989,801</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">15,392,253</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,159,298</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,805,381</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">42,048,908</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Cumulative effect of reclassification of warrants</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(738,449</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(929,577</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,668,026</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Stock based compensation</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">27,373</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">27,373</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">4,258,318</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">3,000,082</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">7,258,400</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared to noncontrolling interest shareholders</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(4,633,987</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">)</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(4,633,987</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Noncontrolling interest acquired from acquisition</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">21,501,712</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">21,501,712</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Adjustment to statutory reserve</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,760,836</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(2,760,836</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">)</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation adjustments</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">18,637</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">427,302</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom">
    <p align="right"><font size="2">445,939</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">BALANCE,
    March 31, 2009 (unaudited)</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,143</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,988,956</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,750,637</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">15,960,158</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,177,935</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">25,100,490</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">64,980,319</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt">&nbsp;</td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
  </tr>
</table>
<p><font size="2">The accompanying notes are an integral part of these
consolidated statements.</font></p>
<p align="center">F-4</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 <br>
(Unaudited)</font></p>
<table style="border-right-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2008</b></font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">CASH
    FLOWS FROM OPERATING ACTIVITIES:</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income attributable to controlling interest</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,258,318</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,267,800</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income attributable to non-controlling interest</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,000,082</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">606,003</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Consolidated net income</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7,258,400</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,873,803</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Adjustments to reconcile net income to cash provided by
    operating activities:</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Depreciation</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">759,072</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">274,361</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Amortization</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">838,459</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">26,157</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">(Gain) Loss on disposal of equipment</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(276</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">166</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Allowance for bad debt</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">26,581</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Stock based compensation</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">27,373</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Change in fair value of warrant liabilities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">393,023</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Equity in income of unconsolidated affiliate</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(40,246</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Change in operating assets and liabilities:</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Notes receivable</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(468,832</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Accounts receivable</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(97,007</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(960,482</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Accounts receivable - related party</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(212,367</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Other receivables</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(18,487</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,285</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Other receivables - related party</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,398</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Inventories</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(3,513,011</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(1,585,462</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Prepayments and deferred expenses</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(124,944</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(96,457</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Accounts payable</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(252,850</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(310,692</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Other payables and accrued liabilities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">307,916</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">101,089</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Accrued interest - related party</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">305,966</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Customer deposits</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,872,712</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">927,456</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Taxes payable</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(979,190</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">871,964</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 34.55pt; margin-right: 0in">
    <font size="2">Contingent liability</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(105,707</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 0.6in; margin-right: 0in">
    <font size="2">Net cash provided by operating activities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,082,292</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,018,879</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">CASH
    FLOWS FROM INVESTING ACTIVITIES:</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Cash acquired through acquisition</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">11,938,784</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Purchase of plant and equipment</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(986,640</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,249,620</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Additions to intangible assets</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(88,845</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(3,285</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Advances on non-current assets</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(474,736</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Advances on building acquired from related party</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(106,777</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 0.6in; margin-right: 0in">
    <font size="2">Net cash provided by (used in) investing activities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">10,388,563</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,359,682</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">CASH
    FLOWS FROM FINANCING ACTIVITIES:</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Proceeds from short term bank loan</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7,647,822</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Payments on short term loan</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(698,850</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 0.6in; margin-right: 0in">
    <font size="2">Net cash provided by (used in) financing activities</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7,647,822</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(698,850</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">EFFECTS
    OF EXCHANGE RATE CHANGE IN CASH</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">72,655</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">182,249</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">INCREASE
    IN CASH</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">25,191,332</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">142,596</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border:medium none; " vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">CASH,
    beginning of period</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">8,814,616</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,010,033</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: medium none #000000; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-bottom: medium none #000000; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-bottom: medium none #000000; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-bottom: medium none #000000; " vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000">
    &nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">CASH,
    end of period</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">34,005,948</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000; border-top-style:none; border-top-width:medium" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5,152,629</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Income taxes paid</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,783,619</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Interest paid (net of capitalized interest)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">236,649</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,416</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Non-cash investing and financing activities:</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Dividend paid by offsetting loan due from holder of
    noncontrolling interest</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,735,243</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Net assets acquired with prepayments made in prior periods</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">14,240,772</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Net assets acquired with unpaid investment</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">14,240,772</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 25.9pt; margin-right: 0in">
    <font size="2">Plant and equipment acquired with prepayments made in prior
    periods</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">87,305</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p><font size="2">The accompanying notes are an integral part of these
consolidated statements.</font></p>
<p align="center">F-5</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><b>Note 1 &#150; Organization background and
principal activities </b></font></p>
<p align="justify"><font size="2"><u>Principal Activities and Reorganization </u>
</font></p>
<p align="justify"><font size="2">China Biologic Products, Inc. (the "Company"
or "CBP") was originally incorporated in 1992 under the laws of the state of
Texas. The Company through its direct and indirect subsidiaries is principally
engaged in the research, development, commercialization, manufacture and sale of
human blood products to customers in the People's Republic of China (the "PRC")
and India. </font></p>
<p align="justify"><font size="2"><b><i>Current Development </i></b></font></p>
<p align="justify"><font size="2"><u>Establishment of New Collection Station in
Guangxi </u></font></p>
<p align="justify"><font size="2">In June 2008, the Company received the
approval from the Guangxi Province Bureau of Health to set up a new plasma
collection station in Pu Bei County, Guangxi Province. The new plasma collection
station will be located in the Centralized Industry Zone of Pu Bei County and
when it becomes operational, it will replace CBP's existing Fang Cheng Plasma
Collection Station ("Fang Cheng"). The Company's management decided to relocate
Fang Cheng to a more strategic location to increase collection volumes. During
the construction period, the existing Fang Cheng Plasma Station will still
continue with its normal operations. With the approval of the Centralized
Industry Zone of Pu Bei County, once Fang Cheng becomes operational, the Company
hopes to expand its coverage area to secure higher collection volumes in the
future. </font></p>
<p align="justify"><font size="2"><u>Dalin Acquisition and Entrustment Agreement
</u></font></p>
<p align="justify"><font size="2">On September 26, 2008, Logic Express Limited
("Logic Express"), through Logic Holdings (Hong Kong) Limited ("Logic
Holdings"), the newly established subsidiary in Hong Kong, entered into an
Equity Transfer Agreement with Chongqing Dalin Biological Technologies Co., Ltd.
("Dalin"), a PRC limited liability company, and Fan Shaowen, Chen Aimin, Chen
Aiguo and Yang Gang, the shareholders of Dalin, relating to the purchase of an
aggregate 90% equity interest in Dalin, for a total purchase price of
approximately $28,479,600 (RMB194,400,000). By April 2009, the Company made
three payments for total amount of approximately $25,638,850 (RMB 174,960,000),
which represents 90% of the purchase price in accordance with terms of the
equity transfer agreement. Logic Holdings is obligated to pay the fourth and
final installment, representing the remaining 10% of the purchase price, on or
before April 9, 2010, the one-year anniversary of the local Administration for
Industry and Commerce's approval of the equity transfer </font></p>
<p align="justify"><font size="2">In accordance with the terms of the equity
transfer agreement, Logic Holdings effectively became a 90% shareholder in Dalin,
including the right to receive its pro rata share of the profits on January 1,
2009. </font></p>
<p align="justify"><font size="2"><u>Huitian Acquisition </u></font></p>
<p align="justify"><font size="2">On October 10, 2008, Taibang entered into an
equity transfer agreement pursuant to which Taibang agreed to acquire 35% of the
equity interest in Xi'an Huitian Blood Products Co., Ltd., or Huitian, a
biopharmaceutical company based in Xi'an, Shaanxi Province, China, from Mr. Fan Qingchun, a PRC citizen, for an aggregate purchase price of approximately
$6,446,000 (RMB 44,000,000). The Company paid approximately $3,223,000 (RMB
22,000,000) of the purchase price and, pursuant to the equity transfer
agreement, as amended, the Company is obligated to pay the balance of the
purchase price 5 business days following June 30, 2009 with interest. On March
17, 2009, the Company completed the government approval process for the
acquisition, and pursuant to the terms of the equity transfer agreement, is
entitled to all the rights and privileges of a 35% shareholder in Huitian,
including the right to receive the pro rata share of the profits generated.
</font></p>
<p align="justify"><font size="2"><u>Formation of Hong Kong Subsidiary </u>
</font></p>
<p align="justify"><font size="2">On December 12, 2008, the Company established
Logic Holding (Hong Kong) Limited (or Logic Holding), our wholly-owned Hong Kong
subsidiary of Logic Express, for the purpose of being a holding company for
majority interest in Dalin.</font></p>
<p align="center">F-6</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><b>Note 2 &#150; Summary of significant accounting
policies </b></font></p>
<p align="justify"><font size="2"><u>Basis of Presentation </u></font></p>
<p align="justify"><font size="2">The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America. The Company's functional currency is
the Chinese Renminbi ("RMB"); however, the Company's reporting currency is the
United States Dollar ("USD"); therefore, the accompanying consolidated financial
statements have been translated and presented in USD. All material inter-company
transactions and balances have been eliminated in the consolidation. </font></p>
<p align="justify"><font size="2">While management has included all normal
recurring adjustments considered necessary to give a fair presentation of the
operating results for the periods presented, interim results are not necessarily
indicative of results for a full year. The information included in this Form
10-Q should be read in conjunction with information included in the 2008 annual
report filed on Form 10-K. </font></p>
<p align="justify"><font size="2"><u>Use of Estimates </u></font></p>
<p align="justify"><font size="2">The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. For example,
management estimates the fair value of stock based compensation as well as
potential losses on outstanding receivables. Management believes that the
estimates utilized in preparing its financial statements are reasonable and
prudent. Actual results could differ from these estimates. </font></p>
<p align="justify"><font size="2"><u>Foreign Currency Translation </u></font>
</p>
<p align="justify"><font size="2">The reporting currency of the Company is the
US dollar. The Company's functional currency is the Chinese Renminbi ("RMB"),
also the local currency of the Company's principal operating subsidiaries.
Results of operations and cash flows are translated at average exchange rates
during the period. Assets and liabilities are translated at the unified exchange
rate as quoted by the People's Bank of China at the end of the period.
Translation adjustments resulting from this process are included in accumulated
other comprehensive income in the statements of stockholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred. </font></p>
<p align="justify"><font size="2">In accordance with FAS 95, "Statement of Cash
Flows," cash flows from the Company's operations is calculated based upon the
local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet. </font></p>
<p align="justify"><font size="2">The consolidated balance sheet amounts, with
the exception of equity at March 31, 2009 and December 31, 2008 were translated
at RMB6.83 to $1.00 and RMB6.82 to $1.00, respectively. The equity accounts were
stated at their historical rate. The average translation rates applied to
consolidated statements of income and cash flow for the three months ended March
31, 2009 and 2008 were RMB6.83 and RMB7.15, respectively. </font></p>
<p align="justify"><font size="2"><u>Revenue Recognition </u></font></p>
<p align="justify"><font size="2">The Company recognizes revenue when products
are delivered and the customer takes ownership and assumes risk of loss,
collection of the relevant receivable is probable, persuasive evidence of an
arrangement exists and the sales price is fixed or determinable, which are
generally considered to be met upon delivery and acceptance of products at the
customer site. Sales are presented net of any discounts given to customers. As a
policy, the Company does not accept any product returns and based on the
Company's records, product returns, if any, are immaterial. Sales revenue
represents the invoiced value of goods, net of a value-added tax ("VAT"). All
products produced by the Company and sold in the PRC are subject to a Chinese
VAT at a rate of 6% of the gross sales price or at a rate approved by the
Chinese local government. Products distributed by Shandong Medical and plasma
raw material inter-company sales from Puding Plasma Company to Qianfeng are
subjected to a 17% VAT. </font></p>
<p align="justify"><font size="2"><u>Shipping and Handling </u></font></p>
<p align="justify"><font size="2">Shipping and handling costs related to costs
of goods sold are included in selling expenses and totaled $44,180 and $7,248
for the three months ended March 31, 2009 and 2008, respectively. </font></p>
<p align="center">F-7</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Financial Instruments </u></font></p>
<p align="justify"><font size="2">FAS 107, "Disclosures about Fair Value of
Financial Instruments" requires disclosure of the fair value of financial
instruments held by the Company. FAS 107 defines financial instruments and
requires fair value disclosures about those instruments. FAS 157, "Fair Value
Measurements", adopted January 1. 2008, defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurement and
enhances disclosures requirements for fair value measures. Receivables,
payables, short and long term loans, and derivative liabilities qualify as
financial instruments. Management concluded the carrying values of the
receivables, payables and short term loans approximate their fair values because
of the short period of time between the origination of such instruments and
their expected realization, and if applicable, their stated rates of interest
are equivalent to interest rates currently available. The fair values of the
long term debt and derivative liabilities are measured pursuant to FAS 157. The
three levels are defined as follow: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="5%">&nbsp;</td>
    <td vAlign="top" width="5%">&nbsp;</td>
    <td vAlign="top" width="90%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&#149;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">Level 1: inputs to the valuation
    methodology are quoted prices (unadjusted) for identical assets or
    liabilities in active markets. </font></td>
  </tr>
  <tr>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&#149;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">Level 2: inputs to the valuation
    methodology include quoted prices for similar assets and liabilities in
    active markets, and inputs that are observable for the assets or liability,
    either directly or indirectly, for substantially the full term of the
    financial instruments. </font></td>
  </tr>
  <tr>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top"><font size="1">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&#149;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">Level 3: inputs to the valuation
    methodology are unobservable and significant to the fair value. </font></td>
  </tr>
</table>
<p align="justify"><font size="2">The Company analyzes all financial instruments
with features of both liabilities and equity under FAS 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity," FAS 133, "Accounting for Derivative Instruments and Hedging Activities"
and EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock." </font></p>
<p align="justify"><font size="2">As required by FAS 157, financial assets and
liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. Depending on the product and
the terms of the transaction, the fair value of the derivative liabilities were
modeled using a series of techniques, including closed-form analytic formula,
such as the Black-Scholes Option Pricing Model, which does not entail material
subjectivity because the methodology employed does not necessitate significant
judgment, and the pricing inputs are observed from actively quoted markets.
</font></p>
<p align="justify"><font size="2">The fair value of 1,284,000 warrants was
determined using the Black-Scholes Model, defined in SFAS 157 as level 2 inputs,
and recorded the change in earnings. As a result, the derivative liability is
carried on the balance sheet at its fair value. </font></p>
<p align="justify"><font size="2">The carrying value of the long term bank loan
amounted to $8,790,000. The Company used Level 3 inputs for its valuation
methodology for the long term bank loan by comparing the stated loan interest
rate to the rate charged by the Bank of China to similar loans. </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="38%">&nbsp;</td>
    <td vAlign="bottom" width="2%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="14%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="8" rowSpan="2">
    <p align="center"><font size="2"><b>Fair Value Measurements at March 31,
    2009<br>
    using Fair Value Hierarchy</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" colSpan="2" rowSpan="3">
    <p align="center"><font size="2"><b>Carrying Value as of<br>
    March 31, 2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Level 1</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Level 2</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Level 3</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Warrant liabilities</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,061,049</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,061,049</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2">Long term bank loan</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">8,790,000</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">8,790,000</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">The Company did not identify any assets or
liabilities that are required to be presented on the balance sheet at fair value
in accordance with FAS 157. </font></p>
<p align="justify"><font size="2"><u>Concentration Risks </u></font></p>
<p align="justify"><font size="2">The Company's operations are carried out in
the PRC and are subject to specific considerations and significant risks not
typically associated with companies in North America and Western Europe.
Accordingly, the Company's business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the PRC, and by the general state of the PRC economy. The Company's results
may be adversely affected by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation, among other things. </font>
</p>
<p align="center">F-8</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Cash includes cash on hand and demand deposits
in accounts maintained with state-owned banks within the PRC, Hong Kong and the
United States. The Company maintains balances at financial institutions which,
from time to time, may exceed Federal Deposit Insurance Corporation insured
limits for the banks located in the United States or may exceed Hong Kong
Deposit Protection Board insured limits for the banks located in Hong Kong.
Balances at financial institutions or state-owned banks within the PRC are not
covered by insurance. Total cash in state-owned banks as of March 31, 2009 and
December 31, 2008 amounted to $33,786,039and $8,689,414, respectively. $78,141
and $78,140 of which are covered by insurance, respectively. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
risks on its cash in bank accounts. </font></p>
<p align="justify"><font size="2">The Company's major product, human albumin: -
20%/10ml, 20%/25ml and 20%/50ml, accounted for 58.2% and 58.1% of total
revenues, for the three months ended March 31, 2009 and 2008, respectively. If
the market demands for human albumin cannot be sustained in the future or if the
price of human albumin decreases, it would adversely affect the Company's
operating results. </font></p>
<p align="justify"><font size="2">All of the Company's customers are located in
the PRC and India. As of March 31, 2009 and 2008, the Company had no significant
concentration of credit risk, except for the amounts due from related parties.
There were no customers that individually comprised 10% or more of the revenue
during the three months ended March 31, 2009 and 2008. No individual customer
represented more than 10% of trade receivables at March 31, 2009 and December
31, 2008. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
</font></p>
<p align="justify"><font size="2">There were no vendors that individually
comprised 10% or more of the purchase during the three months ended March 31,
2009 and 2008. No individual vendors represented more than 10% of accounts
payables at March 31, 2009 and 2008. </font></p>
<p align="justify"><font size="2"><u>Accounts Receivable </u></font></p>
<p align="justify"><font size="2">During the normal course of business, the
Company extends unsecured credit to its customers. Management reviews its
accounts receivable on a regular basis to determine if the allowance for
doubtful accounts is adequate. An estimate for doubtful accounts is made when
collection of the full amount is no longer probable. An estimate for doubtful
accounts is made when collection of the full amount is no longer probable.
Account balances are written-off after management has exhausted all efforts of
collection. Trade accounts receivable consist of the following: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="70%">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Trade
    accounts receivable</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,659,218</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,581,139</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Less:
    Allowance for doubtful accounts</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">(1,275,437</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">)</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">(1,268,052</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Total</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">383,781</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">313,087</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">&nbsp;</td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">&nbsp;</td>
  </tr>
</table>
<p align="justify"><font size="2">The activity in the allowance for doubtful
accounts for trade accounts receivable for the three months ended March 31, 2009
and the year ended December 31, 2008 is as follows: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Beginning allowance for doubtful accounts</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,268,052</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,238,772</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Bad debt expense</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">26,581</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Recovery of amount previously reserved</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(16,768</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">(56,462</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Write-off charged against the allowance</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation adjustment</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(2,428</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">85,742</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Ending
    allowance for doubtful accounts</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,275,437</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,268,052</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center">F-9</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Inventories </u></font></p>
<p align="justify"><font size="2">Inventories are stated at the lower of cost or
market using the weighted average basis and consist of the following: </font>
</p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Raw
    materials</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">13,116,729</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,043,349</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Work-in-process</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7,233,674</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,801,768</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Finished
    goods</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,349,599</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,104,079</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Total</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">26,700,002</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">14,949,196</font></td>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
  </tr>
</table>
<p align="justify"><font size="2">The Company reviews its inventory periodically
for possible obsolete goods and cost in excess of net realizable value to
determine if any reserves are necessary. As of March 31, 2009 and December 31,
2008, the Company has determined that no reserve is necessary. </font></p>
<p align="justify"><font size="2"><u>Plant and Equipment </u></font></p>
<p align="justify"><font size="2">Plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets with 5% residual value.
Depreciation expense for the three months ended March 31, 2009 and 2008 amounted
to $759,072 (unaudited) and $274,361 (unaudited), respectively. </font></p>
<p align="justify"><font size="2">Estimated useful lives of the assets are as
follows:</font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="71%">&nbsp;</td>
    <td vAlign="top" width="13%">
    <p align="right">&nbsp;</td>
    <td vAlign="top" width="14%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="top" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Estimated Useful Life</b></font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Buildings and improvement</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">30</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2">Machinery and equipment</font></td>
    <td vAlign="top">
    <p align="right"><font size="2">10</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Furniture, fixtures and office equipment</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">5-10</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
</table>
<p align="justify"><font size="2">Construction in progress represents the costs
incurred in connection with the construction of buildings, new additions, and
capitalized interest incurred in connection with the Company's plant facilities.
In accordance with the provisions of FAS 34, "Capitalization of Interest Cost",
interest incurred on borrowings is capitalized to the extent that borrowings do
not exceed construction in progress. The credit is a reduction of interest
expense. No depreciation is provided for construction in progress until such
time as the assets are completed and placed into service.. Maintenance, repairs
and minor renewals are charged directly to expenses as incurred. Major additions
and betterment to property and equipment are capitalized. </font></p>
<p align="justify"><font size="2">The Company periodically evaluates the
carrying value of long-lived assets in accordance with FAS 144. "Accounting for
the Impairment or Disposal of Long-Lived Assets." When estimated cash flows
generated by those assets are less than the carrying amounts of the asset, the
Company recognizes an impairment loss. Based on its review, the Company believes
that, as of March 31, 2009 and December 31, 2008, there were no impairments of
its long-lived assets. </font></p>
<p align="justify"><font size="2">Plant and equipment consist of the following:
</font></p>
<table style="border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000"><font size="2">&nbsp;</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Buildings and improvements</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">12,502,700</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,809,724</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Machinery and equipment</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">23,002,042</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">12,308,174</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Furniture, fixtures, office equipment and vehicle</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,237,677</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,501,946</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Total depreciable assets</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">38,742,419</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">19,619,844</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Accumulated depreciation</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(11,985,029</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(3,099,259</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Plant
    and equipment, net</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">26,757,390</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">16,520,585</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Construction in progress</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">825,898</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,778,779</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Total</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">27,583,288</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px double #000000" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">19,299,364</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center">F-<font size="2">10</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">No interest was capitalized into construction
in progress in either of the three months ended March 31, 2009 and 2008. </font>
</p>
<p align="justify"><font size="2"><u>Investment in Unconsolidated Affiliate </u>
</font></p>
<p align="justify"><font size="2">Equity method investments are recorded at
original cost and adjusted to recognize the Company's proportionate share of the
investee's net income or losses and additional contributions made and
distributions received. The Company recognizes a loss if it is determined that
other than temporary decline in the value of the investment exists. Subsidiaries
in which the Company has the ability to exercise significant influence, but does
not have a controlling interest is accounted for using the equity method.
Significant influence is generally considered to exist when the Company has an
ownership interest in the voting stock between 20% and 50%, and other factors,
such as representation on the Board of Directors, voting rights and the impact
of commercial arrangements, are considered in determining whether the equity
method of accounting is appropriate. The Company accounts for investments with
ownership less than 20% using cost method. </font></p>
<p align="justify"><font size="2"><u>Intangible Assets </u></font></p>
<p align="justify"><font size="2">Intangible assets are stated at cost
(estimated fair value upon contribution or acquisition), less accumulated
amortization. Amortization expense is recognized on the straight-line basis over
the estimated useful lives of the assets as follows: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="69%">&nbsp;</td>
    <td vAlign="top" width="5%">&nbsp;</td>
    <td vAlign="top" width="11%">&nbsp;</td>
    <td vAlign="top" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom: 1px solid #000000" vAlign="top"><font size="2"><b>
    Intangible assets</b></font></td>
    <td vAlign="top"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid #000000" vAlign="top" colSpan="2">
    <p align="center"><font size="2"><b>Estimated useful lives</b></font></td>
  </tr>
  <tr>
    <td style="border-top: medium none" vAlign="top" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Land use
    rights</font></td>
    <td vAlign="top" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">50</font></td>
    <td style="border-top: medium none" vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Permits
    and licenses</font></td>
    <td vAlign="top"><font size="2">&nbsp;</font></td>
    <td vAlign="top">
    <p align="right"><font size="2">5-10</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Blood
    donor network</font></td>
    <td vAlign="top" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">10</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Software</font></td>
    <td vAlign="top"><font size="2">&nbsp;</font></td>
    <td vAlign="top">
    <p align="right"><font size="2">3.8</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Good
    Manufacturing Practice certificate</font></td>
    <td vAlign="top" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">5-10</font></td>
    <td vAlign="top" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Long-term customer-relationship intangible assets</font></td>
    <td vAlign="top"><font size="2">&nbsp;</font></td>
    <td vAlign="top">
    <p align="right"><font size="2">4</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;&nbsp;years</font></td>
  </tr>
</table>
<p align="justify"><font size="2">All land in the PRC is owned by the
government; however, the government grants "land use rights." The Company has
obtained rights to use various parcels of land for 50 years. The Company
amortizes the cost of the land use rights over their useful life using the
straight-line method. </font></p>
<p align="justify"><font size="2">Other intangible assets represent permits,
licenses and Good Manufacturing Practice Certificates contributed in return for
equity upon the establishment of Shandong Taibang in 2002. Contributed rights
include those necessary to manufacture and distribute human blood products in
the PRC market as authorized by the relevant PRC authorities. The estimated
useful life of the contributed rights is 5-10 years. </font></p>
<p align="justify"><font size="2">Intangible assets consisted of the following:
</font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Land use
    rights</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,136,255</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">848,982</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Permits
    and licenses</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">11,258,012</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">389,709</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Blood
    donor network</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">22,854</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">22,885</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Software</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">87,712</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">40,758</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">GMP
    certificate</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,327,885</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Long-term customer-relationship</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">6,941,170</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Totals</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">22,773,888</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,302,334</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Accumulated amortization</font></td>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,137,825</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(299,773</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Intangible assets, net</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,636,063</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,002,561</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">&nbsp;</td>
  </tr>
</table>
<p align="center">F-<font size="2">11</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Total amortization expense for the three
months ended March 31, 2009 and 2008 amounted to $838,459 (unaudited) and
$26,157 (unaudited), respectively. The amortization expenses related to
purchased and other intangible assets due to the consolidation of Dalin is
$792,629 for the three months ended March 31, 2009. </font></p>
<p align="justify"><font size="2">Amortization expense for intangible assets for
the next five fiscal years is as follows: </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="21%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2010</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2011</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2012</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2013</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Thereafter</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Amortization expense</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,509,062</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,343,432</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,344,902</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,339,680</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,575,993</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,522,999</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">Intangible assets of the Company are reviewed
at least annually or more often if circumstances dictate, to determine whether
their carrying value has become impaired. The Company considers assets to be
impaired if the carrying value exceeds the future projected cash flows from
related operations. The Company also re-evaluates the years of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. As of March 31, 2009, the Company expects these assets to be
fully recoverable. </font></p>
<p align="justify"><font size="2"><u>Revenues </u></font></p>
<p align="justify"><font size="2">The Company's revenues are primarily derived
from the manufacture and sale of human blood products. The Company's revenues by
significant types of product for the three months ended March 31, 2009 and 2008
are as follows: </font></p>
<table style="border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="66%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009<br>
    (Unaudited)</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2008<br>
    (Unaudited)</b></font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Albumin &#150; 20%/10ml, 20%/25ml and 20%/50ml</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">12,351,699</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,556,503</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Hepatitis B Immunoglobulin</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">60,099</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">224,475</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Immunoglobulin for Intravenous Injection</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,372,502</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,655,292</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Rabies Immunoglobulin</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,629,011</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,203,267</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Tetanus Immunoglobulin</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,029,686</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">111,552</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Human
    Immunoglobulin</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">213,877</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Others</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">491,724</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">97,918</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Totals</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,148,598</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7,849,007</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">The Company is engaged in sale of human blood
products to customers in China and India. The amount sold in India was less than
10% of total sales for the three months ended March 31, 2009. </font></p>
<p align="justify"><font size="2"><u>Research and Development Costs </u></font>
</p>
<p align="justify"><font size="2">Research and development costs are expensed as
incurred. </font></p>
<p align="justify"><font size="2"><u>Retirement and Other Post Retirement
Benefits </u></font></p>
<p align="justify"><font size="2">Contributions to retirement schemes (which are
defined contribution plans) are charged to the statement of operations as and
when the related employee service is provided. </font></p>
<p align="justify"><font size="2"><u>Product Liability </u></font></p>
<p align="justify"><font size="2">The Company's products are covered by product
liability insurance of approximately $2,930,000 (RMB 20,000,000). As of March
31, 2009 and December 31, 2008, no claim on the insurance policy was filed.
However, there are two pre-existing potential claims against Qianfeng's
products, which are still in the court proceedings as explained in the legal
proceeding section below. </font></p>
<p align="justify"><font size="2"><u>Government Grants </u></font></p>
<p align="justify"><font size="2">The Company's subsidiary, Shandong Taibang, is
entitled to receive grants from the PRC municipal government due to its
operation in the high and new technology business sector. For the three months
ended March 31, 2009 and 2008, no non-refundable grants were received from the
PRC municipal government. Grants received from the PRC municipal government can
be used for enterprise development and technology innovation purposes. </font>
</p>
<p align="center">F-<font size="2">12</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Income Taxes </u></font></p>
<p align="justify"><font size="2">The Company accounts for income taxes under
FAS 109, "Accounting for Income Taxes" and FIN 48, "Accounting for Uncertainty
in Income Taxes &#150; an interpretation of FASB Statement No. 109", FAS 109 requires
the recognition of deferred income tax liabilities and assets for the expected
future tax consequences of temporary differences between income tax basis and
financial reporting basis of assets and liabilities. Provision for income taxes
consist of taxes currently due plus deferred taxes. Since the Company had no
operations within the United States there is no provision for US taxes and there
are no deferred tax amounts at March 31, 2009 and 2008. FIN 48 clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
return. FIN 48 provides guidance on the measurement, recognition, classification
and disclosure of tax positions, along with accounting for the related interest
and penalties. </font></p>
<p align="justify"><font size="2">The charge for taxation is based on the
results for the year as adjusted for items, which are non-assessable or
disallowed. It is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. </font></p>
<p align="justify"><font size="2">Deferred tax is accounted for using the
balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax basis used in the computation of
assessable tax profit. In principle, deferred tax liabilities are recognized for
all taxable temporary differences, and deferred tax assets are recognized to the
extent that it is probably that taxable profit will be available against which
deductible temporary differences can be utilized. </font></p>
<p align="justify"><font size="2">Deferred tax is calculated using tax rates
that are expected to apply to the period when the asset is realized or the
liability is settled. Deferred tax is charged or credited in the income
statement, except when it is related to items credited or charged directly to
equity, in which case the deferred tax is also dealt with in equity. </font></p>
<p align="justify"><font size="2">Deferred tax assets and liabilities are offset
when they related to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
</font></p>
<p align="justify"><font size="2"><u>Value Added Tax </u></font></p>
<p align="justify"><font size="2">Enterprises or individuals, who sell products,
engage in repair and maintenance or import and export goods in the PRC are
subject to a VAT in accordance with Chinese laws. The VAT rate applicable to the
Company is 6% of the gross sales price. Products distributed by Shandong Medical
and plasma raw material inter-company sales from Puding Plasma Company to
Qianfeng are subjected to a 17% VAT. No credit is available for VAT paid on
purchases. </font></p>
<p align="justify"><font size="2"><u>Stock-based Compensation </u></font></p>
<p align="justify"><font size="2">The Company accounts and reports stock-based
compensation pursuant to FAS 123R "Accounting for Stock-Based Compensation",
which defines a fair-value-based method of accounting for stock based employee
compensation and transactions in which an entity issues its equity instruments
to acquire goods and services from non-employees. Stock compensation for stock
granted to non-employees has been determined in accordance with FAS 123R and the
EITF 96-18, "Accounting for Equity Instruments that are issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services", as
the fair value of the consideration received or the fair value of equity
instruments issued, whichever is more reliably measured. </font></p>
<p align="justify"><font size="2"><u>Noncontrolling</u> <u>Interest </u></font>
</p>
<p align="justify"><font size="2">Effective January 1, 2009, the Company adopted
FAS 160, "Noncontrolling Interests in Consolidated Financial Statements - an
amendment of Accounting Research Bulletin No. 51" Certain provisions of this
statement are required to be adopted retrospectively for all periods presented.
Such provisions include a requirement that the carrying value of noncontrolling
interests (previously referred to as minority interests) be removed from the
mezzanine section of the balance sheet and reclassified as equity. Further, as a
result of adoption on FAS 160, net income attributable to noncontrolling
interests is now excluded from the determination of consolidated net income. In
addition, foreign currency translation adjustment is allocated between
controlling and noncontrolling interests. </font></p>
<p align="center">F-<font size="2">13</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Recently Issued Accounting Pronouncements
</u></font></p>
<p align="justify"><font size="2">In January 2009, the FASB issued FSP EITF
99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20, and
EITF 99-20, Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets". FSP EITF 99-20-1
changes the impairment model included within EITF 99-20 to be more consistent
with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by
amending the impairment model in EITF 99-20 to remove its exclusive reliance on
"market participant" estimates of future cash flows used in determining fair
value. Changing the cash flows used to analyze other-than-temporary impairment
from the "market participant" view to a holder's estimate of whether there has
been a "probable" adverse change in estimated cash flows allows companies to
apply reasonable judgment in assessing whether an other-than-temporary
impairment has occurred. The adoption of FSP EITF 99-20-1 did not have a
material impact on the Company's consolidated financial statements because all
of the Company's investments in debt securities are classified as trading
securities. </font></p>
<p align="justify"><font size="2">In April 2009, the FASB issued FSP FAS 157-4,
"Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly". FSP FAS 157-4 amends FAS 157 and provides additional guidance for
estimating fair value in accordance with SFAS 157 when the volume and level of
activity for the asset or liability have significantly decreased and also
includes guidance on identifying circumstances that indicate a transaction is
not orderly for fair value measurements. This FSP shall be applied prospectively
with retrospective application not permitted. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity early adopting this
FSP must also early adopt FSP FAS 115-2 and FAS 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments". Additionally, if an entity
elects to early adopt either FSP FAS 107-1 and APB 28-1, "Interim Disclosures
about Fair Value of Financial Instruments" or FSP FAS 115-2 and FAS 124-2, it
must also elect to early adopt this FSP. Management is currently evaluating this
new FSP but do not believe that it will have a significant impact on the
determination or reporting of the financial results. </font></p>
<p align="justify"><font size="2">In April 2009, the FASB issued FSP FAS 115-2
and FAS 124-2. This FSP amends FAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," FAS 124, "Accounting for Certain Investments Held
by Not-for-Profit Organizations," and EITF 99-20, "Recognition of Interest
Income and Impairment on Purchased Beneficial Interests and Beneficial Interests
That Continue to Be Held by a Transferor in Securitized Financial Assets," to
make the other-than-temporary impairments guidance more operational and to
improve the presentation of other-than-temporary impairments in the financial
statements. This FSP will replace the existing requirement that the entity's
management assert it has both the intent and ability to hold an impaired debt
security until recovery with a requirement that management assert it does not
have the intent to sell the security, and it is more likely than not it will not
have to sell the security before recovery of its cost basis. This FSP provides
increased disclosure about the credit and noncredit components of impaired debt
securities that are not expected to be sold and also requires increased and more
frequent disclosures regarding expected cash flows, credit losses, and an aging
of securities with unrealized losses. Although this FSP does not result in a
change in the carrying amount of debt securities, it does require that the
portion of an other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early adopt
this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity
elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1, the
entity also is required to early adopt this FSP. Management is currently
evaluating this new FSP but do not believe that it will have a significant
impact on the determination or reporting of the financial results. </font></p>
<p align="justify"><font size="2">In April 2009, the FASB issued FSP FAS 107-1
and APB 28-1. This FSP amends SFAS 107 to require disclosures about fair value
of financial instruments not measured on the balance sheet at fair value in
interim financial statements as well as in annual financial statements. Prior to
this FSP, fair values for these assets and liabilities were only disclosed
annually. This FSP applies to all financial instruments within the scope of SFAS
107 and requires all entities to disclose the method(s) and significant
assumptions used to estimate the fair value of financial instruments. This FSP
shall be effective for interim periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity may early
adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and FSP FAS
115-2 and FAS 124-2. This FSP does not require disclosures for earlier periods
presented for comparative purposes at initial adoption. In periods after initial
adoption, this FSP requires comparative disclosures only for periods ending
after initial adoption. Management is currently evaluating the disclosure
requirements of this new FSP. </font></p>
<p align="center">F-<font size="2">14</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Reclassifications</u></font></p>
<p align="justify"><font size="2">Certain prior period amounts have been
reclassified to conform to the current period presentation. These
reclassifications have no effect on net income or cash flows. </font></p>
<p align="justify"><font size="2"><b>Note 3 &#150; Related party transactions </b>
</font></p>
<p align="justify"><font size="2">The material related party transactions
undertaken by the Company with related parties as of March 31, 2009 and December
31, 2008 are presented as follows: </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="41%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="21%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="11%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="11%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2"><b>Amount Due from</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2"><b>Purpose</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31,<br>
    2008</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Due from noncontrolling interest
    shareholders<sup>(1)</sup></font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Advances</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">204,864</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">Due from noncontrolling interest
    shareholders<sup>(1)</sup></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">Advances</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="right"><font size="2">592,274</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Due from noncontrolling interest
    shareholders<sup>(2)</sup></font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Processing fees</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">631,803</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
</table>
<p><br>
&nbsp;</p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="41%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="21%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2"><b>Amount Due to</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <font size="2"><b>Purpose</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31,<br>
    2008</b></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Noncontrolling interest shareholder of subsidiary <sup>(3)</sup></font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">Loan</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">772,223 </font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">773,277</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Guizhou
    Eakan Investing Corp.<sup>(4)</sup></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">Loan</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="right"><font size="2">2,119,878</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Guizhou
    Jie'an<sup>(3)</sup></font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">Contribution</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">962,481</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Shandong
    Institute<sup>(6)</sup></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">Institute's
    share of Dalin net income</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top">
    <p align="right"><font size="2">305,966</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Noncontrolling interest shareholder of subsidiary<sup>(7)</sup></font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">Partial acquisition consideration</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">371,314</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Former
    Dalin shareholders<sup>(7)</sup></font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">Partial
    acquisition consideration</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top">
    <p align="right"><font size="2">443,765</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="top">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><sup>(1)</sup> On November 13, 2008, Qianfeng
advanced its shareholders Guizhou Eakan and Guizhou Jie'an approximately
$1,172,000 (RMB 8,000,000) and $1,391,750 (RMB 9,500,000), respectively, as
shareholders loans according to the shareholders resolution of November 10,
2008. The loans bear interest at the prevailing bank lending rate in PRC and
payable each calendar quarterly, which is 5.31% at March 31, 2009 and matures in
one year. The loans were partially offset with the dividends declared on March
10, 2009 with outstanding balances of $204,864 and $592,274 due from Guizhou
Eakan and Guizhou Jie'an, respectively. </font></p>
<p align="justify"><font size="2"><sup>(2)</sup> Qianfeng provides processing
services for Guizhou Eakon, one of the Qianfeng's non-controlling shareholders.
As of March 31, 2009, Guizhou Eakon owes Qianfeng processing fees in the amount
of $631,803. </font></p>
<p align="justify"><font size="2"><sup>(3)</sup> As of March 31, 2009 and
December 31, 2008, the Company borrowed an aggregate of $772,223 and $773,277,
respectively, from its minority shareholder, Shandong Institute, for working
capital purposes. The Company is required to repay the loan in cash due by
August 2009, with an annual interest rate of 6%. </font></p>
<p align="justify"><font size="2"><sup>(4)</sup> Qianfeng has payables to
Guizhou Eakan Investing Corp. in the amount of approximately $2,119,878 (RMB
14,470,160). Guizhou Eakan Investing Corp. is one of the shareholders of Guizhou
Eakon, one of the Qianfeng's minority shareholders. </font></p>
<p align="justify"><font size="2"><sup>(5)</sup> Qianfeng has payables to
Guizhou Jie'an in amount of approximately $962,481 (RMB 6,569,840). In 2007,
Qianfeng received additional contributions from Guizhou Jie'an in the amount of
$962,481 to maintain Jie'an ownership interest in the Company at 9%. However,
due to legal dispute among Shareholders over Raising Additional Capital as
stated in legal proceeding section of Note 9, commitment and contingent
liabilities, the money may be returned to Jie'an. </font></p>
<p align="center">F-<font size="2">15</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><sup>(6)</sup> On April 6, 2009, Logic Express
entered into an equity transfer and entrustment agreement, or Entrustment
Agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of
Biological Products, or the Shandong Institute, the holder of the noncontrolling
interests in Shandong Taibang, pursuant to which, Logic Express agreed to permit
Shandong Taibang and the Shandong Institute to participate in the indirect
purchase of Qianfeng's equity interests. The amount $305,966 represents the pro
rata share of equity investment income pursuant of Entrustment Agreement for the
three month period ended March 31, 2009. </font></p>
<p align="justify"><font size="2"><sup>(7)</sup> The Company has a payable due
to the four Dalin's original shareholders in the amount approximately $815,079 (RMB
5,563,680), which represents partial acquisition considerations Logic Express
paid to the former shareholders of Dalin, which will be remitted to those
shareholders at their demand. Among the total $815,079, $371,314 is due to the
current 10% noncontrolling interest shareholder of Dalin, Fan Shaowen and
$443,765 is due to the remaining three Dalin's original shareholders and
currently are the employees of our subsidiary. </font></p>
<p align="justify"><font size="2"><b>Note 4 &#150; Prepayments and deferred expense
</b></font></p>
<p align="justify"><font size="2">Prepayments and deferred expense represent
partial payments for deposits on raw material purchases and prepayment for
insurance expenses and amounted to $1,133,535 and $614,704 as of March 31, 2009
and December 31, 2008, respectively. </font></p>
<p align="justify"><font size="2">Long term prepayments represent partial
payments or deposits on plant and equipment and intangible assets purchases and
amounted to $4,519,925 and $955,874 as of March 31, 2009 and December 31, 2008,
respectively. </font></p>
<p align="justify"><font size="2"><b>Note 5 &#150; Investment in unconsolidated
affiliate </b></font></p>
<p align="justify"><font size="2">On October 10, 2008, Shandong Taibang entered
into an Equity Transfer Agreement (the "Huitian Agreement") with Mr. Fan
Qingchun (the "Transferor"), a PRC citizen holding 35% of the equity interest in
Xi'an Huitian Blood Products Co., Ltd. ("Huitian"), a PRC limited liability
company. Pursuant to the Huitian Agreement, the Transferor agrees to sell to
Shandong Taibang, and Shandong Taibang agrees to purchase from the Transferor,
35% equity interest in Huitian for an aggregate purchase price of $6,494,036 (or
RMB 44,327,890) including interest of $48,036 (RMB 327,890). Huitian is one of
the 32 government approved plasma-based product producers in China, and it is in
compliance with Good Manufacturing Practices ("GMP") standards. It is also
approved by the PRC's State Food and Drug Administration ("SFDA") to produce
four types of plasma-based products. As of March 31, 2009, the Company has paid
a total of $3,223,000 with the unpaid balance of $3,271,036 to be due by July 7,
2009, including interest. </font></p>
<p align="justify"><font size="2">Logic Express also entered into an investment
entrustment agreement (the "Investment Agreement") with the minority shareholder
in Shandong Taibang, Shandong Biological Products Research Institute
("Biological Institute"), pursuant to which Logic Express agrees to provide the
investment amount for the acquisition and the Shandong Institute agree to
entrust Shandong Taibang to acquire the 35% equity interest of Huitian in its
name. In exchange Logic Express is also obligated to pay Shandong Taibang
approximately $17,580 (or RMB120,000) per year as consideration for Shandong
Taibang's performance under this agreement. Under the Investment Agreement,
after the acquisition, Logic Express will be in charge of Huitian's daily
operation and management, will bear the costs, expenses, liabilities and losses
incurred in its operation, and will enjoy its profits. Shandong Taibang will
perform relevant tasks according to Logic Express's instruction, and will not
exercise any management right over Huitian or derive any financial return from
Huitian. Logic Express agreed to indemnify Shandong Taibang for any loss in
connection with the investment and pledged its equity interest in Shandong
Taibang as collateral against such losses.</font></p>
<p align="center">F-<font size="2">16</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Summarized unaudited financial information of
Huitian is as follows: </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="68%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="10%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Current
    assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">8,125,584 </font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">8,039,180</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Non-current assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,963,109</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">10,145,248</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total
    assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,088,693</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,184,428</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Current
    liabilities</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px double; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px double; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,557,902</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px double; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px double; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,747,573</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Non-current liabilities</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Shareholders' equity</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">15,530,791</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">15,436,855</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total
    liabilities and shareholders' equity</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,088,693 </font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3px double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">18,184,428</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">The portion of the difference between the cost
of an investment and the amount of underlying equity in net assets of Huitian
that is recognized as goodwill in accordance with APB Opinion No. 18, "the
Equity Method of Accounting for investment in Common Stock", shall not be
amortized. However, equity method goodwill shall not be reviewed for impairment
in accordance with FAS 142, but instead should continue to be reviewed for
impairment in accordance with paragraph 19(h) of APB18. </font></p>
<p align="justify"><font size="2">Summarized unaudited financial information of
Huitian is as follows: </font></p>
<table style="border-top-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="81%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="13%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-right: medium none; border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Three months ended<br>
    March 31, 2009</b></font></td>
    <td style="border-left: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
    sales</font></td>
    <td style="border-right: medium none; border-top: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,159,285</font></td>
    <td style="border-left: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Gross
    profit</font></td>
    <td style="border-top: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-right: medium none; border-top: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="bottom">
    <p align="right"><font size="2">389,530</font></td>
    <td style="border-left: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Income
    before taxes</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">135,281</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
    income</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">114,989</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Company's share of net income</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">40,247</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt">&nbsp;</td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
  </tr>
</table>
<p align="justify"><font size="2">The rollforward of investment in Huitian in
the balance sheet is shown below: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="84%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Huitian - 35%<br>
    Ownership</b></font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2007</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Investment made</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="right"><font size="2">6,502,902</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net Income from 2008</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">175,231</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">(147,256</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation gain</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,100</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2008</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">6,533,977</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net Income from the three months ended March 31, 2009</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">40,247</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation loss</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(8,912</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2009 (unaudited)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,565,312</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><b>Note 6 &#150; Debt </b></font></p>
<p align="justify"><font size="2"><u>Short and long term loans </u></font></p>
<p align="justify"><font size="2">Short term loans represent renewable loans due
to various banks which are normally due within one year. </font></p>
<p align="center">F-<font size="2">17</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">The Company's bank loans consisted of the
following: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="40%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="14%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="center"><font size="2"><b>Short/Long-term loan</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Due by</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Annual<br>
    interest rates</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (Unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31,<br>
    2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-top: 1px solid" vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Long
    term bank loan, secured by buildings and land use rights</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">August 3, 2010</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7.02</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,860,000 </font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,868,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Short
    term bank loan, un-secured</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">January 7, 2010</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5.31</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5,860,000</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Short
    term loan, un-secured</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">On demand</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0.00</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">73,250</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Long
    term loan, secured by building, machinery and equipment<sup>(1)</sup></font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">June 25, 2010</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">7.76</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,369,500</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Short
    term loan, guaranteed by minority shareholder of Qianfeng</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">July 3, 2009</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">8.54</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,347,800</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Short
    term loan, secured by raw material<sup>(2)</sup></font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">February 16, 2010</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5.84</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">439,500</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Totals</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">16,950,050 </font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5,868,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p><br>
&nbsp;</p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="5%">
    <p align="justify">&nbsp;</td>
    <td vAlign="top" width="95%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2"><sup>(1)</sup></font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">The interest rate is adjustable monthly at
    1.15 times of the prevailing rate as published by Bank of China. As of March
    31, 2009, the interest rate is fixed at 7.7625% per annum. The short term
    portion of this loan is $439,500 and due by December 25, 2009. The remaining
    balance of $1,465,000 and $1,465,000 are due on April 25, 2010 and June 25,
    2010, respectively. </font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="1">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2"><sup>(2)</sup></font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">The interest rate for this short term loan
    is adjustable quarterly at 1.10 times of the prevailing rate as published by
    Bank of China. As of March 31, 2009, the interest rate is fixed at 5.841%
    per annum. </font></td>
  </tr>
</table>
<p align="justify"><font size="2">Interest expense totaling $622,449 and
$494,040 was incurred during the three months ended March 31, 2009 and 2008,
respectively. </font></p>
<p align="justify"><font size="2">The above loans are secured by Shandong
Taibang's land use rights and buildings located in Taian, Shandong Province, PRC
and Qianfeng's buildings and machinery and equipment located in Guiyang, Guizhou
Province, PRC, with carrying net values as follows: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="68%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Buildings in Taian, Shandong</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,236,322</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,417,138</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Land use
    rights in Taian, Shandong</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">423,021</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">195,691</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Buildings in Guiyang, Guizhou</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,269,802</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Machinery and equipment in Guiyang, Guizhou</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,044,860</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Totals</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">11,974,005</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,612,829</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">&nbsp;</td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
  </tr>
</table>
<p align="center">F-18</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><u>Other payables and accruals </u></font></p>
<p align="justify"><font size="2">Other payables and accruals consist of the
following: </font></p>
<table style="border-left-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="67%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="13%">
    <p align="right">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009<br>
    (unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    payables <sup>(1)</sup></font></td>
    <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">9,099,271</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">319,699</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Payable
    to Sansui Finance department for pending investment on plasma stations <sup>
    (2)</sup></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,173,465</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Accruals
    for salaries and welfare</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">670,634</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">830,388</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Accruals
    for RTO expenses</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">245,657</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">245,657</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Accruals
    for selling commission and promotion fee</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">911,166</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,508,102</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    Payable-Government Grant</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">184,312</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">114,148</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    payable - Deposit received</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">192,892</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">283,826</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    payable - Funds</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">359,303</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">627,157</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Accruals
    for interest</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">33,954</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Others</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">141,681</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Total</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">12,978,381</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,962,931</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p><br>
&nbsp;</p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="5%">
    <p align="justify">&nbsp;</td>
    <td vAlign="top" width="95%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2"><sup>(1)</sup></font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">The other payables mainly comprise of
    deposits by potential strategic investors and payable to former shareholders
    of Dalin with the amount of $5,824,840 and $2,466,930, respectively. As of
    March 31, 2009, Qianfeng has received in an aggregate amount of $5,824,840
    from potential private strategic investors in connection with subscribing
    shares from Qianfeng pursuant to Equity Purchase Agreement. The registration
    of the new investors as Qianfeng's shareholders and the related increase in
    registered capital of Qianfeng with the Administration for Industry and
    Commerce ("AIC") is in incomplete due to share holders dispute as disclosed
    in below legal proceedings section below. The amount $2,466,930 represents
    partial acquisition considerations Logic Express paid to the former
    shareholders of Dalin, which will be remitted to those shareholders at their
    demand. </font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="1">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="1">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2"><sup>(2)</sup></font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">In early 2007, Qianfeng submitted RMB
    8,010,000 (approximately $1,173,465) to the finance department of Sansui
    County, in China's Qiandongnan Autonomous Region, for acquiring the Sansui
    Plasma Collection Station from the local government, which action was
    legitimized and fully endorsement by relevant provincial government
    authorities. However, the finance department refused to implement the
    provincial government's authorization and has returned the funds to Qianfeng.
    As of March 31, 2009, Qianfeng has set aside the full amount as a payable to
    Sansui County, pending the outcome of provincial government's administrative
    review as disclosed in the legal proceedings note below. </font></td>
  </tr>
</table>
<p align="justify"><font size="2"><u>Other payable - land use rights </u></font>
</p>
<p align="justify"><font size="2">In July 2003, Shandong Taibang obtained
certain land use rights from the PRC municipal government. Shandong Taibang is
required to make payments totaling approximately $20,369 (RMB 138,848) per year
to the local state-owned entity, for the 50-year life of the rights or until
Biological Institute completes its privatization process. The Company recorded
"land use rights" equal to "other payable &#150; land use rights" totaling $353,827
and $325,390 as of March 31, 2009 and December 31, 2008, respectively,
determined using present value of annual payments over 50 years. </font></p>
<p align="justify"><font size="2"><b>Note 7 - Earnings per share </b></font></p>
<p align="justify"><font size="2">Basic earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated by dividing net
income by the weighted average number of common shares outstanding and dilutive
potential common shares outstanding during the period. </font></p>
<p align="center">F-<font size="2">19</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Earning per share is as follows for the three
months ended March 31, </font></p>
<div align="center">
  <center>
  <table style="border-collapse: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
    <tr style="font-size: 1px">
      <td vAlign="bottom" width="992" height="2">
      <p align="justify"></td>
      <td vAlign="bottom" width="42" height="2">
      <p align="justify"></td>
      <td vAlign="bottom" width="14" height="2">
      <p align="justify"></td>
      <td vAlign="bottom" width="141" height="2">
      <p align="right"></td>
      <td vAlign="bottom" width="42" height="2">
      <p align="justify"></td>
      <td vAlign="bottom" width="14" height="2">
      <p align="justify"></td>
      <td vAlign="bottom" width="141" height="2">
      <p align="right"></td>
      <td vAlign="bottom" width="15" height="2">
      <p align="justify"></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" height="30">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="30">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="155" colSpan="2" height="30">
      <p align="center"><font size="2"><b>2009<br>
      (unaudited)</b></font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="30">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="155" colSpan="2" height="30">
      <p align="center"><font size="2"><b>2008<br>
      (unaudited)</b></font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" height="30">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" bgColor="#e9f1f8" height="17">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
      income attributable to common shareholders for earnings per share</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="17">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="17">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="17">
      <p align="right"><font size="2">4,258,318</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="17">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="17">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="17">
      <p align="right"><font size="2">2,267,800</font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" bgColor="#e9f1f8" height="17">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      Weighted average shares used in basic computation</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="14" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="141" height="15">
      <p align="right"><font size="2">21,434,942</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="14" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="141" height="15">
      <p align="right"><font size="2">21,434,942</font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" bgColor="#e9f1f8" height="9">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Diluted effect of warrants and options</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="9">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="9">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: medium none" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="9">
      <p align="right"><font size="2">&#151;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="9">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="9">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="9">
      <p align="right"><font size="2">529,226</font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" bgColor="#e9f1f8" height="9">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" height="16">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      Weighted average shares used in diluted computation</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" height="16">
      <p align="right"><font size="2">21,434,942</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" height="16">
      <p align="right"><font size="2">21,964,168</font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" bgColor="#e9f1f8" height="15">
      <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
      Earnings per share:</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="15">
      <p align="right"><font size="2">&nbsp;</font></td>
      <td vAlign="bottom" borderColor="#000000" width="15" bgColor="#e9f1f8" height="15">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" height="16">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Basic</font></td>
      <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" width="42" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" height="16">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" height="16">
      <p align="right"><font size="2">0.20</font></td>
      <td style="border-left: medium none; border-right: medium none" vAlign="bottom" borderColor="#000000" width="42" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" height="16">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" height="16">
      <p align="right"><font size="2">0.11</font></td>
      <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" width="15" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" borderColor="#000000" width="992" bgColor="#e9f1f8" height="16">
      <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
      <font size="2">Diluted</font></td>
      <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="16">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="16">
      <p align="right"><font size="2">0.20</font></td>
      <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" width="42" bgColor="#e9f1f8" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
      <td style="border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="14" bgColor="#e9f1f8" height="16">
      <p align="justify"><font size="2">$</font></td>
      <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" width="141" bgColor="#e9f1f8" height="16">
      <p align="right"><font size="2">0.10</font></td>
      <td style="border-left: medium none" vAlign="bottom" borderColor="#000000" width="15" bgColor="#e9f1f8" height="16">
      <p align="justify"><font size="2">&nbsp;</font></td>
    </tr>
  </table>
  </center>
</div>
<p align="justify"><font size="2">At March 31, 2009, all outstanding warrants
and options were excluded in the calculation of diluted earnings per share
because of their anti-dilutive nature. </font></p>
<p align="justify"><font size="2">At March 31, 2008, all outstanding warrants
were included in the calculation of diluted earnings per share. </font></p>
<p align="justify"><font size="2"><b>Note 8 &#150; Taxes </b></font></p>
<p align="justify"><font size="2"><u>Income taxes </u></font></p>
<p align="justify"><font size="2">The Company is governed by the Income Tax Law
of the People's Republic of China (PRC) concerning Foreign Investment
Enterprises and Foreign Enterprises and various local income tax laws (the
Income Tax Laws). Under the Income Tax Laws, foreign investment enterprises
(FIE) generally are subject to an income tax at an effective rate of 33% (30%
state income taxes plus 3% local income taxes) on income as reported in their
statutory financial statements after appropriate tax adjustments unless the
enterprise is located in specially designated regions of cities for which more
favorable effective tax rates apply. Upon approval by the PRC tax authorities,
FIEs scheduled to operate for a period of 10 years or more and engaged in
manufacturing and production may be exempt from income taxes for two years,
commencing with their first profitable year of operations, after taking into
account any losses brought forward from prior years, and thereafter with a 50%
exemption for the next three years. </font></p>
<p align="justify"><font size="2">In 2002, the Company became a Sino-foreign
joint venture. In 2003, the Company was granted by the state government for
benefit of income tax exemption in first 2 years from January 2003 to December
2004 and 50% exemption for the third to fifth years from January 2005 to
December 2007. </font></p>
<p align="justify"><font size="2">Beginning January 1, 2008, the new Enterprise
Income Tax ("EIT") law will replace the existing laws for Domestic Enterprises
("DES") and Foreign Invested Enterprises ("FIEs"). </font></p>
<p align="justify"><font size="2">The key changes are: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="top" width="5%">
    <p align="justify">&nbsp;</td>
    <td vAlign="top" width="95%">
    <p align="justify">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2">a.</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">The new standard EIT rate of 25% will
    replace the 33% rate currently applicable to both DES and FIEs, except for
    High Tech companies who pays at a reduced rate of 15%; and </font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="top">
    <p align="justify"><font size="2">b.</font></td>
    <td vAlign="top">
    <p align="justify"><font size="2">Companies established before March 16,
    2007 will continue to enjoy tax holiday treatment approved by local
    government for a grace period of the next 5 years or until the tax holiday
    term is completed, whichever is sooner. </font></td>
  </tr>
</table>
<p align="justify"><font size="2">The Company's subsidiary, Shandong Taibang,
was established before March 16, 2007 and is, therefore, qualified to continue
enjoying the reduced tax rate as described above. </font></p>
<p align="justify"><font size="2">Starting from January 1, 2008, Shandong
Taibang became subject to 25% income tax rate according to the newly issued
Income Tax Laws of PRC. According to PRC's central government policy, certain
new technology or high technology companies will enjoy preferential tax
treatment of 15%, instead of 25%. On February 12, 2009, Shandong Taibang
received the new technology or high technology certification from Shandong
provincial government. The Certification allows the Company to receive the 15%
preferential income tax rate, for a period of three years starting from January
1, 2008. </font></p>
<p align="center">F-<font size="2">20</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Starting January 1, 2008, all dividends paid
to foreign parents are subject to a 10% income tax. As a result, Logic Express
recorded $218,238 and $0 income tax expense for the three months ended March 31,
2009 and 2008, respectively, for dividends Shandong Taibang paid to its foreign
parent, Logic Express. </font></p>
<p align="justify"><font size="2">The following table reconciles the U.S.
statutory rates to the Company's effective tax rate for the three months ended
March 31, 2009 and March 31, 2008: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="69%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" colSpan="2">
    <p align="center"><font size="2"><b>2008</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">U.S.
    Statutory rates</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">35.0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">35.0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Foreign
    Income</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(35.0</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(35.0</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">China
    Tax rates</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">25.0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">25.0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">China
    income tax exemption</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(10.0</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(10.0</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    items <sup>(1)</sup></font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6.9</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5.5</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Effective income tax rates</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21.9</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">20.5</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><sup>(1)</sup> The 6.9% represents the $0.2
million income tax expense for dividends Shandong Taibang paid to Logic Express,
its foreign parent and $1.3 million expenses incurred by CBP, Logic Express and
Logic Holding that are not deductible in PRC for the three months ended March
31, 2009. The 5.5% represents the $0.6 million expenses incurred by CBP, Logic
Express and Logic Holding that are not deductible in PRC for the three months
ended March 31, 2008. </font></p>
<p align="justify"><font size="2">The estimated tax savings due to the tax
exemption for the three months ending March 31, 2009 and 2008 amounted to
$763,331 and $318,221, respectively. The net effect on earnings per share if the
income tax had been applied would decrease both basic and diluted earnings per
share for the three months ended March 31, 2009 and 2008 by $0.04 and $0.01,
respectively. </font></p>
<p align="justify"><font size="2">CBP was incorporated in the United States and
has incurred net operating losses of $719,896 and $1,777,854 for income tax
purposes as of March 31, 2009 and December 31, 2008, respectively. The estimated
net operating loss carry forwards for United States income taxes amounted to
$4,381,039 which may be available to reduce future years' taxable income. These
carry forwards will expire, if not utilize, from 2026 through 2029. Management
believes that the realization of the benefits from these losses appears
uncertain due to the Company's limited operating history and continuing losses
for United States income tax purposes. Accordingly, the Company has provided a
100% valuation allowance on the deferred tax asset benefit to reduce the asset
to zero. The net change in the valuation allowance for the period ended March
31, 2009 was $244,765 and the accumulated valuation allowance as of March 31,
2009 amounted to $1,489,553. Management reviews this valuation allowance
periodically and makes adjustments as warranted. The following table represents
the rollforward of the deferred tax valuation allowance: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="57%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="19%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="14%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>For the three months ended<br>
    March 31, 2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="top" borderColor="#000000" colSpan="2" rowSpan="3">
    <p align="center"><font size="2"><b>For the year ended<br>
    December 31, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom" borderColor="#000000">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>(unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Balance as of beginning of period</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,244,789</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">640,318</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">Increase</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">244,764</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">604,471</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Balance as of end of period</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,489,553</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,244,789</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><u>Value added tax </u></font></p>
<p align="justify"><font size="2">VAT on sales amounted to $1,578,403 and
$493,150 for the three months ended March 31, 2009 and 2008, respectively. Sales
are recorded net of VAT collected and paid as the Company acts as an agent for
the government. VAT taxes are not impacted by the income tax holiday. </font>
</p>
<p align="justify"><font size="2">Taxes payable consisted of the following:
</font></p>
<p align="center">F-<font size="2">21</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="62%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="14%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2" rowSpan="2">
    <p align="center"><font size="2"><b>December 31, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>(Unaudited)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">VAT tax
    payable</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">687,849</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">331,505</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Income
    tax payable</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,462,645</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,630,878</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Others
    miscellaneous tax payable</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">61,004</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">97,627</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5,211,498</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,060,010</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom">&nbsp; </td>
    <td vAlign="bottom">
    <p align="justify">&nbsp;</td>
  </tr>
</table>
<p align="justify"><font size="2"><b>Note 9 &#150; Commitments and contingent
liabilities </b></font></p>
<p align="justify"><font size="2"><u>Capital and lease commitments </u></font>
</p>
<p align="justify"><font size="2">The Company's 82.76% owned subsidiary, He Ze,
entered into a lease agreement on January 13, 2005, with the Yun Cheng Lan Tian
Transportation Company in Yun Cheng County, Shandong Province, to lease land use
rights for a period of 10 years. The annual lease amount is approximately $1,760
(RMB 12,000) with no early termination penalty. The Company has the right of
first refusal to renew the lease after the ten year lease term. </font></p>
<p align="justify"><font size="2">The Company's 82.76% owned subsidiary, Qi He,
entered into a lease agreement on April 26, 2007, with the Zhang Bo Shi Village
in Qi He County, Shandong Province, to lease land use rights for a period of 50
years. The annual lease amount is approximately $4,569 (RMB 31,144) with no
early termination penalty. </font></p>
<p align="justify"><font size="2">The Company's 82.76% owned subsidiary, Zhang Qiu, leased land use right and the use of building and equipment for a period of
10 year from January 1, 2007 with annual lease payment of $43,245 (RMB300,000).
The lease was terminated in March 2008. The Company entered into a lease
agreement on April 1, 2008, with the Zhang Qiu Red Cross Blood Center, to lease
land use rights and the use building and equipment for a period of 10 years. The
annual lease payment is approximately $1,467 (RMB 10,000) with no early
termination penalty. </font></p>
<p align="justify"><font size="2">The Company's 48.6% indirectly owned
subsidiary, Qianfeng, entered into a lease agreement on June 1, 2006 with a
group of individuals in an area located next to its production facility, to
lease and use the space for processing industrial wastes for 10 years. The
annual lease amount is approximately $1,529 (RMB 10,438). </font></p>
<p align="justify"><font size="2">The Company's indirectly owned subsidiary,
Huang Ping, entered into a lease with Huang Ping County Finance Department on
April 28, 2007, Guizhou Province, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$10,269 (RMB 70,000). </font></p>
<p align="justify"><font size="2">The Company's indirectly owned subsidiary, Pu
Ding, entered into a lease with Pu Ping County Health Department, Guizhou
Province on March 31, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$22,005 (RMB 150,000). </font></p>
<p align="justify"><font size="2">The Company's indirectly owned subsidiary, Na
Yong, entered into a lease with Na Yong County Health Department, Guizhou
Province on March 31, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$22,005 (RMB 150,000). </font></p>
<p align="justify"><font size="2">The Company's indirectly owned subsidiary, Wei Ning, entered into a lease with Wei Ning County Health Department, Guizhou
Province on April 9, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$11,720 (RMB 80,000). </font></p>
<p align="justify"><font size="2">The Company recognizes lease expense on a
straight line basis over the term of the lease in accordance to FAS 13,
"Accounting for Leases.&quot; Total capital and lease commitments outstanding as of
March 31, 2008 were as follows: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="32%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2"><b>Fiscal year</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2010</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2011</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2012</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2013</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Thereafter</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr bgColor="#e9f1f8">
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Property
    and equipment</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">77,383</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Lease</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">73,293</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">26,586</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">204,892</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr bgColor="#e9f1f8">
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">150,676</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">26,586</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">9,315</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">204,892</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr style="font-size: 1px">
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt">&nbsp;</td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td style="border-bottom: 3px double black" vAlign="bottom" borderColor="#000000">
    &nbsp; </td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify">&nbsp;</td>
  </tr>
</table>
<p align="center">F-<font size="2">22</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">For the three months ended March 31, 2009 and
2008, total rent expense amounted to $33,134 and $16,226, respectively. </font>
</p>
<p align="justify"><font size="2"><u>Guarantees </u></font></p>
<p align="justify"><font size="2">As of March 31, 2009, Qianfeng guaranteed
approximately $1,465,000 (RMB10,000,000) of a short term bank loans for Eakan, a
noncontrolling shareholder of Qianfeng. In return, Eakan cross guaranteed
Qianfeng's bank loan of $1,347,800. The Company is obligated to perform under
the guarantee if Eakan fails to pay principal and interest payments when due.
The maximum potential amount of future undiscounted payments under the guarantee
is $1.5 million including accrued interest. As of March 31, 2009, the Company
did not record a liability for the guarantee because management believes Eakan
is current in its payment obligations, and the likelihood of the Company having
to make good on the guarantee is remote. </font></p>
<p align="justify"><font size="2"><u>Contingencies </u></font></p>
<p align="justify"><font size="2">In the normal course of business, the Company
is exposed to claims related to the manufacture and use of the Company's
products, but currently the Company is not aware of any such claim. </font></p>
<p align="justify"><font size="2"><u>Legal proceedings </u></font></p>
<p align="justify"><font size="2"><i>Misuse of Company Seal </i></font></p>
<p align="justify"><font size="2">In July 2006, one of the Company's sales
employees misappropriated goods and resold them to other parties using a
counterfeit Company seal. The amount involved was approximately $0.15 million
(RMB1.16 million). The incident was revealed during a routine reconciliation of
accounts receivable. The Company reported the misappropriation to the police and
the employee was arrested and criminal charges were brought against him. To
date, the Company recovered approximately $0.05 million (cash of RMB350,000 and
goods valued at approximately RMB30,000). Pursuant to a financial guarantee and
repayment agreement between the Company and the employee, witnessed by officials
at the Taian City Police Station, the Company will continue to pursue recovery.
</font></p>
<p align="justify"><font size="2"><i>Transfer of Equity Interests </i></font>
</p>
<p align="justify"><font size="2">Mr. Zu Ying Du was one of the original equity
holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint
venture agreement, among the original equity holders, Mr. Du was obligated to
make a capital contribution of approximately $2.6 million or (RMB20 million) for
a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds
borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen
Da. Mr. Du failed to repay Beijing Chen Da for his loan of the capital
contribution amount. Mr. Du disputes that the money was due and owing. A Beijing
court found that Beijing Chen Da had given money to Mr. Du but found that the
loan agreement failed to comply with Chinese law. A notice was issued on July 5,
2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit
requesting a stay of the Beijing action pending their investigation into money
laundering relating to the $2.6 million loan to Zu Ying Du. </font></p>
<p align="justify"><font size="2">On September 26, 2004, Beijing Chen Da entered
into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25%
equity interest in Shandong Taibang was transferred to Beijing Chen Da as
repayment of the $2.6 million debts. This agreement was signed by Mr. Du's
brother who held a power of attorney from Mr. Du. This transfer was approved by
the Shandong Provincial Department of Foreign of Trade and Economic Cooperation,
or the Shandong COFTEC on March 17, 2005. Mr. Du disputes the legitimacy of this
transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the
power of attorney. Mr. Du sued his brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the power of
attorney was valid, but that the transfer agreements signed by Mr. Du's brother,
Du Hai Shan were invalid because their execution and delivery were beyond the
scope of Du Hai Shan's authority under the power of attorney. Subsequently the
Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008
to suspend the judgment based on the grounds that the original court lacked
jurisdiction to hear the case. The case is stated to be reviewed again by the
Hubei Jingzhou Intermediate Court. </font></p>
<p align="justify"><font size="2">Missile Engineering, another original equity
holder wholly controlled by Mr. Du, was obligated to contribute approximately
$4.2 million (RMB32.8 million) for a 41% interest in Shandong Taibang by means
of cash, equipment and patent technology. It was obligated to obtain a new drug
certificate and production license of its patent technology from the government
within a stipulated period in order to be recognized as a valid capital
contribution, or in the alternative, make a cash payment. The patent technology
was valued as approximately $3.4 million (RMB26.4 million). However, Missile
Engineering failed to obtain the new drug certificate and production license
within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders
resolution on September 26, 2004, Missile Engineering agreed to sell its 41%
interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the
obligation of Missile Engineering to pay the $3.4 million in cash. This transfer
was approved by Shandong COFTEC on March 17, 2005. Missile Engineering disputes
this transaction and sued Mr. Du's brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the act had
exceeded the scope of the power of attorney. Subsequently the Intermediate Court
of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court. </font></p>
<p align="center">F-<font size="2">23</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">In June 10, 2005, Beijing Chen Da also sold
its equity interest in Shandong Taibang to Up-Wing Investments Limited, or
Up-Wing, pursuant to a share transfer agreement, which became effective on
September 2, 2005, upon approval by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006,
Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our
subsidiary. </font></p>
<p align="justify"><font size="2">In 2006, Missile Engineering applied for
arbitration before the China International Economic and Trade Arbitration
Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing
Investments Limited, of the equity interests in Shandong Taibang, formerly owned
by Missile Engineering. The equity transfer had been approved by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong
COFTEC. Missile Engineering later voluntarily withdrew this application and
instead applied for administrative reconsideration of the equity transfer, but
this application was rejected by the Ministry of Commerce in 2007. Missile
Engineering applied with the District Court of Lixia District, Jinan City,
Shandong province requesting revocation of Shandong COFTEC's approval of the
equity transfer to Up-wing by Missile Engineering. Missile Engineering later
voluntarily withdraw the action. In April 2007, Logic Express initiated an
arbitration proceeding before the Shandong Taian Arbitration Committee, to
establish that Logic Express is the lawful shareholder of Shandong Taibang. The
parties to that proceeding were Logic Express Ltd. and Shandong Taibang
Biological Products Co., Ltd. The Arbitration Committee's decision on September
6, 2007 confirmed that Logic Express had legitimate ownership as a result of the
transfers of Shandong Taibang. Up-Wing started an action in the Intermediate
Court of Taian City, Shandong province requesting the court to establish that
Up-wing is the lawful shareholder of Shandong Taibang. The intermediate court
rejected the application by Up-Wing on the basis that the same matter had been
tried by the arbitration panel. </font></p>
<p align="justify"><font size="2">On February 16, 2009, Mr. Du and Missile
Engineering filed actions in the Intermediate Court of Wuhan City, Hubei
province, against the following defendants, Du Hai Shan the brother of Mr. Du,
Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have requested
that the Wuhan Intermediate Court to restore the equity interests originally
held by the plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by
Missile Engineering. On February 17, 2009, the Wuhan Intermediate Court issued
preliminary orders attaching 66% of the equity of Shandong Taibang pending the
outcome of the case. </font></p>
<p align="justify"><font size="2"><i>Bobai County Collection Station</i> </font>
</p>
<p align="justify"><font size="2">In January 2007, the Company's PRC subsidiary,
Shandong Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20%
minority shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. ("Bobai") in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. ("Hua Lan") filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Taian City. A hearing was held on June 25, 2007 and judgment was
entered against the defendants along with a $226,780 (RMB1,700,000) joint
financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the
judgment against the three defendants and increased the amount of the joint
financial judgment to approximately $405,954 (RMB3,000,000). </font></p>
<p align="center">F-<font size="2">24</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">In January 2008, Hua Lan enforced the judgment
granted by the High Court to freeze the Company's bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Taian City
District Court to seek recovery of any losses in connection with Hua Lan's claim
and to request that the Taian City District Court preserve Hua Lan's property or
freeze up to approximately $411,300 (RMB 3 million) of Hua Lan's assets to
secure the return of such funds to the Company. The intermediate court in Taian
City accepted the application on February 14, 2008 but the matter is still
pending. Pending the outcome of the proceedings, Shandong Taibang increased its
loss contingency reserve during its fourth quarter of 2007 from approximately
$75,593 (RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the
enforcement of this judgment. During the fourth quarter of 2008, full amount of
the judgment, including Feng Lin and Keliang Huang's portions of the judgment
and the related fees, approximately $456,222 (RMB 3,109,900) has been withdrawn
from Shandong Taibang's account. The Company recorded Feng Lin and Keliang
Huang's portion of the judgment, approximately $304,143 (RMB2,073,234), as
receivable as a result of the withdraw. As of December 31, 2008, the Company
determined that it is unlikely that the Company will be able to recover such
receivable from those two individuals and wrote off the receivable as bad debt
expense. </font></p>
<p align="justify"><font size="2">In light of the foregoing, it is unlikely that
the Company's planned acquisition of the assets of Bobai will go forward. </font>
</p>
<p align="justify"><font size="2"><i>Dispute among Shareholders over Raising
Additional Capital </i></font></p>
<p align="justify"><font size="2">On May 28, 2007, a 91% majority of Qianfeng's
shareholders approved a plan to raise additional capital from private strategic
investors through the issuance of an additional 20,000,000 shares of Qianfeng
equity interests at RMB 2.80 per share. The plan required all existing Qianfeng
shareholders to waive their rights of first refusal to subscribe for the
additional shares. The remaining 9% minority holder of Qianfeng's shares, the
Guizhou Jie'an Company, or Jie'an, did not support the plan and did not agree to
waive its right of first refusal. On May 29, 2007, the majority shareholders
caused Qianfeng to sign an Equity Purchase Agreement with certain investors,
pursuant to which the investors agreed to invest an aggregate of approximately
$7,475,832 (RMB 50,960,000) in exchange for 18,200,000 shares, or 21.4%, of
Qianfeng's equity interests. At the same time, Jie'an also subscribed for
1,800,000 shares, representing its 9% pro rata share of the 20,000,000 shares
being offered. The proceeds from all parties were received by Qianfeng in
accordance with the agreement. </font></p>
<font FACE="Times New Roman" SIZE="2">
<p ALIGN="JUSTIFY">In June 2007, Jie&#146;an brought suit in the High Court of
Guizhou province, China, against Qianfeng and the three other original Qianfeng
shareholders, alleging the illegality of the Equity Purchase Agreement. In its
complaint, Jie&#146;an alleged that it had a right to acquire the shares waived by
the original Qianfeng shareholders and offered to the investors in connection
with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High
Court ruled against Jie&#146;an and sustained the Equity Purchase Agreement, but on
November 2008, Jie&#146;an appealed the Guizhou High Court judgment to the People&#146;s
Supreme Court in Beijing. On May 13, 2009, the People&#146;s Supreme Court sustained
the ruling of the High Court of Guizhou and denied Jie&#146;an&#146;s right of first
refusal claim over shares with respect to which the original Qianfeng
shareholders waived their right of first refusal. The registration of the new
investors as Qianfeng&#146;s shareholders and the related increase in registered
capital of Qianfeng with the Administration for Industry and Commerce is still
pending. Qianfeng is evaluating whether it has the right to rescind the Equity
Purchase Agreement and the transactions contemplated by that agreement, or the
2007 Financing. If Qianfeng does not have such rescission right, Dalin&#146;s
interests in Qianfeng would be reduced to approximately 41.3%. However, we will
be able to retain control over Qianfeng due to our right to appoint a majority
of Qianfeng&#146;s directors. Meanwhile, Qianfeng has set aside amounts received from the
investors and Jie&#146;an in the 2007 Financing as well as amounts of dividends to
which the investors and Jie&#146;an will be entitled if Qianfeng does not have the
right to rescind the 2007 Financing. </font><font FACE="Times New Roman"></p>
</font>
<p align="justify"><font size="2"><i>Dispute over Qianfeng Technical Consulting
Agreement </i></font></p>
<p align="justify"><font size="2">In 1997, Qianfeng entered into a Technical
Cooperation Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide
certain fractionation equipment and transfer processing know-how to Qianfeng. In
August 2004, Sin filed a law suit against Qianfeng with the Intermediate Court
in Guiyang City, China, alleging non-payment of approximately, $14,670 (RMB
100,000) for his fractionation equipment and approximately, $733,500 (RMB
5,000,000) for the transfer of his technological know-how. The Intermediate
Court ruled in favor of Sin and found that Qianfeng owed Sin approximately, $
1,522,183 (RMB 10,376,160), but Qianfeng appealed the Intermediate Court ruling
to the Guizhou High Court. The Guizhou High Court agreed in part with Qianfeng's
grounds for appeal and reduced the amount of know-how transfer fee to
approximately, $289,060 (RMB 1,970,413). In May 2007, Sin appealed the Guizhou
High Court's decision to the People's Supreme Court in Beijing. The People's
Supreme Court heard in April 2008, but had not issued its decision as of the
date of this report. </font></p>
<p align="center">F-<font size="2">25</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><i>Qianfeng Product Liability Claims</i>
</font></p>
<p align="justify"><font size="2">In January 2008, Qianfeng, along with two
local hospitals and a local blood center, was sued in the Zhuhui District Court
in Hengyang, Hunan province, China, by a resident of Hunan province, for
approximately, $256,631 (RMB 1,749,358) in damages, in connection with his
alleged HIV contamination via blood transfusion during the plaintiff's treatment
following an April 2006 traffic accident. The Zhuhui District Court awarded the
plaintiff approximately, $29,340 (RMB 200,000), but found that the defendants
were not responsible for his HIV contamination. All parties appealed to the
Zhuhui Middle Court. On December 4, 2008, the Zhuhui Middle Court remanded the
case to the lower court for retrial, on grounds that the HIV contamination could
not be directly linked to the plaintiff's treatment by the hospitals or to Qianfeng's products. There have been no further developments on this case as of
the date of this report. </font></p>
<p align="justify"><font size="2">On November 10, 2006, Qianfeng and eight other
defendants were sued in the Sigu District Court of Hengyang County, Hunan
province, China, by a resident of Hunan province, for approximately, $106,446 (RMB
725,606) in damages, in connection with his alleged Hepatitis C contamination
via blood transfusion and injection of plasma-based products, during the
plaintiff's August 2004 treatment for hemophilia. On December 8, 2008, the Sigu
District Court ruled in favor of the plaintiff and held Qianfeng liable for 10%
of the total approximately, $2,680 (RMB 18,293) judgment against three of the
defendants. All three defendants, including Qianfeng appealed the district court
ruling to the Intermediate Court of the Hengyang County. On May 4, 2009, the
Intermediate Court ruled against the defendants and sustained the original
district court ruling. As of result, Qianfeng is liable and obligated to pay the
plaintiff approximately, $2,680 (RMB 18,293) in damages and related court fees.
</font></p>
<p align="justify"><font size="2"><i>Administration Interference </i></font></p>
<p align="justify"><font size="2">Qianfeng is party to an administrative
proceeding against the government of the Qiandongnan Autonomous Region, or the
Qiandongnan Authorities, in Guizhou Province, China, in connection with the
ownership of three of Qianfeng's eight plasma stations in Guizhou Province.
Qianfeng was authorized to acquire a total of eight plasma stations in Guizhou
Province based on several national and provincial administrative authorizations
issued by the PRC State Council and the Guizhou Ministry of Health between 2006
and 2007<b>,</b> but to date, the governmental authorizations have not been
fully implemented by the Qiandongnan Authorities. In early 2007, Qianfeng
submitted approximately $1,173,465 (RMB 8,010,000) to the local finance
department of Sansui County, Qiandongnan, for acquiring the Sansui Plasma
Collection Station ("Sansui"), but the local finance department refused to honor
the purchase and returned the full consideration to Qianfeng. Furthermore,
subsequent local rulings published by the Qiandongnan Authorities February 28,
2008 appear to authorize another private company to acquire the Sansui and two
other stations, the Zhengyuan Plasma Collection Station and the Shibing Plasma
Collection Station. In December 2008 Qianfeng filed an administrative review
application with the People's Government of Guizhou Province, or the Guizhou
Provincial Government, but the Guizhou Provincial Government has delayed making
a final decision pending further review of regulations regarding administrative
authorizations. Qianfeng has received verbal notification from staff in the
Guizhou Provincial Government that the Qiandongnan Authorities have withdrawn
the local rulings authorizing acquisition of the three plasma stations, but
management has not received any written confirmation of such withdrawal. As a
result, Qianfeng has maintained its application with the Guizhou Provincial
Government for a formal administrative ruling on its right to acquire all eight
plasma stations in Guizhou Province. In addition, Qianfeng has set aside the
purchase price payable for Sansui pending the outcome of the administrative
review.</font></p>
<p align="center">F-<font size="2">26</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><b>Note 10 &#150; Warrants and options </b></font>
</p>
<p align="justify"><font size="2"><u>Warrants </u></font></p>
<p align="justify"><font size="2">On July 18, 2006, the Company entered into a
securities purchase agreement with certain accredited investors and completed
the sale of 2,200,000 shares of common stock on July 18, 2006. Concurrent with
the private placement, the Company issued 1,070,000 warrants with an exercise
price of $2.8425 per share ("Investor Warrant") to investors. The warrants have
a 5-year term and shall be callable by the Company if the shares trade at 160%
of the exercise price for 15 consecutive trading days after the registration
statement has been effective for 45 days. On July 28, 2006, the Company also
issued 214,000 warrants with exercise price at $2.8425 ("Placement Agent
Warrant") to Lane Capital Markets, LLC, the placement agent. These warrants have
a 5-year term and were non-callable and vested upon grant. </font></p>
<p align="justify"><font size="2">Effective January 1, 2009, the Company adopted
the provisions of EITF 07-5, "Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity's Own Stock", which is effective for financial
statements for fiscal years beginning after December 15, 2008 and which replaced
the previous guidance on this topic in EITF 01-6. Paragraph 11(a) of FAS 133
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to the Company's own stock and (b) classified
in stockholders' equity in the statement of financial position would not be
considered a derivative financial instrument. EITF 07-5 provides a new two-step
model to be applied in determining whether a financial instrument or an embedded
feature is indexed to an issuer's own stock and thus able to qualify for the FAS
133 paragraph 11(a) scope exception. Because of strike prices of the 1,284,000
previously issued warrants are denominated in USD which is different than the
Company's function currency, RMB, these warrants previously treated as equity
pursuant to the derivative treatment exemption were no longer afforded equity
treatment. </font></p>
<p align="justify"><font size="2">As such, effective January 1, 2009, the
Company reclassified the original fair value of these warrants $738,449 from
equity to liability status as if these warrants were treated as a derivative
liability since their date of issue in July 2006. On January 1, 2009, the
Company reclassified from additional paid-in capital, as a cumulative effect
adjustment, $929,577 from beginning retained earnings and $1,668,026 to a
long-term derivative liability to recognize the fair value of such warrants on
such date. The fair value of these common stock purchase warrants increased to
$2,061,049 as of March 31, 2009. As such the Company recognized a $393,023 loss
from the change in fair value of these warrants for three months ended March 31,
2009. </font></p>
<p align="justify"><font size="2">These common stock purchase warrants were not
issued with the intent of effectively hedging any future cash flow, fair value
of any asset, liability or any net investment in a foreign operation. The
warrants do not qualify for hedge accounting, and as such, all future changes in
the fair value of these warrants will be recognized currently in earnings until
such time as the warrants are exercised or expire. These common stock purchase
warrants do not trade in an active securities market, and as such, the Company
estimated the fair value of these warrants using the Black-Scholes option
pricing model using the following assumptions: </font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="70%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2"><b>Granted on</b> </font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>March 31, 2009</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>January 1, 2009</b></font></td>
    <td vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Expected dividend yield</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2">Risk-free interest rate</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">0.98</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1.01</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">%</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Expected life (in years)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.30</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.55</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2">Weighted average expected volatility</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">130</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">130</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">%</font></td>
  </tr>
</table>
<p align="justify"><font size="2">Expected volatility is based on historical
volatility. Historical volatility was computed using daily pricing observations
for recent periods that correspond to the term of the warrants. The Company
believes this method produces an estimate that is representative of our
expectations of future volatility over the expected term of these warrants. The
Company has no reason to believe future volatility over the expected remaining
life of these warrants likely to differ materially from historical volatility.
The expected life is based on the remaining term of the warrants. The risk-free
interest rate is based on U.S. Treasury securities according to the remaining
term of the warrants. </font></p>
<p align="center">F-<font size="2">27</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">The summary of warrant activity is as follows:
</font></p>
<table cellSpacing="0" cellPadding="0" width="80%" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="51%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="12%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Warrants<br>
    Outstanding</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Weighted<br>
    Average<br>
    Exercise<br>
    Price</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Average<br>
    Remaining<br>
    Contractual<br>
    Life</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2007</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,284,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.84</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3.55</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2008(unaudited)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,284,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.84</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3.30</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2008</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,284,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.84</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.55</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2009(unaudited)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,284,000</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.84</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2.30</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><u>Options </u></font></p>
<p align="justify"><font size="2">On May 9, 2008, the Company adopted the 2008
Equity Incentive Plan, which provides up to 5,000,000 shares of Company's Common
Stock to be made available to employees and directors at various prices as
established by the Board of Directors of the Company. On May 9, 2008, the
Company granted options to purchase an aggregate of 937,500 shares of the
Company's common stock under the 2008 Plan to certain directors and employees,
pursuant to stock option agreements between the Company and each of these
directors or employees. The options have an exercise price of $4.00 per share,
will vest immediately vest and will expire on June 1, 2018. On July 24, 2008,
the Company granted options to purchase an aggregate of 60,000 shares of the
Company's common stock under the 2008 plan to its three independent directors.
These options have an exercise price of $4.00 per share and 30,000 shares will
be vested on January 24, 2009 and the remaining 30,000 shares will be vested on
July 24, 2009, with the expiration date of July 24, 2018. As of December 31,
2008, there were 4,002,500 shares available under the plan. </font></p>
<p align="justify"><font size="2">The fair value of each option granted on May
9, 2008 and July 24, 2008 are estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions: </font></p>
<table cellSpacing="0" cellPadding="0" width="90%" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="74%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2"><b>Granted on</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>May 9, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>July 24, 2008</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Expected dividend yield</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">%</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">Risk-free interest rate</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3.56</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3.56</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">Expected life (in years)</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">5</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">Weighted average expected volatility</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">59.4</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">81.2</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">%</font></td>
  </tr>
</table>
<p align="justify"><font size="2">The volatility of the Company's common stock
was estimated by management based on the historical volatility of the Company's
common stock, the risk free interest rate was based on Treasury Constant
Maturity Rates published by the U.S. Federal Reserve for periods applicable to
the estimated life of the options, and the expected dividend yield was based on
the Company's current and expected dividend policy. The value of the options was
based on the Company's common stock price on the date the options were granted.
Because the Company does not have a history of employee stock options, the
Company utilized the simplified method to estimate the life of the options which
is the same as assuming that the options are exercised at the mid-point between
the vesting date and expiration date. For the three months ended March 31, 2009,
the Company expensed $27,373 in compensation expense. As of March 31, 2009,
approximately $34,908 of estimated expense with respect to non-vested
stock-based awards has yet to be recognized and will be recognized as an expense
over the employee's remaining weighted average service period of approximately
0.42 years. The options are accounted for as equity under SFAS 133 and EITF
00-19.The options activity is as follows: </font></p>
<p align="center">F-28</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<table cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="43%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Options<br>
    Outstanding</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Options<br>
    Exercisable</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Weighted<br>
    Average<br>
    Exercise<br>
    Price</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Average<br>
    Remaining<br>
    Contractual<br>
    Life</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Aggregate<br>
    Intrinsic<br>
    Value</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2007</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2008</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">997,500</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">937,500</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">4.00</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">10.00</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2008</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">997,500</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">937,500</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">4.00</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">9.43</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Granted</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">30,000</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">4.00</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">9.31</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Forfeited</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Exercised</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2009</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">997,500</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">967,500</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">4.00</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">9.18</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid #000000; border-bottom: 1px double #000000" vAlign="bottom" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><b>Note 11 &#150; Statutory reserves </b></font>
</p>
<p align="justify"><font size="2">In accordance with the "Law of the PRC on
Joint Ventures Using Chinese and Foreign Investment" and the Company's Articles
of Association, appropriations from net profit should be made to the Reserve
Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from
prior years, and before profit distributions to the investors. The percentages
to be appropriated to the Reserve Fund and the Enterprise Expansion Fund are
determined by the Board of Directors of the Company. </font></p>
<p align="justify"><font size="2"><u>Reserve fund </u></font></p>
<p align="justify"><font size="2">For the three months ended March 31, 2009 and
2008, the Company transferred $2,508,741 (unaudited) and $235,303 (unaudited),
respectively, to the surplus reserve fund. Amounts represent 10% of the net
income determined in accordance with PRC accounting rules and regulations, and
are transferred to a statutory surplus reserve fund until such reserve balance
reaches 50% of the Company's registered capital. As of March 31, 2009,
approximately $8 million still needs to be transferred to statutory reserve. The
transfer to this reserve must be made before distribution of any dividend to
shareholders. The surplus reserve fund is non-distributable other than during
liquidation and can be used to fund previous years' losses, if any, and may be
utilized for business expansion or converted into share capital by issuing new
shares to existing stockholders in proportion to their shareholding or by
increasing the par value of the shares currently held by them, provided that the
remaining reserve balance after such issue is not less than 25% of the
registered capital. </font></p>
<p align="justify"><font size="2"><u>Enterprise expansion fund </u></font></p>
<p align="justify"><font size="2">The enterprise fund may be used to acquire
plant and equipment or to increase the working capital to expend on production
and operation of the business. For the three months ended March 31, 2009 and
2008, the Company transferred $252,095 (unaudited) and $117,651 (unaudited),
respectively, to the fund. Amounts represent 5% of the net income determined in
accordance with the Company's policy. </font></p>
<p align="justify"><font size="2"><b>Note 12 &#150; Retirement benefit plans </b>
</font></p>
<p align="justify"><font size="2">Regulations in the PRC require the Company to
contribute to a defined contribution retirement plan for the benefit of all
permanent employees. All permanent employees are entitled to an annual pension
equal to their basic salaries at retirement. The PRC government is responsible
for the benefit liability to these retired employees. The Company is required to
make contributions to the state retirement plan at 20% of the monthly base
salaries of the current employees. For the three months ended March 31, 2009 and
2008, the Company made pension contributions in the amount of $220,493
(unaudited) and $54,591 (unaudited), respectively. </font></p>
<p align="center">F-29</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2"><b>Note 13- Noncontrolling interest and
distribution </b></font></p>
<p align="justify"><font size="2">The roll forward of noncontrolling interest in
the balance sheet is shown below: </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="29%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="7%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="9%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="2%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="8%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Fang Cheng<br>
    Plasma Co.<br>
    Minority<br>
    Owner<br>
    (20%)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Shandong<br>
    Taibang<br>
    Minority<br>
    Owner<br>
    (17.24%)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Guizhou<br>
    Renyuan<br>
    Minority<br>
    Owners<br>
    (75%)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Guiyang<br>
    Qianfeng<br>
    Minority<br>
    Owners<br>
    (46%)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Chongqing<br>
    Dalin<br>
    Minority<br>
    Owner<br>
    (10%)</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Total<br>
    Noncontrolling<br>
    interest</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2007</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">82,994</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,098,344</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,181,338</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income(loss)</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(83,938</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,387,779</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,303,841</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation gain/(loss)</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">944</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">301,303</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">302,247</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(2,982,045</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(2,982,045</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">December
    31, 2008</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,805,381</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151; </font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,805,381</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dalin acquisition</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,521,470</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">17,249,290</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,730,952</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,501,712</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Net income(loss)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(2,449</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">850,158</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">15,694</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,914,995</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">221,684</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">3,000,082</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Foreign currency translation gain/(loss)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(4,260</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">36,543</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">352,923</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">42,096</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">427,302</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.3pt; margin-right: 0in">
    <font size="2">Dividend declared</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(454,308</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(4,179,679</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(4,633,987</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">March
    31, 2009</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(2,449</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">5,196,971</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,573,707</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">15,337,529</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,994,732</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">25,100,490</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">Dividends declared are split pro rata between
the shareholders according to their ownership interest. The payment of the
dividends may occur at different times to the shareholders resulting in
distributions which do not appear to be reflective of the minority ownership
percentages. As of March 31, 2009, minority shareholders owned 17.24% of the
Shandong Taibang, 10% of Dalin and 46% of Qianfeng. The table below shows the
minority shareholder and dividends outstanding. </font></p>
<table style="border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" width="56%">
    <p align="justify">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Shandong Taibang<br>
    Noncontrolling<br>
    shareholder</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Guiyang Qianfeng<br>
    Noncontrolling<br>
    shareholder</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Total<br>
    Noncontrolling<br>
    shareholder</b></font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Distribution payable, December 31, 2006</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">476,597</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">476,597</font></td>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    declared</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,207,541</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,207,541</font></td>
    <td vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    paid</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(488,878</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">(488,878</font></td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    used to increase registered capital</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,710,880</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(1,710,880</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Foreign
    currency translation adjustments</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">22,246</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">22,246</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Distribution payable, December 31, 2007</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">506,626</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">506,626</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    declared</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,982,045</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,982,045</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    paid</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(288,300</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(288,300</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Foreign
    currency translation adjustments</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">51,983</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">51,983</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Distribution payable, December 31, 2008</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,252,354</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,252,354</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    declared</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">454,308</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,179,679</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,633,987</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Dividend
    paid</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(3,735,243</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">(3,735,243</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">)</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Foreign
    currency translation adjustments</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">12,796</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">2,798</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">15,594</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Distribution payable, March 31, 2009</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,719,458</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">447,234</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,166,692</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2"><b>Note 14 &#150; Business Combinations </b></font>
</p>
<p align="justify"><font size="2">On September 26, 2008, Logic Express entered
into an equity transfer agreement with Dalin, a PRC limited liability company,
and Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang, the shareholders of Dalin,
relating to the purchase of an aggregate 90% equity interest in Dalin, for a
total purchase price of RMB194,400,000 (approximately $28,479,600), due in four
installments. On April 14, 2009, the Company paid the third installment towards
the acquisition which represented the payment of 90% of the purchase price in
the aggregate, and in accordance with terms of the equity transfer agreement,
Logic Holdings, the Hong Kong subsidiary, is now entitled to all the rights and
privileges of a 90% shareholder in Dalin, including the right to receive its pro
rata share of the profits generated by Dalin's 54% majority-owned operating
subsidiary, Qianfeng Biological Products Co., Ltd., or Qianfeng, as of January
1, 2009, subject to a possible dilution to as low as 41.3%, if a dissenting
Qianfeng shareholder prevails in a pre-existing suit to obtain additional equity
interests in Qianfeng. The Company are obligated to pay the fourth and final
installment, representing the remaining 10% of the Dalin purchase price, on or
before April 9, 2010, the one-year anniversary of the local Administration for
Industry and Commerce's approval of the equity transfer. On January 16, 2009, Qianfeng's shareholders, including Dalin, elected four members to its seven
member Board of Directors that were nominated by Dalin, and on January 17, 2009,
the Qianfeng's Board of Directors elected a new management team consisting of
all Logic Express' and Dalin's appointees, including a new CEO, Executive Senior
Vice President, CFO and Director of Sales. The operational control of Qianfeng
passed to the Company effective January 1, 2009. The results of Dalin's and its
subsidiaries' operations from January 1, 2009 through March 31, 2009 are
included in the Company's Consolidated Statements of Income and Comprehensive
Income. </font></p>
<p align="center">F-<font size="2">30</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">Effective January 1, 2009, the Company adopted
FAS 141R, "Business Combinations" to replace FAS 141, "Business Combinations".
FAS 141R retains the fundamental requirements in FAS 141 that the acquisition
method of accounting (which FAS 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. FAS 141R requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. This replaces FAS 141's cost-allocation process, which required the
cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. FAS 141R also requires
the acquirer in a business combination achieved in stages (sometimes referred to
as a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with FAS 141R).
</font></p>
<p align="justify"><font size="2">The Company's acquisition of Dalin was
accounted for in accordance with FAS 141R and we have allocated the purchase
price of Dalin based upon the fair value of the net assets acquired and
liabilities assumed and the fair value of the noncontrolling interest measured
at the acquisition date. The Company estimated the fair values of the assets
acquired and liabilities assumed at the acquisition date in accordance with FAS
141R and, expect for cash and cash equivalents, fair value was estimated using
level 3 inputs under SFAS No. 157. Level 3 inputs for the nonfinancial assets
included a valuation report (prepared by a third party appraisal firm) that
primarily utilized a combination of Income approach, cost approach and Market
approach valuation techniques. Level 3 inputs for other assets and liabilities
included present value techniques applied to after-tax income, expected
after-tax cash flows and estimated selling prices (less costs of disposal and
profit allowance) for inventories. In accordance with SFAS No. 142, "Goodwill
and Other Intangibles Assets", indefinite lived intangibles and goodwill are not
being amortized. </font></p>
<p align="justify"><font size="2">The following table summarizes the net book
value and the fair value of the assets acquired and liabilities assumed at the
date of acquisition, which represents the purchase price allocation at the date
of the acquisition of Dalin based on valuation report which was prepared by a
third party appraisal firm: </font></p>
<table style="border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td vAlign="bottom" borderColor="#000000" width="70%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" borderColor="#000000" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Net Book Value</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Fair Value</b></font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Current
    assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">26,883,246</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">26,883,246</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Property, plant and equipment, net</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">6,060,024</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">8,098,959</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Intangibles</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">1,729,112</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,471,408</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    non-current assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,449,162</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,449,162</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Goodwill</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&#151;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">13,692,473</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total
    assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">38,121,544</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">73,595,248</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total
    liabilities</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">23,178,257</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">23,178,257</font></td>
    <td style="border: medium none" vAlign="bottom" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border-right: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
    assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">14,943,287</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">50,416,991</font></td>
    <td style="border: medium none" vAlign="bottom">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">The Company determined the $50.4 million fair
value of the acquired assets of Dalin based on an evaluation by an independent
appraisal and the final asset evaluation by the management. Pursuant to FAS
141R, the excess of the cost of an acquired entity over the net of the amounts
assigned to assets acquired and liabilities assumed shall be recognized as
goodwill. As a result, the $13.7 million of goodwill was due to the acquisition
purchase price over the fair value of the assets acquired. During the three
months ended March 31, 2009, the Company did not record any impairment charge
from write-downs of purchased intangible assets since the Company do not
identify any trends caused a reduction in expected future cash flows. </font>
</p>
<p align="center">F-<font size="2">31</font></p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center"><font size="3">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES</font></p>
<p align="center"><font size="3">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
March 31, 2009 <br>
(Unaudited)</font></p>
<p align="justify"><font size="2">The following table presents the details of
the fair value purchased intangible assets acquired through business
combinations as of January 1, 2009: </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="70%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Useful life</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>(in years)</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>Fair Value</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Plasma
    collection permits</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">10</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">10,891,092</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Land use
    rights</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">40</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,285,968</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Long-term customer-relationship intangible assets</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">4</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,955,384</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">GMP
    certificate</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">5.8</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,332,652</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Software</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="center"><font size="2">3.8</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,312</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Total</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,471,408</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="justify"><font size="2">In addition, the Company determined the $21.5
million fair value of the noncontrolling interest of Dalin based on an
evaluation by an independent third party appraisal firm. Level 3 inputs for
noncontrolling interest included considering average control premium in relevant
Merger and Acquisition premium. </font></p>
<p align="justify"><font size="2"><u>Pro Forma </u></font></p>
<p align="justify"><font size="2">The following unaudited pro forma condensed
income statement for the three months ended March 31, 2009 and 2008 were
prepared under generally accepted accounting principles as if the acquisition of
Dalin has occurred on January 1, 2008. The pro forma information may not be
indicative of the results that actually would have occurred if the acquisition
had been in effect from and on the date indicated. </font></p>
<table style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px" cellSpacing="0" cellPadding="0" width="100%" align="center" border="0">
  <tr style="font-size: 1px">
    <td style="border-bottom: medium none" vAlign="bottom" width="70%">
    <p align="justify">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="3%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="10%">
    <p align="center">&nbsp;</td>
    <td style="border-bottom: medium none" vAlign="bottom" width="1%">
    <p align="center">&nbsp;</td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" colSpan="5">
    <p align="center"><font size="2"><b>For the three months ended March 31,</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2009</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="center"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" colSpan="2">
    <p align="center"><font size="2"><b>2008</b></font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Sales</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,148,598</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">16,221,336</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Cost of
    Goods Sold</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">6,214,930</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,844,829</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Gross
    Profit</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">14,933,688</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">11,376,507</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">
    Operating Expenses</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">4,870,130</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,358,037</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Other
    expense, net</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">774,944</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">85,803</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Income
    Tax</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,030,194</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">1,428,232</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
    Income before noncontrolling interest</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">7,258,400</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">6,504,435</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Less:
    Net income attributable to noncontrolling interest</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">3,000,082</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">2,136,434</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Net
    Income attributable to controlling interest</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,258,318</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">4,368,001</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Basic -
    earning per share</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.65pt"><font size="2">
    Weighted average number of shares</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.65pt"><font size="2">
    Earnings per share</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 8.65pt"><font size="2">Diluted
    - earning per share</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">&nbsp;</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p style="text-indent: -8.65pt; margin-left: 17.65pt"><font size="2">
    Weighted average number of shares</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,434,942</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" vAlign="bottom" borderColor="#000000">
    <p align="right"><font size="2">21,964,168</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p style="text-indent: -8.65pt; margin-left: 17.65pt"><font size="2">
    Earnings per share</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">$</font></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 3pt double" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="right"><font size="2">0.20</font></td>
    <td style="border: medium none" vAlign="bottom" borderColor="#000000" bgColor="#e9f1f8">
    <p align="justify"><font size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center">F-<font size="2">32</font></p>

<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">

<font size="2">
<p align="center"><b>CHINA BIOLOGIC PRODUCTS, INC. <br>
CONSOLIDATED FINANCIAL STATEMENTS </b></p>
<p align="center"><b>YEARS ENDED DECEMBER 31, 2008 AND 2007 </b></p>
<p align="center"><b>CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES </b></p>
<p align="center"><b>Index to Financial Statements </b></p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="center" width="10%"><b><u>Page</u></b> </td>
  </tr>
  <tr vAlign="top">
    <td align="left"><b>CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED</b>&nbsp;
    <strong>DECEMBER 31, 2008 AND 2007</strong> </td>
    <td align="center" width="10%">&nbsp; </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;</td>
    <td align="center" width="10%">&nbsp; </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Report of Independent Registered Public
    Accounting Firm</td>
    <td align="center" width="10%" bgColor="#e6efff">F-34 </td>
  </tr>
  <tr vAlign="top">
    <td align="left">Consolidated Balance Sheets as of December 31, 2008 and
    2007</td>
    <td align="center" width="10%">F-35 </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Consolidated Statements of Income and
    Other Comprehensive Income for the Years Ended December 31, 2008 and 2007
    </td>
    <td align="center" width="10%" bgColor="#e6efff">F-36 </td>
  </tr>
  <tr vAlign="top">
    <td align="left">Consolidated Statements of Shareholders' Equity for the
    Years Ended December 31, 2008 and 2007 </td>
    <td align="center" width="10%">F-37 </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2008 and 2007 </td>
    <td align="center" width="10%" bgColor="#e6efff">F-38 </td>
  </tr>
  <tr vAlign="top">
    <td align="left">Notes to Consolidated Financial Statements </td>
    <td align="center" width="10%">F-39 </td>
  </tr>
</table>
<p align="center">F-33</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </b>
</p>
<p align="justify">To the Board of Directors and Stockholders of <br>
China Biologic Products, Inc. </p>
<p align="justify">We have audited the accompanying consolidated balance sheets
of China Biologic Products, Inc. and subsidiaries as of December, 2008 and 2007,
and the related consolidated statements of income and other comprehensive
income, shareholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 2008. China Biologic Products, Inc's
management is responsible for these consolidated financial statements. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. </p>
<p align="justify">We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. </p>
<p align="justify">In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of China Biologic Products, Inc. and subsidiaries as of December 31,
2008 and 2007, and the results of its operations and cash flows for each of the
years in the two-year period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of America. </p>
<p align="justify">/s/ Moore Stephens Wurth Frazer and Torbet, LLP </p>
<p align="justify">Walnut, California <br>
March 30, 2009 </p>
<p align="center">F-34</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES </p>
<p align="center">CONSOLIDATED BALANCE SHEETS <br>
AS OF DECEMBER 31, 2008 AND 2007 </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="bottom">
    <td align="middle" colSpan="6"><u>A S S E T S</u>&nbsp;&nbsp; </td>
    <td align="middle" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">CURRENT ASSETS: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="12%" bgColor="#e6efff">
    &nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="12%" bgColor="#e6efff">
    &nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Cash </td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;8,814,616 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;5,010,033 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Note receivable </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">41,130 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Accounts receivable, net of allowance for doubtful
    accounts of $1,268,052 </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;and $1,238,772 as of December 31, 2008 and
    2007, respectively </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">313,087 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">316,869 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Dividend receivable </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">147,256 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Other receivables </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">356,957 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">301,773 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Other receivables- related party
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">413,697 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Inventories </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">14,949,196 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">9,505,074 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Prepayments and deferred expense
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    614,704 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    138,756 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total current assets </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    25,195,816 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    15,727,332 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">PLANT AND EQUIPMENT, net </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    19,299,364 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    15,434,124 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">OTHER ASSETS: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Investment in unconsolidated
    affiliate </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">6,533,977 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Refundable deposit for potential acquisition </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">14,181,800 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Prepayments-non-current </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">955,874 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">711,459 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Long term prepayment &#150; related party </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">516,456 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Intangible assets, net </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    1,002,561 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    915,874 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total other assets </td>
    <td style="border-right: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" align="right" width="12%">
    22,674,212 </td>
    <td style="border-left: medium none" align="left" width="2%">&nbsp;</td>
    <td style="border-right: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: 1px solid" align="right" width="12%">
    2,143,789 </td>
    <td style="border-left: medium none" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;67,169,392 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;33,305,245 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle" colSpan="6"><u>L I A B I L I T I E S&nbsp;&nbsp; A N D&nbsp;&nbsp; S H A R E
    H O L D E R S'</u> <u>&nbsp; E Q U I T Y</u> </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">CURRENT LIABILITIES: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Accounts payable </td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;2,481,889 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;2,677,587 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Notes payable </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">29,340 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Short term loans - bank </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">685,500 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Short term loan &#150; minority
    shareholder </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">773,277 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">722,674 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Other payables and accrued liabilities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,962,931 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">1,200,068 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Other payable - land use right </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,683 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,485 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Distribution payable to minority shareholder </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,252,354 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">506,626 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Customer deposits </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,091,792 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">398,794 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Taxes payable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">4,060,010 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">384,788 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Investment payable </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    3,275,501 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    - </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total current liabilities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    18,928,777 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    6,577,522 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">OTHER LIABILITIES: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Non-current other payable &#150; land use right </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">323,707 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">304,086 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Long term loan-bank </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    5,868,000 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    - </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Total other liabilities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    6,191,707 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    304,086 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total liabilities </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    25,120,484 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    6,881,608 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">COMMITMENTS AND CONTINGENCIES </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">142,120 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">MINORITY INTEREST </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    4,211,794 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    3,885,892 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">SHAREHOLDERS' EQUITY: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Common stock, $0.0001 par value,
    100,000,000 shares authorized, 21,434,942 </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;shares issued and outstanding
    at December 31, 2008 and 2007 </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,143 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,143 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Paid-in-capital </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">10,700,032 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">9,388,305 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Statutory reserves </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">6,989,801 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">3,934,703 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Retained earnings </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">15,392,253 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">6,461,680 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Accumulated other comprehensive
    income </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    4,752,885 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    2,608,794 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total shareholders' equity </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    37,837,114 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    22,395,625 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Total liabilities
    and shareholders' equity </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;67,169,392 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;33,305,245 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="left">See report of independent registered public accounting firm. <br>
The accompanying notes are an integral part of these statements. </p>
<p align="center">F-35</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES </p>
<p align="center">CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME <br>
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">REVENUES </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td align="right" width="12%" bgColor="#e6efff">&nbsp;46,751,160 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td align="right" width="12%" bgColor="#e6efff">&nbsp;32,398,669 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">COST OF SALES </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">14,040,602
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">9,945,921
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">GROSS PROFIT </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    32,710,558 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    22,452,748 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">OPERATING EXPENSES: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Selling expenses </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,212,073 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">4,434,721 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;General and administrative expenses </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">7,684,493 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">4,651,434 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Research and development expenses
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,166,494 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">609,178 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Stock-based compensation expenses (general and
    administrative) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">1,311,727
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">TOTAL OPERATING EXPENSES </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    12,374,787 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    9,695,333 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">INCOME FROM OPERATIONS </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">20,335,771
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">12,757,415
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">OTHER EXPENSES (INCOME): </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Equity in income of unconsolidated affiliate </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(175,231</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Interest expense (income), net
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">373,497 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">88,686 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Other expense (income), net </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">251,390 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">422,891 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">TOTAL OTHER EXPENSES (INCOME), NET </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    449,656 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    511,577 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">INCOME BEFORE PROVISION FOR INCOME TAXES </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;&nbsp;&nbsp;&nbsp; AND MINORITY INTEREST </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">19,886,115 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">12,245,838 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">PROVISION FOR INCOME TAXES </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    4,596,603 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    2,074,560 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">NET INCOME BEFORE MINORITY INTEREST </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">15,289,512 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">10,171,278 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">LESS MINORITY INTEREST </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    3,303,841 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    1,991,902 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">NET INCOME </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">11,985,671 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">8,179,376 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">OTHER COMPREHENSIVE INCOME: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Foreign currency translation gain </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">2,144,091
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">1,490,409
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">COMPREHENSIVE INCOME </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;14,129,762 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;9,669,785 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">BASIC EARNINGS PER SHARE: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Weighted average number of shares
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    21,434,942 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    21,434,942 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Earnings per share </td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;0.56 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;0.38 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">DILUTED EARNINGS PER SHARE: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp;Weighted average number of shares </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 3px double" align="right" width="12%">21,556,342
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 3px double" align="right" width="12%">21,861,014
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp;Earnings per share </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;0.56 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;0.37 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">See report of independent registered public accounting firm.
<br>
The accompanying notes are an integral part of these statements. </p>
<p align="center">F-36</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES </p>
<p align="center">CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY <br>
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 </p>
<table style="font-size: 8pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="17%" colSpan="4">
    <font size="2">&nbsp;Common stock </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="17%" colSpan="4">
    <font size="2">Retained earnings </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">
    Accumulated </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="2%">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">
    Additional </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="2%">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" align="middle" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">other
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">Par
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">Paid-in
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">
    Statutory </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">
    comprehensive </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="7%"><font size="2">&nbsp;
    </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Shares </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">value </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">capital </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">reserves </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Unrestricted </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">income </font></td>
    <td style="font-size: 10pt" align="middle" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="middle" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">&nbsp; &nbsp; &nbsp;Totals </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td style="font-size: 10pt" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left" bgColor="#e6efff"><font size="2">
    BALANCE, December 31, 2006 </font></td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">21,434,942 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;2,143 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">9,388,305 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">2,199,580 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;17,427 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;1,118,385 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;12,725,840 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td style="font-size: 10pt"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" width="7%"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp;Net income </font>
    </td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    8,179,376 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    8,179,376 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left" bgColor="#e6efff"><font size="2">
    &nbsp;Adjustment to statutory reserve </font></td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">1,735,123 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">(1,735,123</font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">) </td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp;Foreign currency
    translation adjustments </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="right" width="7%">
    <font size="2">1,490,409 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="right" width="7%">
    <font size="2">1,490,409 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td style="font-size: 10pt; border-bottom: medium none" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-bottom: medium none" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid; border-bottom: medium none" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-bottom: medium none" width="2%" bgColor="#e6efff">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt; border: medium none" align="left" bgColor="#e6efff">
    <font size="2">BALANCE, December 31, 2007 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">21,434,942 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;2,143 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">9,388,305 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">3,934,703 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;6,461,680 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;2,608,794 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="font-size: 10pt; border: medium none" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="font-size: 10pt; border: medium none" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;22,395,625 </font></td>
    <td style="font-size: 10pt; border: medium none" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="font-size: 10pt; border-top: medium none"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: medium none" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt; border-top: medium none" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp;Stock based
    compensation </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    1,311,727 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    1,311,727 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left" bgColor="#e6efff"><font size="2">
    &nbsp;Net income </font></td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">11,985,671 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%" bgColor="#e6efff">
    <font size="2">11,985,671 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">&nbsp;Adjustment to
    statutory reserve </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    3,055,098 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">
    (3,055,098</font></td>
    <td style="font-size: 10pt" align="left" width="2%">) </td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="7%"><font size="2">&nbsp; </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt" align="right" width="7%"><font size="2">- </font>
    </td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left" bgColor="#e6efff"><font size="2">
    &nbsp;Foreign currency translation adjustments </font></td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">2,144,091 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">2,144,091 </font></td>
    <td style="font-size: 10pt" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td style="font-size: 10pt"><font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-top: 1px solid" width="7%">
    <font size="2">&nbsp; </font></td>
    <td style="font-size: 10pt" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="font-size: 10pt" align="left"><font size="2">BALANCE, December
    31, 2008 </font></td>
    <td style="font-size: 10pt" align="left" width="1%">&nbsp;</td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">21,434,942 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;2,143 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">10,700,032 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">6,989,801 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">15,392,253 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;4,752,885 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
    <td style="font-size: 10pt" align="left" width="1%"><font size="2">$</font></td>
    <td style="font-size: 10pt; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;37,837,114 </font></td>
    <td style="font-size: 10pt" align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">See report of independent registered public accounting firm.
<br>
The accompanying notes are an integral part of these statements. </p>
<p align="justify">&nbsp;</p>
<p align="center">F-37</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES </p>
<p align="center">CONSOLIDATED STATEMENTS OF CASH FLOWS <br>
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">CASH FLOWS FROM OPERATING ACTIVITIES:
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Net income </td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;11,985,671 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td align="right" width="12%">&nbsp;8,179,376 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Adjustments to reconcile net income
    to cash </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;provided by operating
    activities: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Minority Interest </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,303,841 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">1,991,902 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Depreciation </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,088,155 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">777,007 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Amortization </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">61,095 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">91,965 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Loss on disposal
    of equipment </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">214,663 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">245,042 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Allowance for bad debt &#150; accounts
    receivable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(56,462</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">221,813 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Allowance for bad
    debt &#150; other receivables and prepayments </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">560,668 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Impairment of assets </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">415,873 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Stock based
    compensation </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,311,727 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Equity in income of unconsolidated
    affiliate </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(175,231</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Change in operating assets
    and liabilities: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Notes receivable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">43,245 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">44,109 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Accounts
    receivable </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">81,980 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">3,351,444 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other receivables </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(33,462</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">310,943 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other receivables
    &#150; related party </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,442 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(2,302</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Inventories </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(4,695,495</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(2,845,676</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Prepayments and
    deferred expenses </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(459,019</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">599,238 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Accounts payable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(376,527</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">93,800 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other payables and
    accrued liabilities </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,695,860 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(773,185</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Other payables &#150;land use right </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(37,308</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(1,346</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Customer deposits
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">653,514 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,679 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Taxes payable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,585,237 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">227,604 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Contingent
    liability </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    (149,428</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    136,491 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Net cash provided by
    operating activities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    20,020,039 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    12,650,904 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">CASH FLOWS FROM INVESTING ACTIVITIES: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Payments to related party </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(395,010</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Additions to plant and equipment </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(4,033,667</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(7,715,142</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Additions to intangible assets </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(83,259</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(234,120</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Payments for unconsolidated affiliate </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(3,171,300</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Prepayments for potential
    acquisition </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(14,181,800</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Advances on non-current assets </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(270,119</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(381,996</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Advances on building purchase to
    related party </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">
    <p align="right">&nbsp; -</td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(496,001</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Proceeds from sales of equipment </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">73,641 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">11,455 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Net cash
    used in investing activities </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    (21,666,504</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    (9,210,814</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">CASH FLOWS FROM FINANCING ACTIVITIES:
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Proceeds from notes payable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">28,830 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Proceeds from short term loan </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,316,700 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Payments on short term loan </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(720,750</td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(3,291,750</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Proceeds from long term loan </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">5,766,000 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Payments on long term debt </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(658,350</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Dividends paid to minority
    shareholders </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    (288,300</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    (488,878</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Net cash provided by (used
    in) financing activities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    4,785,780 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="right" width="12%">
    (3,122,278</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">EFFECTS OF EXCHANGE RATE CHANGE IN CASH </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">665,268 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">424,001 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">INCREASE IN CASH </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,804,583 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">741,813 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">CASH, beginning of year </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">5,010,033
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">4,268,220
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">CASH, end of year </td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;8,814,616
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;5,010,033
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="12%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Income taxes paid </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,523,867 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,803,510 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Interest paid (net of capitalized interest) </td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;108,170
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;107,077
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Non-cash transactions </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Accounts receivable in exchange for accrued
    liabilities </td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;1,126,404
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Unpaid investment in
    unconsolidated affiliate </td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;3,218,565 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<!--$$/page=-->
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="border-right: medium none" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plant and
    equipment acquired with prepayments made in prior periods </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="1%">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 3px double #000000" align="right" width="12%">
    &nbsp;78,905 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%">
    &nbsp;</td>
    <td style="border-left: medium none" align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;498,147
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">See report of independent registered public accounting firm.
<br>
The accompanying notes are an integral part of these statements. </p>
<p align="center">F-38 </p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
DECEMBER 31, 2008 </p>
<p align="justify"><b>Note 1 &#150; Organization background and principal activities</b></p>
<p align="justify"><u>Principal Activities and Reorganization</u><br>
&nbsp;</p>
<p align="justify">China Biologic Products, Inc. (the "Company" or "CBP") was
originally incorporated in 1992 under the laws of the state of Texas as Shepherd
Food Equipment, Inc. On July 18, 2006, the Company entered into a Share Exchange
Agreement with Logic Express Ltd ("Logic Express") and its stockholders. Upon
the closing of the Share Exchange Agreement on July 19, 2006, Logic Express
became a wholly-owned subsidiary of the Company. </p>
<p align="justify">Logic Express was incorporated on January 6, 2006, in the
British Virgin Islands. Logic Express was established for the purpose of
acquiring an 82.76% majority equity interest in Shandong Missile Biological
Products Co., Ltd., which it acquired on April 17, 2006 and on February 27, 2007
changed its name to Shandong Taibang Biological Products Co., Ltd. ("Shandong
Taibang"). As a result of the acquisition, Shandong Taibang became the Company's
indirect subsidiary.</p>
<p align="justify">The Company through its direct and indirect subsidiaries is
principally engaged in the research, development, commercialization, manufacture
and sale of human blood products to customers in the People's Republic of China
(the "PRC") and India.</p>
<p align="justify"><u>Acquisition of assets from plasma stations</u><br>
&nbsp;</p>
<p align="justify">In the third quarter of 2006, Shandong Taibang, through its
wholly owned plasma companies, entered into an asset transfer agreement with the
Shandong Provincial government to acquire certain assets of five plasma stations
in Shandong Province, for total consideration of approximately $2,607,356 (RMB
19.3 million). The operating licenses of the plasma companies were effective as
of January 1, 2007. </p>
<p align="justify">In January 2007, Shandong Taibang, through its 100% and 80%
owned plasma companies, entered into letters of intent to acquire certain assets
of two plasma stations in Guangxi Province for total consideration of
approximately $761,781 (approximately RMB 5.6 million). </p>
<p align="justify"><u>Establishment of distribution company</u><br>
&nbsp;</p>
<p align="justify">In September 2006, Shandong Taibang applied to establish a
wholly owned subsidiary "Shandong Missile Medical Co., Ltd." ("Shandong
Medical"). The registration of Shandong Medical was approved by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation on July 19,
2007. Shandong Medical's scope of business is the wholesale of biological
products with a business license period of 25 years from the date of
registration, with a registered capital of $384,600.</p>
<p align="justify"><u>Establishment of new collection station in Guangxi</u><br>
&nbsp;</p>
<p align="justify">In June 2008, the Company received the approval from the
Guangxi Province Bureau of Health to set up a new plasma collection station in
Pu Bei County, Guangxi Province. The new plasma collection station will be
located in the Centralized Industry Zone of Pu Bei County and when it becomes
operational, it will replace CBP's existing Fang Cheng Plasma Collection Station
("Fang Cheng"). The Company's management decided to relocate Fang Cheng to a
more strategic location to increase collection volumes. During the construction
period, the existing Fang Cheng Plasma Station will still continue with its
normal operations. With the approval of the Centralized Industry Zone of Pu Bei
County, once Fang Cheng becomes operational, the Company hopes to expand its
coverage area to secure higher collection volumes in the future. </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-39</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
DECEMBER 31, 2008 </p>
<p align="justify"><b>Note 2 &#150; Summary of significant accounting policies</b></p>
<p align="justify"><u>Principles of consolidation</u><br>
&nbsp;</p>
<p align="justify">The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"). All material inter-company transactions
and balances have been eliminated in the consolidation.</p>
<p align="justify"><u>Use of estimates</u><br>
&nbsp;</p>
<p align="justify">The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. For example, management estimates the fair value of stock based
compensation as well as potential losses on outstanding receivables. Management
believes that the estimates utilized in preparing its financial statements are
reasonable and prudent. Actual results could differ from these estimates. </p>
<p align="justify"><u>Foreign currency translation</u><br>
&nbsp;</p>
<p align="justify">The reporting currency of the Company is the US dollar. The
Company's principal operating subsidiaries established in the PRC use their
local currency, Renminbi ("RMB"), as their functional currency. Results of
operations and cash flows are translated at average exchange rates during the
period. Assets and liabilities are translated at the unified exchange rate as
quoted by the People's Bank of China at the end of the period. Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in the statements of stockholders' equity. Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the
results of operations as incurred.</p>
<p align="justify">In accordance with FAS 95, &quot;Statement of Cash Flows,&quot; cash
flows from the Company's operations is calculated based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet. </p>
<p align="justify">The consolidated balance sheet amounts, with the exception of
equity at December 31, 2008 and 2007 were translated at RMB6.82 to $1.00 and
RMB7.29 to $1.00, respectively. The equity accounts were stated at their
historical rate. The average translation rates applied to consolidated
statements of income and cash flow for the years ended December 31, 2008 and
2007 were RMB6.94 and RMB7.59, respectively. </p>
<p align="justify"><u>Revenue recognition</u><br>
&nbsp;</p>
<p align="justify">The Company recognizes revenue when products are delivered
and the customer takes ownership and assumes risk of loss, collection of the
relevant receivable is probable, persuasive evidence of an arrangement exists
and the sales price is fixed or determinable, which are generally considered to
be met upon delivery and acceptance of products at the customer site. Sales are
presented net of any discounts given to customers. As a policy, the Company does
not accept any product returns and based on our records, product returns, if
any, are immaterial. Sales revenue represents the invoiced value of goods, net
of a value-added tax ("VAT"). All products produced by the Company and sold in
the PRC are subject to a Chinese VAT at a rate of 6% of the gross sales price or
at a rate approved by the Chinese local government. Products distributed by
Shandong Medical are subjected to a 17% VAT. </p>
<p align="justify"><u>Shipping and handling</u><br>
&nbsp;</p>
<p align="justify">Shipping and handling costs related to costs of goods sold
are included in selling, general and administrative costs and totaled $60,164
and $93,107 for the years ended December 31, 2008 and 2007, respectively. </p>
<p align="justify"><u>Financial instruments</u><br>
&nbsp;</p>
<p align="justify">Statement of Financial Accounting Standards ("SFAS") 107,
"Disclosures about Fair Value of Financial Instruments" requires disclosure of
the fair value of financial instruments held by the Company. SFAS 107 defines
the fair value of financial instruments. The Company considers the carrying
amount of cash, receivables, payables including accrued liabilities and short
term loans to approximate their fair values because of the short period of time
between the origination of such instruments and their expected realization and
if applicable, their stated rates of interest are equivalent to interest rates
currently available. </p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-40</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">On January 1, 2008, the Company adopted SFAS 157, "Fair Value
Measurements", which defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosures
requirements for fair value measures. The three levels are defined as follow:
</p>
<ul style="text-align: justify">
  <li>
  <p style="margin-top: 0px; margin-bottom: 12px">Level 1: inputs to the
  valuation methodology are quoted prices (unadjusted) for identical assets or
  liabilities in active markets. </li>
  <li>
  <p style="margin-top: 0px; margin-bottom: 12px">Level 2: inputs to the
  valuation methodology include quoted prices for similar assets and liabilities
  in active markets, and inputs that are observable for the assets or liability,
  either directly or indirectly, for substantially the full term of the
  financial instruments. </li>
  <li>
  <p style="margin-top: 0px; margin-bottom: 12px">Level 3: inputs to the
  valuation methodology are unobservable and significant to the fair value. </li>
</ul>
<p align="justify">The Company's investment in unconsolidated affiliate amounted
to $6,533,977 as of December 31, 2008. Since there is no quoted or observable
market price for the fair value of similar investment, the Company then used the
level 3 inputs for its valuation methodology. The determination of the fair
value was based on the capital investment that the Company contributed income or
losses from investment and additional contributions made and distributions
received. The carrying value of the investment in unconsolidated affiliate
approximated the fair value as of December 31, 2008.</p>
<p align="justify">The carrying value of the long term bank loan amounted to
$5,868,000. The Company used Level 2 inputs for its valuation methodology for
the long term bank loan by comparing the stated loan interest rate to the rate
charged by the Bank of China to similar loans. </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td vAlign="bottom" noWrap align="middle"><font style="font-size: 8pt">&nbsp;
    </font></td>
    <td vAlign="bottom" noWrap align="middle" width="1%">&nbsp;</td>
    <td vAlign="bottom" noWrap align="middle" width="10%">
    <font style="font-size: 8pt">Carrying Value as of </font></td>
    <td vAlign="bottom" noWrap align="middle" width="2%">&nbsp;</td>
    <td vAlign="bottom" noWrap align="middle" width="1%">&nbsp;</td>
    <td vAlign="bottom" noWrap align="middle" width="36%" colSpan="7">
    <font style="font-size: 8pt">Fair Value Measurements at December 31, 2008
    </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td vAlign="bottom" noWrap align="middle"><font style="font-size: 8pt">&nbsp;
    </font></td>
    <td vAlign="bottom" noWrap align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="10%">
    <font style="font-size: 8pt">December 31, 2008 </font></td>
    <td vAlign="bottom" noWrap align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="1%">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="36%" colSpan="7">
    <font style="font-size: 8pt">using Fair Value Hierarchy </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td vAlign="bottom" align="middle"><font style="font-size: 8pt">&nbsp; </font>
    </td>
    <td vAlign="bottom" align="middle" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" vAlign="bottom" align="middle" width="10%">
    &nbsp;</td>
    <td vAlign="bottom" align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" align="middle" width="10%">
    <font style="font-size: 8pt">Level 1</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" align="middle" width="2%">
    &nbsp;</td>
    <td style="border-top: 1px solid" vAlign="bottom" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" align="middle" width="10%">
    <font style="font-size: 8pt">Level 2</font></td>
    <td style="border-top: 1px solid" vAlign="bottom" align="middle" width="2%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" vAlign="bottom" align="middle" width="10%">
    <font style="font-size: 8pt">Level 3</font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td vAlign="bottom" align="left" bgColor="#e6efff"><font size="2">Investment
    </font></td>
    <td vAlign="bottom" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp;6,533,977 </font></td>
    <td vAlign="bottom" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td vAlign="bottom" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%" bgColor="#e6efff">$&nbsp;</td>
    <td vAlign="bottom" align="right" width="10%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td vAlign="bottom" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp;6,533,977 </font></td>
    <td vAlign="bottom" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td vAlign="bottom" align="left"><font size="2">Long term bank loan </font>
    </td>
    <td vAlign="bottom" align="left" width="1%"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%"><font size="2">&nbsp;5,868,000
    </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%"><font size="2">&nbsp;- </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%"><font size="2">&nbsp;5,380,114
    </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
    <td vAlign="bottom" align="left" width="1%"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="10%"><font size="2">&nbsp;- </font></td>
    <td vAlign="bottom" align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">The Company did not identify any assets or liabilities that
are required to be presented on the balance sheet at fair value in accordance
with SFAS 157. </p>
<p align="justify"><u>Concentration of risk</u><br>
&nbsp;</p>
<p align="justify">The Company's operations are carried out in the PRC and are
subject to specific considerations and significant risks not typically
associated with companies in North America and Western Europe. Accordingly, the
Company's business, financial condition and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC economy. The Company's results may be adversely
affected by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.</p>
<p align="justify">Cash includes cash on hand and demand deposits in accounts
maintained with state-owned banks within the PRC, Hong Kong and the United
States. Certain financial instruments, which subject the Company to
concentration of credit risk, consist of cash. The Company maintains balances at
financial institutions which, from time to time, may exceed Federal Deposit
Insurance Corporation insured limits for the banks located in the United States
or may exceed Hong Kong Deposit Protection Board insured limits for the banks
located in Hong Kong. Balances at financial institutions or state-owned banks
within the PRC are not covered by insurance. Total cash in state-owned banks at
December 31, 2008 and 2007 amounted to $8,689,414 and $4,814,991, respectively,
$47,865 and $240,797 of which are covered by insurance, respectively. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any risks on its cash in bank accounts. </p>
<p align="justify">The Company's major product, human albumin: - 20%/10ml,
20%/25ml and 20%/50ml, accounted for 57.8% and 63.5% of total revenues, for the
years ended December 31, 2008 and 2007, respectively. If the market demands for
human albumin cannot be sustained in the future or if the price of human albumin
decreases, it would adversely affect the Company's operating results. </p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-41</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">All of the Company's customers are located in the PRC. As of
December 31, 2008 and 2007, the Company had no significant concentration of
credit risk, except for the amounts due from related parties. There were no
customers that individually comprised 10% or more of the revenue during the
fiscal year ended December 31, 2008 and 2007, respectively. No individual
customer represented more than 10% of trade receivables at December 31, 2008 and
2007. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.</p>
<p align="justify">The Company's top three vendors comprised 36.3% and 24.0%,
respectively, of the Company's purchases for the years ended December 31, 2008
and 2007. Accounts payable to these vendors amounted $448,016 and $318,843 as of
December 31, 2008 and 2007, respectively.</p>
<p align="justify"><u>Accounts receivable</u><br>
&nbsp;</p>
<p align="justify">During the normal course of business, the Company extends
unsecured credit to its customers. Management reviews its accounts receivable on
a regular basis to determine if the allowance for doubtful accounts is adequate.
An estimate for doubtful accounts is made when collection of the full amount is
no longer probable. Account balances are written-off after management has
exhausted all efforts of collection. Trade accounts receivable consist of the
following: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Trade accounts receivable </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,581,139 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,555,641 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Less: Allowance for doubtful accounts </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">(1,268,052</td>
    <td align="left" width="2%">) </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">(1,238,772</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp;Total </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;313,087 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;316,869 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">The activity in the allowance for doubtful accounts for trade
accounts receivable for the years ended December 31, 2008 and 2007 is as
follows: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Beginning allowance for doubtful accounts
    </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,238,772 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,131,209 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp;Bad debt expense </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">221,813 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Recovery of amount previously
    reserved </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(56,462</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-bottom: medium none" align="left">&nbsp; &nbsp; &nbsp;Write-off charged
    against the allowance </td>
    <td style="border-bottom: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" align="right" width="12%">- </td>
    <td style="border-bottom: medium none" align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: medium none" align="right" width="12%">(188,891</td>
    <td style="border-bottom: medium none" align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" bgColor="#e6efff">
    &nbsp; &nbsp; &nbsp;Foreign currency translation adjustment </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff">
    85,742 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff">
    74,641 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left">Ending allowance for doubtful
    accounts </td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;1,268,052 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;1,238,772 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify"><u>Inventories</u> </p>
<p align="justify">Inventories are stated at the lower of cost or market using
the weighted average basis and consist of the following: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="border: medium none" align="middle">&nbsp; </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="12%">
    December 31, 2008 </td>
    <td style="border: medium none" align="middle" width="2%">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="12%">
    December 31, 2007 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" bgColor="#e6efff">Raw materials
    </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" bgColor="#e6efff">
    &nbsp;7,043,349 </td>
    <td style="border: medium none" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" bgColor="#e6efff">
    &nbsp;3,841,595 </td>
    <td style="border: medium none" align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left">Work-in-process </td>
    <td style="border: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border: medium none" align="right" width="12%">4,801,768 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
    <td style="border: medium none" align="left" width="1%">&nbsp;</td>
    <td style="border: medium none" align="right" width="12%">4,068,389 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" bgColor="#e6efff">
    Finished goods </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff">
    3,104,079 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff">
    1,595,090 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left">&nbsp; &nbsp;Total </td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;14,949,196 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;9,505,074 </td>
    <td style="border: medium none" align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">The Company reviews its inventory periodically for possible
obsolete goods or to determine if any reserves are necessary for potential
obsolescence. As of December 31, 2008 and 2007, the Company has determined that
no reserve is necessary. </p>
<p align="justify"><u>Plant and equipment</u><br>
&nbsp;</p>
<p align="justify">Plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets with 5% residual value. Depreciation
expense for the year ended December 31, 2008 and 2007 amounted to $1,088,155 and
$777,007, respectively. </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-42</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">Estimated useful lives of the assets are as follows:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="right" width="30%" colSpan="2">
    <p align="center">Estimated Useful Life </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Buildings and improvement </td>
    <td style="border-top: 1px solid" align="right" width="15%" bgColor="#e6efff">
    30 </td>
    <td style="border-top: 1px solid" align="left" width="15%" bgColor="#e6efff">
    <p style="margin-left: 10px">years </td>
  </tr>
  <tr vAlign="top">
    <td align="left">Machinery and equipment </td>
    <td align="right" width="15%">10 </td>
    <td align="left" width="15%">
    <p style="margin-left: 10px">years </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Furniture, fixtures and office equipment
    </td>
    <td align="right" width="15%" bgColor="#e6efff">5-10 </td>
    <td align="left" width="15%" bgColor="#e6efff">
    <p style="margin-left: 10px">years </td>
  </tr>
</table>
<p align="justify">Construction in progress represents the costs incurred in
connection with the construction of buildings, new additions, or capitalized
interest incurred in connection with the Company's plant facilities. In
accordance with the provisions of SFAS No. 34, "Capitalize of Interest Cost",
interest incurred on borrowings is capitalized to the extent that borrowings do
not exceed construction in progress. The credit is a reduction of interest
expense. No depreciation is provided for construction in progress until such
time as the assets are completed and placed into service. Maintenance, repairs
and minor renewals are charged directly to expenses as incurred. Major additions
and betterment to property and equipment are capitalized. </p>
<p align="justify">The Company periodically evaluates the carrying value of
long-lived assets in accordance with SFAS 144. When estimated cash flows
generated by those assets are less than the carrying amounts of the asset, the
Company recognizes an impairment loss. Based on its review, the Company believes
that, as of December 31, 2008, there were no impairments of its long-lived
assets. </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" height="165" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="border: medium none" align="left" height="15">Plant and equipment
    consist of the following: </td>
    <td style="border: medium none" align="left" width="1%" height="15"></td>
    <td style="border: medium none" align="left" width="12%" height="15">&nbsp; </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
    <td style="border: medium none" align="left" width="1%" height="15"></td>
    <td style="border: medium none" align="left" width="12%" height="15">&nbsp; </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
  </tr>
  <tr>
    <td style="border: medium none" height="15">&nbsp; </td>
    <td style="border: medium none" width="1%" height="15"></td>
    <td style="border: medium none" width="12%" height="15">&nbsp; </td>
    <td style="border: medium none" width="2%" height="15"></td>
    <td style="border: medium none" width="1%" height="15"></td>
    <td style="border: medium none" width="12%" height="15">&nbsp; </td>
    <td style="border: medium none" width="2%" height="15"></td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="middle" height="16">&nbsp; </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="1%" height="16">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="12%" height="16">
    December 31, 2008 </td>
    <td style="border: medium none" align="middle" width="2%" height="16"></td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="1%" height="16">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid" align="middle" width="12%" height="16">
    December 31, 2007 </td>
    <td style="border: medium none" align="left" width="2%" height="16"></td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" bgColor="#e6efff" height="15">
    &nbsp;Buildings and improvements </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" bgColor="#e6efff" height="15">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" bgColor="#e6efff" height="15">
    &nbsp;5,809,724 </td>
    <td style="border: medium none" align="left" width="2%" bgColor="#e6efff" height="15">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" bgColor="#e6efff" height="15">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" bgColor="#e6efff" height="15">
    &nbsp;4,525,589 </td>
    <td style="border: medium none" align="left" width="2%" bgColor="#e6efff" height="15">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" height="15">&nbsp;Machinery and
    equipment </td>
    <td style="border: medium none" align="left" width="1%" height="15"></td>
    <td style="border: medium none" align="right" width="12%" height="15">
    12,308,174 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
    <td style="border: medium none" align="left" width="1%" height="15"></td>
    <td style="border: medium none" align="right" width="12%" height="15">
    8,201,720 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
  </tr>
  <tr vAlign="top">
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" bgColor="#e6efff" height="16">
    &nbsp;Furniture, fixtures, and office equipment </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="left" width="1%" bgColor="#e6efff" height="16">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="right" width="12%" bgColor="#e6efff" height="16">
    1,501,946 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="16">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="left" width="1%" bgColor="#e6efff" height="16">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="right" width="12%" bgColor="#e6efff" height="16">
    768,197 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="16">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" height="15">&nbsp; &nbsp; &nbsp;Total
    depreciable assets </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" height="15">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" height="15">
    19,619,844 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" height="15">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" height="15">
    13,495,506 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
  </tr>
  <tr vAlign="top">
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" bgColor="#e6efff" height="16">
    &nbsp;Accumulated depreciation </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="left" width="1%" bgColor="#e6efff" height="16">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="right" width="12%" bgColor="#e6efff" height="16">
    (3,099,259</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="16">
    ) </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="left" width="1%" bgColor="#e6efff" height="16">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: 1px solid #000000" align="right" width="12%" bgColor="#e6efff" height="16">
    (1,840,197</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="16">
    ) </td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" height="15">&nbsp; </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" height="15">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" height="15">
    16,520,585 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="left" width="1%" height="15">
    </td>
    <td style="border-left: medium none; border-right: medium none; border-bottom: medium none" align="right" width="12%" height="15">
    11,655,309 </td>
    <td style="border: medium none" align="left" width="2%" height="15"></td>
  </tr>
  <tr vAlign="top">
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" bgColor="#e6efff" height="15">
    &nbsp;Construction in progress </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff" height="15">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff" height="15">
    2,778,779 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="15">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="left" width="1%" bgColor="#e6efff" height="15">
    &nbsp;</td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom-color: #000000" align="right" width="12%" bgColor="#e6efff" height="15">
    3,778,815 </td>
    <td style="border-left: medium none; border-right: medium none; border-top: medium none; border-bottom: medium none #000000" align="left" width="2%" bgColor="#e6efff" height="15">
    &nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border: medium none" align="left" height="12">&nbsp; &nbsp; &nbsp;Total </td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" height="12">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" height="12">
    &nbsp;19,299,364 </td>
    <td style="border: medium none" align="left" width="2%" height="12"></td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" height="12">
    $</td>
    <td style="border-left: medium none; border-right: medium none; border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" height="12">
    &nbsp;15,434,124 </td>
    <td style="border: medium none" align="left" width="2%" height="12"></td>
  </tr>
</table>
<p align="justify">Interest expense of $0 and $52,701 was capitalized into
construction in progress for the years ended December 31, 2008 and 2007,
respectively. </p>
<p align="justify"><u>Investment in unconsolidated affiliate</u><br>
&nbsp;</p>
<p align="justify">Equity method investments are recorded at original cost and
adjusted to recognize the Company's proportionate share of the investee's net
income or losses and additional contributions made and distributions received.
The Company recognizes a loss if it is determined that other than temporary
decline in the value of the investment exists. </p>
<p align="justify"><u>Intangible assets</u><br>
&nbsp;</p>
<p align="justify">Intangible assets are stated at cost (estimated fair value
upon contribution or acquisition), less accumulated amortization. Amortization
expense is recognized on the straight-line basis over the estimated useful lives
of the assets as follows: </p>
<div align="center">
  <center>
  <table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="75%" border="0">
    <tr vAlign="top">
      <td style="border-bottom: 1px solid" align="left">Intangible assets </td>
      <td align="right">&nbsp;</td>
      <td style="border-bottom: 1px solid" align="right">Estimated useful lives
      </td>
    </tr>
    <tr vAlign="top">
      <td style="border-top: 1px solid" align="left" bgColor="#e6efff">Land use
      rights </td>
      <td align="right" bgColor="#e6efff">&nbsp;</td>
      <td style="border-top: 1px solid" align="right" bgColor="#e6efff">50 years
      </td>
    </tr>
    <tr vAlign="top">
      <td align="left">Permits and licenses </td>
      <td align="right">&nbsp;</td>
      <td align="right">5-10 years </td>
    </tr>
    <tr vAlign="top">
      <td align="left" bgColor="#e6efff">Blood donor network </td>
      <td align="right" bgColor="#e6efff">&nbsp;</td>
      <td align="right" bgColor="#e6efff">10 years </td>
    </tr>
  </table>
  </center>
</div>
<p align="justify">All land in the PRC is owned by the government; however, the
government grants "land use rights." The Company has obtained rights to use
various parcels of land for 50 years. The Company amortizes the cost of the land
use rights over their useful life using the straight-line method.</p>
<p align="justify">Other intangible assets represent permits, licenses and Good
Manufacturing Practice Certificates contributed in return for equity upon the
establishment of Shandong Taibang in 2002. Contributed rights include those
necessary to manufacture and distribute human blood products in the PRC market
as authorized by the relevant PRC authorities. The estimated useful life of the
contributed rights is 5-10 years. </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-43</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">Intangible assets consisted of the following:<br>
&nbsp;</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Land use rights </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;848,982 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;819,937 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Permits and licenses </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">389,709 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">326,983 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Blood donor network </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,347 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">5,621 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Software </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">61,296 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">28,892 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp;Totals </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    1,302,334 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    1,181,433 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Accumulated amortization </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">(299,773</td>
    <td align="left" width="2%">) </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">(265,559</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Intangible assets, net </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,002,561 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;915,874 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">Total amortization expense for the years ended December 31,
2008 and 2007 amounted to $61,095 and $91,965, respectively.</p>
<p align="justify">Amortization expense for intangible assets for the next five
fiscal years is as follows: </p>
<table style="font-size: 8pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle"><font size="2">&nbsp; </font></td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2009 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2010 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2011 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2012 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2013 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Thereafter </font></td>
    <td align="middle" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Amortization expense
    </font></td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;64,328 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;62,635 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;62,635 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;56,560 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;31,777 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;749,029 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">Intangible assets of the Company are reviewed at least
annually or more often if circumstances dictate, to determine whether their
carrying value has become impaired. The Company considers assets to be impaired
if the carrying value exceeds the future projected cash flows from related
operations. The Company also re-evaluates the years of amortization to determine
whether subsequent events and circumstances warrant revised estimates of useful
lives. For the years ended December 31, 2008 and 2007, the Company recorded an
impairment loss of $415,873 and $0, respectively. As of December 31, 2008, the
Company expects these assets to be fully recoverable. </p>
<p align="justify"><u>Revenues</u><br>
&nbsp;</p>
<p align="justify">The Company's revenues are primarily derived from the
manufacture and sale of human blood products. The Company's revenues by
significant types of product for the years ended December 31, 2008 and 2007 are
as follows: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2007 </td>
    <td align="middle" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Human Albumin &#150; 20%/10ml, 20%/25ml and
    20%/50ml </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;27,021,733 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;20,544,330 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Human Hepatitis B Immunoglobulin </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,203,901 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">1,532,661 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Human Immunoglobulin for Intravenous
    Injection </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">10,307,294 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">3,335,607 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Human Rabies Immunoglobulin </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,619,622 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">5,753,124 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Human Tetanus Immunoglobulin </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,492,421 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">1,105,630 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Others </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">1,106,189
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">127,317 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp;Totals </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;46,751,160 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;32,398,669 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">The Company is engaged in sale of human blood products to
customers in India. The amount was immaterial and less than 10% of total sales
for the year ended December 31, 2008. </p>
<p align="justify"><u>Research and development costs</u> </p>
<p align="justify">Research and development costs are expensed as incurred.<br>
&nbsp;</p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-44</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify"><u>Retirement and other post retirement benefits</u> </p>
<p align="justify">Contributions to retirement schemes (which are defined
contribution plans) are charged to the statement of operations as and when the
related employee service is provided. </p>
<p align="justify"><u>Product liability</u><br>
&nbsp;</p>
<p align="justify">The Company's products are covered by product liability
insurance of approximately $2,934,000 (RMB 20,000,000). For the years ended
December 31, 2008 and 2007, no claim on the insurance policy was filed. </p>
<p align="justify"><u>Government grants</u><br>
&nbsp;</p>
<p align="justify">The Company's subsidiary, Shandong Taibang, is entitled to
receive grants from the PRC municipal government due to its operation in the
high- and new technology business sector. For the years ended December 31, 2008
and 2007, Shandong Taibang received non-refundable grants of $139,365 and
$257,415, respectively, from the PRC municipal government. Grants received from
the PRC municipal government can be used for enterprise development and
technology innovation purposes. The government grants received during the 2008
and 2007 periods were recognized in the accompanying statement of operations as
an offset to Research and Development expenses as they were earmarked or as a
reduction of cost of the assets acquired. </p>
<p align="justify"><u>Income taxes</u><br>
&nbsp;</p>
<p align="justify">The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes", which requires the recognition of deferred income
tax liabilities and assets for the expected future tax consequences of temporary
differences between income tax basis and financial reporting basis of assets and
liabilities. Provision for income taxes consist of taxes currently due plus
deferred taxes. Since the Company had no operations within the United States
there is no provision for US taxes and there are no deferred tax amounts at
December 31, 2008 and 2007. In July, 2006, the Financial Accounting Standard
Board ("FASB") issued FASB Interpretations No. 48, <i>Accounting for Uncertainty
in Income Taxes &#150; an interpretation of FASB Statement No. 109</i> ("FIN 48"),
which clarifies the accounting for uncertainty in tax positions taken or
expected to be taken in a return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. FIN 48 became effective at
the beginning of 2007 and had no impact on the Company's consolidated financial
statements. </p>
<p align="justify">The charge for taxation is based on the results for the year
as adjusted for items, which are non-assessable or disallowed. It is calculated
using tax rates that have been enacted or substantively enacted by the balance
sheet date. </p>
<p align="justify">Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of assessable
tax profit. In principle, deferred tax liabilities are recognized for all
taxable temporary differences, and deferred tax assets are recognized to the
extent that it is probably that taxable profit will be available against which
deductible temporary differences can be utilized. </p>
<p align="justify">Deferred tax is calculated using tax rates that are expected
to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it is
related to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity. </p>
<p align="justify">Deferred tax assets and liabilities are offset when they
related to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis. </p>
<p align="justify"><u>Value added tax</u><br>
&nbsp;</p>
<p align="justify">Enterprises or individuals, who sell products, engage in
repair and maintenance or import and export goods in the PRC are subject to a
VAT in accordance with Chinese laws. The VAT rate applicable to the Company is
6% of the gross sales price. Products distributed by Shandong Medical are
subjected to a 17% VAT. No credit is available for VAT paid on purchases.</p>
<p align="justify"><u>Stock-based compensation</u><br>
&nbsp;</p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-45</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">The Company accounts and reports stock-based compensation
pursuant to SFAS 123R "Accounting for Stock-Based Compensation", which defines a
fair-value-based method of accounting for stock based employee compensation and
transactions in which an entity issues its equity instruments to acquire goods
and services from non-employees. Stock compensation for stock granted to
non-employees has been determined in accordance with SFAS 123R and the EITF
96-18, &quot;Accounting for Equity Instruments that are issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services&quot;, as
the fair value of the consideration received or the fair value of equity
instruments issued, whichever is more reliably measured. </p>
<p align="justify"><u>Recently issued accounting pronouncements</u><br>
&nbsp;</p>
<p align="justify">In February 2007, the FASB issued SFAS 159, "The Fair Value
Option for Financial Assets and Financial Liabilities&#151;including an amendment of
FASB Statement No. 115" which permits companies to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The objective of SFAS 159 is to
provide opportunities to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
hedge accounting provisions. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The Company adopted SFAS 159 on January 1, 2008, and chose not to
elect the option to measure the fair value of eligible financial assets and
liabilities. </p>
<p align="justify">In June 2007, the FASB issued FASB Staff Position No. EITF
07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services
Received for use in Future Research and Development Activities" ("FSP EITF
07-3"), which addresses whether nonrefundable advance payments for goods or
services that used or rendered for research and development activities should be
expensed when the advance payment is made or when the research and development
activity has been performed. The adoption of FSP EITF 07-3 did not impact the
Company's consolidated financial statements </p>
<p align="justify">In December 2007, the FASB issued SFAS 160, "Noncontrolling
Interests in Consolidated Financial Statements - an amendment of Accounting
Research Bulletin No. 51", which establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The Company
believes adopting SFAS 160 will significantly impact its financial statements
for purchases of minority ownership completed after December 31, 2008. </p>
<p align="justify">In December 2007, the FASB issued SFAS 141(R), "Business
Combinations" to replace SFAS 141, "Business Combinations"<i>. </i>SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions.
This replaces SFAS 141's cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141R also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS 141R).
SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The Company believes adopting SFAS 141R will significantly
impact its financial statements for all business combinations completed after
December 31, 2008. </p>
<p align="justify">In March 2008, the FASB issued SFAS 161, "Disclosures about
Derivative Instruments and Hedging Activities &#150;An Amendment of SFAS No. 133".
Effective on January 1, 2009, SFAS 161 seeks to improve financial reporting for
derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, SFAS 161 requires (1) the
disclosure of the fair value of derivative instruments and gains and losses in a
tabular format; (2) the disclosure of derivative features that are credit
risk-related; and (3) cross-referencing within the footnotes. The Company is in
the process of evaluating the new disclosure requirements under SFAS 161. </p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-46</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">In May 2008, the FASB issued SFAS 162, &quot;The Hierarchy of
Generally Accepted Accounting Principles&quot;. SFAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. GAAP for nongovernmental entities.
SFAS 162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, &quot;The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles.&quot; SFAS 162
has no impact on the Company's financial condition, operations or cash flows.
</p>
<p align="justify">In June 2008, the FASB issued EITF 07-5 "Determining whether
an Instrument (or Embedded Feature) is indexed to an Entity's Own Stock". This
Issue is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 "Accounting for
Derivatives and Hedging Activities" specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company's own stock and (b) classified in stockholders' equity in the statement
of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer's own stock
and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This
standard triggers liability accounting on all options and warrants exercisable
at strike prices denominated in any currency other than the functional currency
of the operating entity in China (Renminbi). EITF 07-5 is effective for fiscal
years beginning after December 15, 2008, and is expected to materially affect
the Company's financial statements to carry all warrants and options as
liabilities at fair value and to reflect the change in fair value as a gain
(loss). </p>
<p align="justify">In June 2008, FASB issued EITF 08-4, "Transition Guidance for
Conforming Changes to Issue No. 98-5." The objective of EITF 08-4 is to provide
transition guidance for conforming changes made to EITF 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios", that result from EITF 00-27 "Application of Issue
No. 98-5 to Certain Convertible Instruments", and SFAS 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". This Issue is effective for financial statements issued for fiscal
years ending after December 15, 2008. Early application is permitted. EITF 08-4
had no impact on the Company.</p>
<p align="justify">On October 10, 2008, the FASB issued FSP 157-3, "Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active," which clarifies the application of SFAS 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. FSP 157-3 became effective on October 10, 2008, and its adoption did
not have a material impact on our financial position or results for the years
ended December 31, 2008.<i> </i></p>
<p align="justify">In January 2009, the FASB issued FSP EITF 99-20-1,
"Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20,
Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets". FSP EITF 99-20-1 changes
the impairment model included within EITF 99-20 to be more consistent with the
impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the
impairment model in EITF 99-20 to remove its exclusive reliance on "market
participant" estimates of future cash flows used in determining fair value.
Changing the cash flows used to analyze other-than-temporary impairment from the
"market participant" view to a holder's estimate of whether there has been a
"probable" adverse change in estimated cash flows allows companies to apply
reasonable judgment in assessing whether an other-than-temporary impairment has
occurred. The adoption of FSP EITF 99-20-1 did not have a material impact on our
consolidated financial statements because all of our investments in debt
securities are classified as trading securities </p>
<p align="justify"><u>Reclassifications</u><br>
&nbsp;</p>
<p align="justify">Certain prior period amounts have been reclassified to
conform to the current period presentation. These reclassifications have no
effect on net income or cash flows.</p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-47</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify"><b>Note 3 &#150; Related party transactions</b></p>
<p align="justify">The material related party transactions undertaken by the
Company with related parties during the years ended December 31, 2008 and 2007
are presented as follows:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="border-bottom: 1px solid" align="left">Amount Due from </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" noWrap align="left" width="10%">Purpose
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="10%">December 31,
    2008 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="10%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-top: 1px solid" align="left" bgColor="#e6efff">Minority
    shareholder of subsidiary <sup>(1)</sup> </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" noWrap align="left" width="10%" bgColor="#e6efff">
    Advances </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="10%" bgColor="#e6efff">
    &nbsp;- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="10%" bgColor="#e6efff">
    &nbsp;413,697 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Minority shareholder of subsidiary <sup>(2)</sup> </td>
    <td align="left" width="1%">&nbsp;</td>
    <td noWrap align="left" width="10%">Prepayment for assets </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="10%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="10%">516,456 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td bgColor="#e6efff">&nbsp; </td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td noWrap align="left" width="10%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="10%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
    <td width="1%" bgColor="#e6efff">&nbsp;</td>
    <td width="10%" bgColor="#e6efff">&nbsp; </td>
    <td width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-bottom: 1px solid" align="left">Amount Due to </td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" noWrap align="left" width="10%">Purpose
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="10%">December 31,
    2008 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="10%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-top: 1px solid" align="left" bgColor="#e6efff">Minority
    shareholder of subsidiary <sup>(3)</sup> </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" noWrap align="left" width="10%" bgColor="#e6efff">
    Loan </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="10%" bgColor="#e6efff">
    &nbsp;773,277 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="10%" bgColor="#e6efff">
    &nbsp;722,674 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">(1) During 2007, the Company advanced in total $413,697 (RMB
3,007,481) in cash to a 20% minority shareholder of one of the Company's plasma
companies for the purchases of plasma collection license and certain equipments
for its Fang Cheng Plasma Company. However, the title transfer of those
equipments, with the estimated value of approximately $16,871 (RMB 122,481), has
not been realized. The Company determined that the likelihood of the minority
shareholder's ability to deliver the title of those equipments is minimal and
made a provision for the amount of $16,871 as of December 31, 2008. The Company
also determined that the future cash flows expected to be generated from the
Fang Cheng plasma collection license had impaired as the plasma collected in
2008 did not warrant any carrying amount for the license. As a result, the
Company recorded an impairment write-down of intangible assets for approximately
$415,873 (RMB 2,885,000).</p>
<p align="justify">(2) The Company prepaid approximately $516,456 (RMB
3,767,000) to a minority shareholder of one of the plasma companies as of
December 31, 2008. The prepayment is for the purpose of acquiring certain
assets. Assets are expected to be received by January 2009. The Company
determined that the likelihood of recovering this prepayment is minimal, due to
the minority shareholder's ability to secure the title of the assets and the
personal financial difficulty as a result of the economic downturn, and made a
provision for the amount as allowance for bad debt as of December 31, 2008. The
Company is currently negotiating with the shareholder in attempt to recover the
fund. </p>
<p align="justify">(3) As of December 31, 2008 and 2007, the Company borrowed an
aggregate of $773,277 and $722,674, respectively, from its minority shareholder,
Shandong Institute, for working capital purposes. The Company is required to
repay the loan in cash due by August 2009, with an annual interest rate of 6%.</p>
<p align="justify"><b>Note 4 &#150; Prepayments and deferred expense</b><br>
&nbsp;</p>
<p align="justify">Prepayments and deferred expense represent partial payments
for deposits on raw material purchases and prepayment for insurance expenses and
amounted to $614,704 and $138,756 as of December 31, 2008 and 2007,
respectively. </p>
<p align="justify">Long term prepayments represent partial payments or deposits
on plant and equipment and intangible assets purchases and amounted to $955,874
and $711,459 as of December 31, 2008 and 2007, respectively. </p>
<p align="justify"><b>Note 5 &#150; Investment in unconsolidated affiliate</b><br>
&nbsp;</p>
<p align="justify">On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement (the &quot;Equity Transfer Agreement&quot;) with Mr. Fan Qingchun (the
&quot;Transferor&quot;), a PRC citizen holding 35% of the equity interest in Xi'an Huitian
Blood Products Co., Ltd. (&quot;Huitian&quot;), a PRC limited liability company. Pursuant
to the Equity Transfer Agreement, the Transferor agrees to sell to Shandong
Taibang, and Shandong Taibang agrees to purchase from the Transferor, 35% equity
interest in Huitian for an aggregate purchase price of $6,502,902 (or RMB
44,327,890) including interest of $48,102 (RMB 327,890). Huitian is one of the
32 government approved plasma-based product producers in China, and it is in
compliance with Good Manufacturing Practices ("GMP") standards. It is also
approved by the PRC's State Food and Drug Administration ("SFDA") to produce
four types of plasma-based products. As December 31, 2008, the Company has paid
a total of $3,171,300 with the unpaid balance of $3,275,501 to be due by March
31, 2009, including interest. <font face="Times New Roman" size="2">While the
Company is able and willing to make the final payment, the local tax authority
where Huitian is located prohibited the Company from making the final payment
due to the dispute over the Mr. Fan's personal income tax rate and the
withholding tax receiving jurisdiction. The Company is awaiting the final
decision from the local tax authority and expects the payment can be made during
April, 2009. </p>
</font>
<p align="justify">Logic Express has also entered into an investment entrustment
agreement (the &quot;Investment Agreement&quot;) with the minority shareholder in Shandong
Taibang, Shandong Biological Products Research Institute (&quot;Biological
Institute&quot;), pursuant to which Logic Express agrees to provide the investment
amount for the acquisition and the Shandong Institute agree to entrust Shandong
Taibang to acquire the 35% equity interest of Huitian in its name. In exchange
Logic Express is also obligated to pay Shandong Taibang approximately $18,000
(or RMB120,000) per year as consideration for Shandong Taibang's performance
under this agreement. Under the Investment Agreement, after the acquisition,
Logic Express will be in charge of Huitian's daily operation and management,
will bear the costs, expenses, liabilities and losses incurred in its operation,
and will enjoy its profits. Shandong Taibang will perform relevant tasks
according to Logic Express's instruction, and will not exercise any management
right over Huitian or derive any financial return from Huitian. Logic Express
agreed to indemnify Shandong Taibang for any loss in connection with the
investment and pledged its equity interest in Shandong Taibang as collateral
against such losses.<b> </b></p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-48</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">Summarized unaudited financial information of Huitian is as
follows:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">
    <p align="center">December 31, 2008 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Current assets </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;8,039,180 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Non-current assets </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">10,145,248
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Total assets </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    18,184,428 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Current liabilities </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">2,747,573 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Non-current liabilities </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Shareholders' equity </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">15,436,855
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Total liabilities and shareholders'
    equity </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;18,184,428 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">The portion of the difference between the cost of an
investment and the amount of underlying equity in net assets of Huitian that is
recognized as goodwill in accordance with APB Opinion No. 18, "the Equity Method
of Accounting for investment in Common Stock", shall not be amortized. However,
equity method goodwill shall not be reviewed for impairment in accordance with
SFAS No.142, but instead should continue to be reviewed for impairment in
accordance with paragraph 19(h) of APB18.</p>
<p align="justify">Summarized unaudited financial information of Huitian from
October 10, 2008, date of acquisition, to December 31, 2008 is as follows:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="middle" width="12%">From October 10, 2008 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="middle" width="12%">to </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Net sales </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,777,321 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Gross profit </td>
    <td style="border-bottom: 3px double" align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;1,022,416
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Income before taxes </td>
    <td style="border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;560,443 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Net income </td>
    <td style="border-bottom: 3px double" align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;500,661
    </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Company's share of net income </td>
    <td style="border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;175,231 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p><br>
&nbsp;</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left" colSpan="3">The roll forward of investment in Huitian in
    the balance sheet is shown below: </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="middle" width="12%">Huitian Minority </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">35%
    Ownership </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;December 31, 2007 </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;Investment made </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">6,502,902 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;Net Income </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">175,231 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;Dividend declared </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(147,256</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;Foreign currency translation gain </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    3,100 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;December 31, 2008 </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;6,533,977 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">See report of independent registered public accounting
    firm. </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" colSpan="4">
    <p align="center">F-49</td>
  </tr>
  <tr vAlign="top">
    <td align="left" colSpan="4">&nbsp;</td>
  </tr>
</table>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify"><b>Note 6 &#150; Debt</b><br>
&nbsp;</p>
<p align="justify"><u>Short term and long term loans</u><br>
&nbsp;</p>
<p align="justify">Short term loans represent renewable loans due to various
banks which are normally due within one year.</p>
<p align="justify">The Company's bank loans consisted of the following:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Short term bank loan, secured by
    buildings and land use rights, due on February 25, 2008, annual interest
    rate at 6.12% </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;685,500 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Long term bank loan, secured by buildings and land use
    rights, due on August 3, 2010, annual interest rate at 7.02% </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">5,868,000
    </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp;Totals </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;5,868,000 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;685,500 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">The above loans are secured by Shandong Taibang's land use
rights and a building located in Taian, Shandong Province, PRC, with carrying
value as follows: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Buildings </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,417,138 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,369,831 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Land use rights </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">195,691 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">387,989 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Totals </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,612,829 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,757,820 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p><br>
&nbsp;</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left"><u>Other payables and accruals</u> </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Other payables and accruals consist of the following: </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;Other payables </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,344,830 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;664,195 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;Accruals for salaries and welfare </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">830,388 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">184,942 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;Accruals for RTO expenses </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">245,657 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">245,658 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;Accruals for selling commission </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">1,508,102 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">104,753 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp;Accruals for interest </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">33,954 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">- </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp;Others </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">- </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">520 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp;Total </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;3,962,931 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,200,068 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify"><u>Other payable - land use rights</u> </p>
<p align="justify">In July 2003, Shandong Taibang obtained certain land use
rights from the PRC municipal government. Shandong Taibang is required to make
payments totaling approximately $20,369 (RMB 138,848) per year to the local
state-owned entity, for the 50-year life of the rights or until Biological
Institute completes its privatization process. The Company recorded "land use
rights" equal to "other payable &#150; land use rights" totaling $325,390 and
$305,571 as of December 31, 2008 and December 31, 2007, respectively, determined
using present value of annual payments over 50 years.</p>
<p align="justify"><b>Note 7 - Earnings per share</b><br>
&nbsp;</p>
<p align="justify">Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is calculated by dividing net income by the weighted
average number of common shares outstanding and dilutive potential common shares
outstanding during the period.</p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-50</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">Earning per share is as follows for the years ended December
31, </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Net income for earnings per share </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;11,985,671 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;8,179,376 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Weighted average shares used in basic computation </td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%">21,434,942 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%">21,434,942 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp;Diluted effect of warrants and options
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    121,400 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    426,072 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Weighted average shares used in diluted computation </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    21,556,342 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    21,861,014 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Earnings per share: </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="12%" bgColor="#e6efff">&nbsp; </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Basic </td>
    <td style="border-bottom: 3px double" align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;0.56 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 3px double" align="left" width="1%">$</td>
    <td style="border-bottom: 3px double" align="right" width="12%">&nbsp;0.38 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Diluted </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;0.56 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;0.37 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">At December 31, 2008, 1,284,000 warrants were included in the
calculation of diluted earnings per share and 937,500 options were excluded from
the calculation because of their antidilutive nature.</p>
<p align="justify">At December 31, 2007, all outstanding warrants were included
in the calculation of diluted earnings per share. </p>
<p align="justify"><b>Note 8 &#150; Taxes</b></p>
<p align="justify"><u>Income taxes</u> </p>
<p align="justify">The Company is governed by the Income Tax Law of the People's
Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign
Enterprises and various local income tax laws (the Income Tax Laws). Under the
Income Tax Laws, foreign investment enterprises (FIE) generally are subject to
an income tax at an effective rate of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments unless the enterprise is located in specially
designated regions of cities for which more favorable effective tax rates apply.
Upon approval by the PRC tax authorities, FIEs scheduled to operate for a period
of 10 years or more and engaged in manufacturing and production may be exempt
from income taxes for two years, commencing with their first profitable year of
operations, after taking into account any losses brought forward from prior
years, and thereafter with a 50% exemption for the next three years. </p>
<p align="justify">In 2002, the Company became a Sino-foreign joint venture. In
2003, the Company was granted by the state government for benefit of income tax
exemption in first 2 years from January 2003 to December 2004 and 50% exemption
for the third to fifth years from January 2005 to December 2007. </p>
<p align="justify">Beginning January 1, 2008, the new Enterprise Income Tax ("EIT")
law will replace the existing laws for Domestic Enterprises ("DES") and Foreign
Invested Enterprises ("FIEs").</p>
<p align="justify">The key changes are: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0" BCLLIST>
  <tr>
    <td vAlign="top" width="5%">a. </td>
    <td>
    <p align="justify">The new standard EIT rate of 25% will replace the 33%
    rate currently applicable to both DES and FIEs, except for High Tech
    companies who pays at a reduced rate of 15%; and</td>
  </tr>
  <tr>
    <td width="5%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="5%">b. </td>
    <td>
    <p align="justify">Companies established before March 16, 2007 will continue
    to enjoy tax holiday treatment approved by local government for a grace
    period of the next 5 years or until the tax holiday term is completed,
    whichever is sooner.</td>
  </tr>
</table>
<p align="justify">The Company's subsidiary, Shandong Taibang, was established
before March 16, 2007 and therefore is qualified to continue enjoying the
reduced tax rate as described above.</p>
<p align="justify">Starting from January 1, 2008, Shandong Taibang became
subject to 25% income tax rate according to the newly issued Income Tax Laws of
PRC. According to PRC's central government policy, certain new technology or
high technology companies will enjoy preferential tax treatment of 15%, instead
of 25%. On February 12, 2009, Shandong Taibang received the new technology or
high technology certification from Shandong provincial government. The
Certification allows the Company to receive the 15% preferential income tax
rate, for a period of three years starting from January 1, 2008. </p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-51</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">The local government granted the Company tax exemption for
purchases of locally manufactured equipment for the fiscal year ended December
31, 2003 through 2007. Starting January 1, 2008 the government no longer
provides this tax exemption for purchases of locally manufactured equipment.
During the third quarter of 2008, the Company received a tax rebate for the
amount of $319,095 (RMB 2,181,102) for the Company's reinvestment of its
dividends back into Shandong Taibang at the end of our fiscal year 2007.
Starting January 1, 2008, all dividends paid to foreign parents are subject to a
10% income tax. As a result, the company recorded a $1,228,775 income tax
expense for dividends Shandong Taibang paid to its foreign parent, Logic
Express. </p>
<p align="justify">The following table reconciles the U.S. statutory rates to
the Company's effective tax rate for the years ended December 31, 2008 and 2007:
</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td style="border-bottom: 1px solid" align="middle"><font size="2">&nbsp; </font>
    </td>
    <td align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">
    <font size="2">2008 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">
    <font size="2">2007 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td style="border-top: 1px solid" align="left" bgColor="#e6efff">
    <font size="2">U.S. Statutory rates </font></td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    <font size="2">35.0 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">%&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    <font size="2">35.0 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">%&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Foreign Income </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(35.0</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(35.0</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">China Tax rates </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff"><font size="2">25.0 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff"><font size="2">33.0 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">China income tax exemption </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(10.0</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(18.0</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Other items (1) </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    <font size="2">8.1 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    <font size="2">1.9 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Effective income tax rates </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    <font size="2">23.1 </font></td>
    <td align="left" width="2%">%&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    <font size="2">16.9 </font></td>
    <td align="left" width="2%">%&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
  </tr>
</table>
<p align="justify">(1) The 8.1% represents the $1,228,775 income tax expense for
dividends Shandong Taibang paid to its foreign parent in 2008 and expenses
incurred by CBP and Logic Express that are not deductible in PRC for the year
ended December 31, 2008 offset by tax rebate of $319,095 received during the
third quarter of 2008. The 1.9% represents expenses incurred by CBP and Logic
Express that are not deductible in PRC for the year ended December 31, 2007. </p>
<p align="justify">The estimated tax savings due to the tax exemption for the
fiscal year ending December 31, 2008 and 2007 amounted to $2,443,657 and
$2,498,472, respectively. The net effect on earnings per share if the income tax
had been applied would decrease basic earnings per share for the years ended
December 31, 2008 and 2007 by $0.11 and $0.12, respectively, would decrease the
diluted earnings per share for the years ended December 31, 2008 and 2007 by
$0.11 and $0.11, respectively. </p>
<p align="justify">CBP was incorporated in the United States and has incurred
net operating losses of $1,777,854 (estimated) and $614,982 for income tax
purposes for the years ended December 31, 2008 and 2007, respectively. The
estimated net operating loss carry forwards for United States income taxes
amounted to $3,661,143 which may be available to reduce future years' taxable
income. These carry forwards will expire, if not utilize, from 2026 through
2028. Management believes that the realization of the benefits from these losses
appears uncertain due to the Company's limited operating history and continuing
losses for United States income tax purposes. Accordingly, the Company has
provided a 100% valuation allowance on the deferred tax asset benefit to reduce
the asset to zero. Management reviews this valuation allowance periodically and
makes adjustments as warranted. The following table represents the rollforward
of the deferred tax valuation allowance </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="27%" colSpan="4">
    For the year ended December 31, </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="middle" width="12%">
    2008 </td>
    <td style="border-top: 1px solid" align="middle" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="middle" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 1px solid" align="middle" width="12%">
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Balance of January 1, </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;640,318 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;431,224 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Increase </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">604,471 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">209,094 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Balance as of December 31, </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;1,244,789 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%" bgColor="#e6efff">
    &nbsp;640,318 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp; </td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><u>Value added tax</u> </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="12%">&nbsp; </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">VAT on sales amounted to $3,098,977 and $2,203,070 for the
years ended December 31, 2008 and 2007, respectively. Sales are recorded net of
VAT collected and paid as the Company acts as an agent for the government. VAT
taxes are not impacted by the income tax holiday. <br>
&nbsp;</p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-52</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">Taxes payable consisted of the following:</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2008 </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">December 31,
    2007 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">VAT tax payable </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;331,505 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;168,369 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Income tax payable </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3,630,878 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">187,924 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Others miscellaneous tax payable </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    97,627 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    28,495 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;4,060,010 </td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;384,788 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify"><b>Note 9 &#150; Commitments and contingent liabilities </b></p>
<p align="justify"><u>Capital and lease commitments</u></p>
<p align="justify">The Company's 82.76% owned subsidiary, He Ze, entered into a
lease agreement on January 13, 2005, with the Yun Cheng Lan Tian Transportation
Company in Yun Cheng County, Shandong Province, to lease land use rights for a
period of 10 years. The annual lease amount is approximately $1,760 (RMB 12,000)
with no early termination penalty. The Company has the right of first refusal to
renew the lease after the ten year lease term. </p>
<p align="justify">The Company's 82.76% owned subsidiary, Qi He, entered into a
lease agreement on April 26, 2007, with the Zhang Bo Shi Village in Qi He
County, Shandong Province, to lease land use rights for a period of 50 years.
The annual lease amount is approximately $4,569 (RMB 31,144) with no early
termination penalty. </p>
<p align="justify">The Company's 82.76% owned subsidiary, Zhang Qiu, leased land
use right and the use of building and equipment for a period of 10 year from
January 1, 2007 with annual lease payment of $43,245 (RMB300,000). The lease was
terminated in March 2008. The Company entered into a lease agreement on April 1,
2008, with the Zhang Qiu Red Cross Blood Center, to lease land use rights and
the use of building and equipment for a period of 10 years. The annual lease
payment is approximately $1,467 (RMB 10,000) with no early termination penalty.
</p>
<p align="justify">The Company recognizes lease expense on a straight line basis
over the term of the lease in accordance to SFAS 13, "Accounting for leases."
Total capital and lease commitments outstanding as of December 31, 2008 were as
follows: </p>
<table style="font-size: 8pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">
    <p align="left"><font size="2">Fiscal year </font></td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2009 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2010 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2011 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2012 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">2013 </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Thereafter </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Property and equipment
    </font></td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;82,068 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Lease </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">205,977 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Purchase of 54% Dalin
    Equity </font></td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">11,407,392 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">2,851,848 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Total </font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;11,497,256 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;2,859,644 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;7,796 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;205,977 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">For the years ended December 31, 2008 and 2007, total rent
expense amounted to $21,717 and $0, respectively. </p>
<p align="justify"><u>Contingencies</u> </p>
<p align="justify">In the normal course of business, the Company is exposed to
claims related to the manufacture and use of the Company's products, but
currently the Company is not aware of any such claim. </p>
<p align="justify"><u>Legal proceedings</u></p>
<p align="justify"><i>Misuse of Company Seal </i></p>
<p align="justify">In July 2006, one of the Company's sales employees
misappropriated goods and resold them to other parties using a counterfeit
Company seal. The amount involved was approximately $0.15 million (RMB1.16
million). The incident was revealed during a routine reconciliation of accounts
receivable. The Company reported the misappropriation to the police and the
employee was arrested and criminal charges were brought against him. To date,
the Company recovered approximately $0.05 million (cash of RMB350,000 and goods
valued at approximately RMB30,000). Pursuant to a financial guarantee and
repayment agreement between the Company and the employee, witnessed by officials
at the Taian City Police Station, the Company will continue to pursue recovery.
</p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-53</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify"><i>Transfer of Equity Interests</i><br>
&nbsp;</p>
<p align="justify">Mr. Zu Ying Du was one of the original equity holders in our
operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement,
among the original equity holders, Mr. Du was obligated to make a capital
contribution of RMB20 million (or approximately $2.6 million) for a 25% interest
in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the
Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed
to repay Beijing Chen Da for his loan of the capital contribution amount.<sup>
</sup>Mr. Du disputes that the money was due and owing. A Beijing court found
that Beijing Chen Da had given money to Mr. Du but found that the loan agreement
failed to comply with Chinese law. A notice was issued on July 5, 2004 by the
Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a
stay of the Beijing action pending their investigation into money laundering
relating to the 20 million RMB loan to Zu Ying Du. </p>
<p align="justify">On September 26, 2004, Beijing Chen Da entered into an equity
transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest
in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB20
million debts. This agreement was signed by Mr. Du's brother who held a power of
attorney from Mr. Du. This transfer was approved by the Shandong Provincial
Department of Foreign of Trade and Economic Cooperation, or the Shandong COFTEC
on March 17, 2005. Mr. Du disputes the legitimacy of this transfer and has
argued that his brother, Du Hai Shan, exceeded the scope of the power of
attorney. Mr. Du sued his brother in the court of Jianli County, Hubei province,
relating to the propriety of the brother's actions under the power of attorney.
Initially the county court found in its judgment that the power of attorney was
valid, but that the transfer agreements signed by Mr. Du's brother, Du Hai Shan
were invalid because their execution and delivery were beyond the scope of Du
Hai Shan's authority under the power of attorney. Subsequently the Intermediate
Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend
the judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court. </p>
<p align="justify">Missile Engineering, another original equity holder wholly
controlled by Mr. Du, was obligated to contribute RMB32.8 million (or $4.2
million) for a 41% interest in Shandong Taibang by means of cash, equipment and
patent technology. It was obligated to obtain a new drug certificate and
production license of its patent technology from the government within a
stipulated period in order to be recognized as a valid capital contribution, or
in the alternative, make a cash payment. The patent technology was valued as
RMB26.4 million (or approximately $3.4 million). However, Missile Engineering
failed to obtain the new drug certificate and production license within the
stipulated period. Mr. Du also disputes whether the period for obtaining the
certificate and license had expired. Pursuant to a stockholders resolution on
September 26, 2004, Missile Engineering agreed to sell its 41% interest in
Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB26.4 million in cash. This transfer was
approved by Shandong COFTEC on March 17, 2005. Missile Engineering disputes this
transaction and sued Mr. Du's brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the act had
exceeded the scope of the power of attorney. Subsequently the Intermediate Court
of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court.</p>
<p align="justify">In June 10, 2005, Beijing Chen Da also sold its equity
interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing,
pursuant to a share transfer agreement, which became effective on September 2,
2005, upon approval by the Shandong Provincial Department of Foreign Trade and
Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its
equity interests in Shandong Taibang to Logic Express, our subsidiary.</p>
<p align="justify">In 2006, Missile Engineering applied for arbitration before
the China International Economic and Trade Arbitration Commission, or CIETAC, to
challenge the effectiveness of the transfer to Up-Wing Investments Limited, of
the equity interests in Shandong Taibang, formerly owned by Missile Engineering.
The equity transfer had been approved by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile
Engineering later voluntarily withdrew this application and instead applied for
administrative reconsideration of the equity transfer, but this application was
rejected by the Ministry of Commerce in 2007. Missile Engineering applied with
the District Court of Lixia District, Jinan City, Shandong province requesting
revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by
Missile Engineering. Missile Engineering later voluntarily withdraw the action.
In April 2007, Logic Express initiated an arbitration proceeding before the
Shandong Taian Arbitration Committee, to establish that Logic Express is the
lawful shareholder of Shandong Taibang. The parties to that proceeding were
Logic Express Ltd. and Shandong Taibang Biological Products Co., Ltd. The
Arbitration Committee's decision on September 6, 2007 confirmed that Logic
Express had legitimate ownership as a result of the transfers of Shandong Taibang. Up-Wing started an action in the Intermediate Court of Taian City,
Shandong province requesting the court to establish that Up-wing is the lawful
shareholder of Shandong Taibang. The intermediate court rejected the application
by Up-Wing on the basis that the same matter had been tried by the arbitration
panel.</p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-54</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">On February 16, 2009, Mr. Du and Missile Engineering have
filed actions in the Intermediate Court of Wuhan City, Hubei province, against
the following defendants, Du Hai Shan the brother of Mr. Du, Beijing Chen Da and
Logic Express. Mr. Du and Missile Engineering have requested that the Wuhan
Intermediate Court to restore the equity interests originally held by the
plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by Missile
Engineering. On February 17, the Wuhan Intermediate Court has issued preliminary
orders attaching 66% of the equity of Shandong Taibang pending the outcome of
the case. </p>
<p align="justify"><i>Bobai County Collection Station</i><br>
&nbsp;</p>
<p align="justify">In January 2007, the Company's PRC subsidiary, Shandong
Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20% minority
shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. ("Bobai") in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. ("Hua Lan") filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Taian City. A hearing was held on June 25, 2007 and judgment was
entered against the defendants along with a $226,780 (RMB1,700,000) joint
financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the
judgment against the three defendants and increased the amount of the joint
financial judgment to approximately $405,954 (RMB3,000,000).</p>
<p align="justify">In January 2008, Hua Lan enforced the judgment granted by the
High Court to freeze the Company's bank accounts. Shandong Taibang has filed a
separate action against Hua Lan before the Taian City District Court to seek
recovery of any losses in connection with Hua Lan's claim and to request that
the Taian City District Court preserve Hua Lan's property or freeze up to
approximately $411,300 (RMB 3 million) of Hua Lan's assets to secure the return
of such funds to the Company. The intermediate court in Taian City accepted the
application on February 14, 2008 but the matter is still pending. Pending the
outcome of the proceedings, Shandong Taibang increased its loss contingency
reserve during its fourth quarter of 2007 from approximately $75,593
(RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the enforcement of
this judgment. During the fourth quarter of 2008, full amount of the judgment,
including Feng Lin and Keliang Huang's portions of the judgment and the related
fees, approximately $456,222 (RMB 3,109,900) has been withdrawn from Shandong
Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of
the judgment, approximately $304,143 (RMB2,073,234), as receivable as a result
of the withdraw. As of December 31, 2008, the Company determined that it is
unlikely that the Company will be able to recover such receivable from those two
individuals and wrote off the receivable as bad debt expense.</p>
<p align="justify">In light of the foregoing, it is unlikely that the Company's
planned acquisition of the assets of Bobai will go forward. </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-55</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify"><b>Note 10 &#150; Warrants and options</b><br>
&nbsp;</p>
<p align="justify"><u>Warrants</u></p>
<p align="justify">The Company's warrants are accounted for as equity under SFAS
133 and EITF 00-19. The warrant activity is as follows: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Weighted </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Average </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Average </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Remaining </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Warrants </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Warrants </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Exercise </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="10%"><font size="2">Contractual </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="middle"><font size="2">&nbsp; </font></td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="10%">
    <font size="2">Outstanding </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="10%">
    <font size="2">Exercisable </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="10%">
    <font size="2">Price </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="10%">
    <font size="2">Life </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2006 </font></td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">
    1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">&nbsp;
    &nbsp; &nbsp; &nbsp;1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">
    &nbsp;2.84 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">
    4.55 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Granted </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Forfeited </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Exercised </font>
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2007 </font></td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">
    1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">&nbsp;
    &nbsp; &nbsp; &nbsp;1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">
    &nbsp;2.84 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="10%"><font size="2">&nbsp;
    &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;3.55 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Granted </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="10%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Forfeited </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Exercised </font>
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="10%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2008 </font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="10%">
    <font size="2">1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="10%">
    <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;1,284,000 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="10%">
    <font size="2">&nbsp;2.84 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="10%">
    <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;2.55 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2">&nbsp; </font></td>
    <td width="1%">&nbsp;</td>
    <td width="10%"><font size="2">&nbsp; </font></td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="10%"><font size="2">&nbsp; </font></td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="10%"><font size="2">&nbsp; </font></td>
    <td width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="10%"><font size="2">&nbsp; </font></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2"><u>Options</u> </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="10%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">On May 9, 2008, the Company adopted the 2008 Equity Incentive
Plan, which provides up to 5,000,000 shares of Company's Common Stock to be made
available to employees and directors at various prices as established by the
Board of Directors of the Company. On May 9, 2008, the Company granted options
to purchase an aggregate of 937,500 shares of the Company's common stock under
the 2008 Plan to certain directors and employees, pursuant to stock option
agreements between the Company and each of these directors or employees. The
options have an exercise price of $4.00 per share, will vest immediately vest
and will expire on June 1, 2018. On July 24, 2008, the Company granted options
to purchase an aggregate of 60,000 shares of the Company's common stock under
the 2008 plan to its three independent directors. These options have an exercise
price of $4.00 per share and 30,000 shares will be vested on January 24, 2009
and the remaining 30,000 shares will be vested on July 24, 2009, with the
expiration date of July 24, 2018. As of December 31, 2008, there were 4,002,500
shares available under the plan. </p>
<p align="justify">The fair value of each option granted on May 9, 2008 and July
24, 2008 are estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: </p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="middle">
    <p align="left">Granted on </td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">May 9, 2008
    </td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="12%">July 24,
    2008 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Expected dividend yield </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    0% </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    0% </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Risk-free interest rate </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3.56% </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">3.56% </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Expected life (in years) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">5 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">5 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Weighted average expected volatility </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">59.4% </td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">81.2% </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify">The volatility of the Company's common stock was estimated by
management based on the historical volatility of the Company's common stock, the
risk free interest rate was based on Treasury Constant Maturity Rates published
by the U.S. Federal Reserve for periods applicable to the estimated life of the
options, and the expected dividend yield was based on our current and expected
dividend policy. The value of the options was based on the Company's common
stock price on the date the options were granted. Because the Company does not
have a history of employee stock options, the Company utilized the simplified
method to estimate the life of the options which is the same as assuming that
the options are exercised at the mid-point between the vesting date and
expiration date. For the year ended December 31, 2008, the Company expensed
$1,311,727 in compensation expense. As of December 31, 2008, approximately
$62,281 of estimated expense with respect to non-vested stock-based awards has
yet to be recognized and will be recognized as an expense over the employee's
remaining weighted average service period of approximately 0.67 years. The
options are accounted for as equity under SFAS 133 and EITF 00-19.The options
activity is as follows: </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-56</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<table style="font-size: 8pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Weighted </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Average </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">&nbsp; </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Average </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Remaining </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Aggregate </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; </font></td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Options </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Options </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Exercise </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Contractual </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td align="middle" width="1%">&nbsp;</td>
    <td align="middle" width="7%"><font size="2">Intrinsic </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; </font></td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Outstanding </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Exercisable </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Price </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Life </font></td>
    <td align="middle" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="middle" width="7%">
    <font size="2">Value </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2006 </font></td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">&nbsp;-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">&nbsp;-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Granted </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="7%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="7%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="7%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="7%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="7%" bgColor="#e6efff"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Forfeited </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Exercised </font>
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2007 </font></td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">&nbsp;-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%"><font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%"><font size="2">&nbsp;-
    </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Granted </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">997,500 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">937,500 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">4.00 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">10.00 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Forfeited </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="left" width="7%"><font size="2">&nbsp; </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;Exercised </font>
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp; </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">December 31, 2008 </font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">997,500 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">937,500 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;4.00 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    &nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">9.43 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify"><b>Note 11 &#150; Statutory reserves</b><br>
&nbsp;</p>
<p align="justify">In accordance with the "Law of the PRC on Joint Ventures
Using Chinese and Foreign Investment" and the Company's Articles of Association,
appropriations from net profit should be made to the Reserve Fund and the
Enterprise Expansion Fund, after offsetting accumulated losses from prior years,
and before profit distributions to the investors. The percentages to be
appropriated to the Reserve Fund and the Enterprise Expansion Fund are
determined by the Board of Directors of the Company. </p>
<p align="justify"><u>Reserve fund</u><br>
&nbsp;</p>
<p align="justify">For the years ended December 31, 2008 and 2007, the Company
transferred $2,036,732 and $1,156,748, respectively, to the surplus reserve
fund. Amounts represent 10% of the net income determined in accordance with PRC
accounting rules and regulations, and are transferred to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company's registered
capital. As of December 31, 2008, amount of $3,806,825 still needs to be
transferred to statutory reserve. The transfer to this reserve must be made
before distribution of any dividend to shareholders. The surplus reserve fund is
non-distributable other than during liquidation and can be used to fund previous
years' losses, if any, and may be utilized for business expansion or converted
into share capital by issuing new shares to existing stockholders in proportion
to their shareholding or by increasing the par value of the shares currently
held by them, provided that the remaining reserve balance after such issue is
not less than 25% of the registered capital.</p>
<p align="justify"><u>Enterprise expansion fund</u><br>
&nbsp;</p>
<p align="justify">The enterprise fund may be used to acquire fixed assets or to
increase the working capital to expend on production and operation of the
business. For the years ended December 31, 2008 and 2007, the Company
transferred $1,018,366 and $578,375, respectively, to the fund. Amounts
represent 5% of the net income determined in accordance with PRC accounting
rules and regulations. </p>
<p align="justify"><b>Note 12 &#150; Retirement benefit plans</b><br>
&nbsp;</p>
<p align="justify">Regulations in the PRC require the Company to contribute to a
defined contribution retirement plan for the benefit of all permanent employees.
All permanent employees are entitled to an annual pension equal to their basic
salaries at retirement. The PRC government is responsible for the benefit
liability to these retired employees. The Company is required to make
contributions to the state retirement plan at 20% of the monthly base salaries
of the current employees. For the years ended December 31, 2008 and 2007, the
Company made pension contributions in the amount of $220,493 and $171,802,
respectively. </p>
<p align="justify"><b>Note 13- Minority interest and distribution</b><br>
&nbsp;</p>
<p align="justify">The roll forward of minority interest in the balance sheet is
shown below:</p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-57</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<table style="font-size: 8pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td vAlign="bottom" noWrap align="middle"><br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="1%">
    <br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="7%">
    Fang Cheng <br>
    Minority <br>
    Owners <br>
    (20%)</td>
    <td vAlign="bottom" noWrap align="middle" width="2%"><br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="1%">
    <br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-top: medium none; border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="7%">
    Shandong Taibang <br>
    Minority Owners <br>
    (17.24%)</td>
    <td vAlign="bottom" noWrap align="middle" width="2%"><br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="1%">
    <br>
    <br>
    <br>
    <br>
&nbsp;</td>
    <td style="border-bottom: 1px solid" vAlign="bottom" noWrap align="middle" width="7%">
    Total <br>
    Minority <br>
    Interest </td>
    <td vAlign="bottom" noWrap align="middle" width="2%"><br>
    <br>
    <br>
    <br>
&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">December 31, 2006 </font>
    </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;2,308,487 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;2,308,487 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Net income(loss) </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">(2,332</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">1,994,234 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">1,991,902 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Foreign currency
    translation gain/(loss) </font></td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">(96</font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">(96</font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Investment made </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">82,260 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">- </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">82,260 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Dividend declared </font>
    </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">(2,207,541</font></td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">(2,207,541</font></td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Dividend reinvested </font></td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">- </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">1,710,880 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">1,710,880 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">December 31, 2007 </font>
    </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;79,832 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;3,806,060 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;3,885,892 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Net income(loss) </font></td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">(83,938</font></td>
    <td align="left" width="2%">) </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">3,387,779 </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="7%"><font size="2">3,303,841 </font></td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">Foreign currency
    translation gain/(loss) </font></td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">4,106 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="7%" bgColor="#e6efff"><font size="2">4,106 </font>
    </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left"><font size="2">Dividend declared </font></td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">- </font></td>
    <td align="left" width="2%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">(2,982,045</font></td>
    <td align="left" width="2%">) </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="7%">
    <font size="2">(2,982,045</font></td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff"><font size="2">December 31, 2008 </font>
    </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;- </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;4,211,794 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%" bgColor="#e6efff">
    <font size="2">$</font></td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="7%" bgColor="#e6efff">
    <font size="2">&nbsp;4,211,794 </font></td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
</table>
<p align="justify">Dividends declared are split pro rata between the
shareholders according to their ownership interest. The payment of the dividends
may occur at different times to the shareholders resulting in distributions
which do not appear to be reflective of the minority ownership percentages. In
2008 and 2007, minority shareholders owned 17.24% of the Company's subsidiaries.
The table below shows the minority shareholder and dividends outstanding.</p>
<table style="font-size: 10pt; border-collapse: collapse; border-color: black" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr vAlign="top">
    <td align="left">&nbsp; </td>
    <td style="border-bottom: 1px solid" align="left" width="1%">&nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%">
    <p align="center">Minority shareholder </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Distribution payable, December 31, 2006
    </td>
    <td style="border-top: 1px solid" align="left" width="1%" bgColor="#e6efff">
    $</td>
    <td style="border-top: 1px solid" align="right" width="12%" bgColor="#e6efff">
    &nbsp;476,597 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Dividend declared </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">2,207,541 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Dividend paid </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">(488,878</td>
    <td align="left" width="2%" bgColor="#e6efff">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left">Dividend used to increase registered capital </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(1,710,880</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Foreign currency translation adjustments
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    22,246 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Distribution payable, December 31, 2007 </td>
    <td style="border-top: 1px solid" align="left" width="1%">$</td>
    <td style="border-top: 1px solid" align="right" width="12%">&nbsp;506,626 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Dividend declared </td>
    <td align="left" width="1%" bgColor="#e6efff">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e6efff">2,982,045 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Dividend paid </td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="12%">(288,300</td>
    <td align="left" width="2%">) </td>
  </tr>
  <tr vAlign="top">
    <td align="left" bgColor="#e6efff">Foreign currency translation adjustments
    </td>
    <td style="border-bottom: 1px solid" align="left" width="1%" bgColor="#e6efff">
    &nbsp;</td>
    <td style="border-bottom: 1px solid" align="right" width="12%" bgColor="#e6efff">
    51,983 </td>
    <td align="left" width="2%" bgColor="#e6efff">&nbsp;</td>
  </tr>
  <tr vAlign="top">
    <td align="left">Distribution payable, December 31, 2008 </td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="left" width="1%">
    $</td>
    <td style="border-top: 1px solid; border-bottom: 3px double" align="right" width="12%">
    &nbsp;3,252,354 </td>
    <td align="left" width="2%">&nbsp;</td>
  </tr>
</table>
<p align="justify"><b>Note 14 &#150; Subsequent event </b></p>
<p align="justify">On September 26, 2008, Logic Express Limited ("Logic
Express"), a wholly-owned BVI subsidiary of the Company, entered into an Equity
Transfer Agreement with Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang for
the purchase of a total of a 90% equity interest in Chongqing Dalin Biologic
Technologies Co., Ltd., ("Chongqing Dalin"), a PRC limited liabilities company,
for a price of $28,518,480 (RMB 194,400,000). The Company made prepayments of
approximately $2,023,165 (RMB 13,810,000) and approximately $12,208,296
(RMB83,390,000) on this potential acquisition in October and December 2008,
respectively. An English translation of the Equity Transfer Agreement is
incorporated by reference to exhibit 10.1 of the Company's Form 8-K filed with
SEC on October 2, 2008. As of December 31, 2008, the Company has completed the
financial and legal due diligence investigations on Dalin and Qianfeng and
expects to close the transaction within a few months, subject to the formal
transfer of title to the Company. In January 2009, Logic Express appointed three
out of the four Board of Directors members to the Chongqing Dalin to take
control of Dalin. On January 16, 2009, the shareholders of Qianfeng Biological
Products ("Qianfeng"), which Chongqing Dalin owns 54% equity interest, elected
four Board of Directors appointed by Chongqing Dalin as part of its seven board
members. On January 17, 2009, the Board of Directors of Qianfeng elected a new
management team consists of all Logic Express and Chongqing Dalin's appointees,
including CEO, Executive Senior Vice President, CFO and Directors of sales. As a
result, the Company took over the control of Qianfeng starting January 16, 2009.
</p>
<p align="justify">As part of its due diligence investigation into Dalin and
Qianfeng, the Company discovered that the indirect interest in Qianfeng that
would be acquired under Equity Transfer Agreement will be diluted. The local AIC
records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued
equity to certain investors pursuant to a capital increase agreement, dated May
2007. Qianfeng received the consideration for the equity, but the increase in
registered capital and issuance of the equity interest has not yet been
registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that
such shareholder's right of first refusal with respect to the new equity
issuance was violated. When the capital increase is registered with AIC, Dalin
will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng
shareholder was decided against such shareholder, who subsequently appealed.
Therefore, Dalin's interests in Qianfeng could be diluted to as low as 41.3% as
the result of the issuance of additional equity to the shareholder, if his
appeal prevails. Even if the indirect equity interest that the Company acquires
through the proposed acquisition is diluted down to 41.3%, the Company would be
able to retain control over Qianfeng as a result of the four board membership to
the Qianfeng's board. The Company does not expect this dispute to impact its
ability to complete the acquisition.</p>
<p align="justify">See report of independent registered public accounting firm.
</p>
<p align="center">F-58</p>
<hr style="page-break-after: always" align="center" width="100%" color="black" noShade SIZE="5">
<!--$$/page=-->
<p align="center">CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES </p>
<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
DECEMBER 31, 2008 </p>
<p align="justify">On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement with Mr. Fan Qingchun, a PRC citizen holding 35% of the
equity interest in Xi'an Huitian Blood Products Co., Ltd., a PRC limited
liabilities company ("Huitian"), for a price of approximately $6,454,800 (RMB
44,000,000).The Company has made a prepayment of $1,467,000 (RMB 10,000,000) and
$1,760,400(RMB 12,000,000) on this potential acquisition in September and in
November 2008, respectively. An English translation of the Equity Transfer
Agreement is incorporated by reference to exhibit 10.1 of the Company's Form 8-K
filed with SEC on October 16, 2008. Since November 14, 2008, the date of second installment payment, the Company has been exercise its rights in Huitian as a
shareholder, pursuant to cooperation agreements among Taibang and the other
Huitian shareholders, including the right to re-elect directors to Huitian's
board of directors and board of supervisors and engagement of new executive
officers. On March 17, 2009, the Shandong Taibang successfully completed the
registration process with Administration of Industry and Commerce in the City of
Xi'An, Shannxi Province to transfer the 35% equity title from Mr. Fan Qingchun
to Shandong Taibang according to the Equity Transfer Agreement. In January 2009,
Shandong Taibang received approximately $147,256 (RMB 1,003,789) from Huitian
for its share of 2008 dividends declared by Huitian according to the Equity
Transfer Agreement. </p>
<p align="justify">On January 8, 2009, Shandong Taibang entered into a loan
agreement with Taishan Sub-Branch of the Bank of China, to borrow $5,868,000 (RMB
40,000,000) for purchase of raw material. The loan bears a fixed interest rate
of 5.31% per annum and payable in full on January 7, 2010 and early prepayment
will be subject to a penalty equal to 0.0005 of the principal. During the term
of the loan agreement, the Company had agreed that it will not engage in any
sub-contracting, leasing, equity restructuring, pooling, consolidating, merging,
splitting, joint investment, capital transferring, filing for restructuring,
fling for dissolution, filing for bankruptcy, and other actions which may affect
realization of the bank's right under the loan agreement. </p>
<p align="justify">On February 16, 2009, Shandong Taibang's board of directors
declared a cash dividend in the amount of approximately $2,640,600 (RMB
18,000,000). According to the PRC tax law, Shandong Taibang had withheld at
source 10% of the dividend amount of its BVI parent, Logic Express. </p>
<p align="justify">See report of independent registered public accounting firm.</p>
<p align="center">F-59</p>
<hr color="#000000" size="5">
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China Biologic Products, Inc.: Form S-1 - Prepared by TNT Filings
   Inc.
As filed with the Securities and Exchange Commission on July
24, 2009
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHINA BIOLOGIC PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware
2836
75-2308816
(State or other jurisdiction of incorporation
(Primary Standard Industrial Classification
(I.R.S. Employer
or organization)
Code Number)
Identification No.)
No. 14 East Hushan Road, Tai'an City, Shandong
People's Republic of China 271000
(86-538)-620-3897
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
____________________________
Tristan Kuo, Chief Financial Officer
Louis A. Bevilacqua, Esq.
China Biologic Products, Inc.
Pillsbury Winthrop Shaw Pittman LLP
No. 14 East Hushan Road, Tai'an City
2300 N Street, N.W.
Shandong, China 271000
Washington, D.C. 20037-1122
(86-538)-620-3897
(202) 663-8158
(Names, addresses and
      telephone numbers of agents for service)
____________________________
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of this registration
statement.
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If this form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement the same offering.
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [  ]
Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if smaller reporting
      company)
Smaller reporting company [X]
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be
Amount to be
Proposed maximum
Proposed maximum
Amount of registration
registered
registered
(
1)
offering price per
aggregate offering price
fee
share
Common stock, $0.0001 par value
2,388,535
(2)
$3.78
$9,028,663
(3)
$504
Common stock, $0.0001 par value
1,194,268
(4)
$4.80
$5,732,486
(5)
$320
Total
3,582,803
-
$14,761,149
$824
(1) Pursuant to Rule 416 under the Securities Act
of 1933, as amended, this registration statement shall be deemed to cover any
additional securities to be offered or issued by the registrant to the selling
stockholders upon adjustment under anti-dilution provisions covering stock
splits, stock dividends and similar transactions.
(2)
Represents shares of the registrant's common stock issuable upon conversion of
3.8% secured convertible notes (the "Notes") issued in the June 2009 private
placement to certain accredited investors. Pursuant to the terms of the Notes
issued in connection with the private placement, the Notes are initially,
subject to adjustment, convertible or exercisable into an aggregate of 2,388,535
shares of Common Stock.
(3) The proposed maximum
aggregate price per unit was estimated pursuant to Rule 457(c) promulgated under
the Securities Act of 1933, as amended, solely for the purpose of determining
the registration fee, based on the average of high and low prices of the
registrant's common stock as quoted on the over-the-counter bulletin board on
July 15, 2009.
(4) Represents shares of the registrant's
common stock issuable upon exercise of three-year warrants to purchase shares of
the registrant's common stock by the selling stockholders named in this
registration statement.
(5) Calculated in accordance
with Rule 457(g) based upon the price at which the warrants may be exercised.
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to such
Section 8(a), may determine.
The information in this prospectus is not complete and may be
changed. No person may sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and no person named in this prospectus
is soliciting offers to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS
Subject to completion, dated July 24, 2009
CHINA BIOLOGIC PRODUCTS, INC.
3,582,803 Shares of Common Stock
This prospectus relates to the
resale of up to 3,582,803 shares of our common stock being offered by the
selling stockholders, which includes:
2,388,535 shares of Common Stock issuable to the selling stockholders
  named in this prospectus upon conversion of 3.8% secured convertible notes
  issued in the June 2009 private placement to certain accredited investors; and
1,194,268 shares of common stock issuable upon the exercise of three-year
  warrants owned by the selling stockholders named in this prospectus.
We will not receive any proceeds
from the sales by the selling stockholders, but we will receive funds from the
exercise of warrants held by the selling stockholders, if exercised for cash,
which we will use for working capital purposes.
Our common stock is quoted on the
over-the-counter bulletin board (the "OTCBB") maintained by the Financial
Industry Regulatory Authority under the symbol "CBPO." The closing bid price for
our common stock on July 15, 2009 was $3.80 per share, as reported by the OTCBB.
The selling stockholders will
sell our shares at prevailing market prices or at privately negotiated
prices.
Investing in our common stock
involves a high degree of risk. See "Risk Factors" beginning on page 11 to read
about factors you should consider before buying shares of our common stock.
Neither the Securities and
Exchange Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is ___________, 2009.
TABLE OF CONTENTS
Page
SUMMARY
4
RISK FACTORS
11
SPECIAL NOTE REGARDING FORWARD-LOOKING
      STATEMENTS
26
USE OF PROCEEDS
27
DIVIDEND POLICY
27
MARKET FOR OUR COMMON STOCK
27
DILUTION
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
28
CORPORATE STRUCTURE AND HISTORY
41
OUR BUSINESS
44
MANAGEMENT
61
EXECUTIVE COMPENSATION
66
TRANSACTIONS WITH RELATED PERSONS,
      PROMOTERS AND CERTAIN CONTROL PERSONS; DIRECTOR INDEPENDENCE
69
CHANGE OF ACCOUNTANTS
70
SELLING STOCKHOLDERS
70
DESCRIPTION OF SECURITIES TO BE REGISTERED
73
SHARES ELIGIBLE FOR FUTURE SALE
74
PLAN OF DISTRIBUTION
75
LEGAL MATTERS
77
EXPERTS
77
INTEREST OF NAMED EXPERTS AND COUNSEL
77
WHERE YOU CAN FIND MORE INFORMATION
78
You should only rely on the information contained in this
prospectus. We have not, and the selling stockholders have not, authorized any
other person to provide you with different information. This prospectus is not
an offer to sell, nor is it seeking an offer to buy, these securities in any
state where the offer or sale is not permitted. The information in this
prospectus is accurate only as of the date on the front cover, but the
information may have changed since that date.
SUMMARY
The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the
more detailed information set out in this prospectus, including the financial statements, the notes thereto and matters set forth under "Risk Factors." For certain defined terms, see "Use of Terms"  on Page 7.
Overview of Our Business
We are a biopharmaceutical company and through our indirect Chinese subsidiaries, Shandong Taibang and Qianfeng, we are principally engaged in the research, development and manufacturing of plasma-based pharmaceutical products in China. Shandong
Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province and Qianfeng operates in Guizhou Province. The collection facilities of our minority owned subsidiary, Huitian, are located in Xi'an Province. The
plasma-based biopharmaceutical manufacturing industry in China is highly regulated by both the provincial and central governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma
from human donors to finished products. Our principal products include our approved human albumin and immunoglobulin products.
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.
We sell our products to customers in the PRC, mainly hospitals and inoculation centers. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended December
31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.
We have product liability insurance covering all of our products. However, since our establishment in 2002, there has not been any product liability claims nor has any legal action been filed against the Company brought by patients related to the
use of our products.
In this prospectus, we refer to information and statistics regarding the plasma-based biopharmaceutical industry that we have obtained from a variety of sources, including:
The 2006 Hua Yuan Medicine Net Survey
The China National Institute for the Control of Pharmaceutical and Biological Products
This information is publicly available for free and has not been specifically prepared for us for use in this prospectus or otherwise.
Overview of Our Industry
The collection of human plasma in China is generally influenced by factors such as government regulations, geographical locations of collection stations, sanitary conditions of collection stations, living standards of the donors, and cultural and
religious beliefs. Until recently, only licensed Plasmapheresis stations owned and operated by the government could collect human plasma. Furthermore, each collection station was only allowed to supply plasma to
the one manufacturer that had signed the "Quality Responsibility" statement with them. However, in March 2006, the Ministry of Health promulgated certain "Measures on Reforming Plasma Collection Stations," or the Blood Collection
Measures, whereby the ownership and management of PRC plasma stations are required to be transferred to plasma-based biopharmaceutical companies and the local government is charged with regulatory supervision and administrative control in accordance
with the policies of the central government. Plasma stations that did not complete their reform by December 31, 2006 risked revocation of their license to collect plasma.
- 4 -
The supply of plasma for plasma-based products in the PRC has been on the decline since 2003 from the historical high of annual supply of approximately 7,000 tons to approximately 4,000 tons. We believe that this decline is a direct result of the
government's industry reforms of the country's collection practices which led to the closure of many stations that did not meet the new industry standards. Based on reports promulgated by the PRC Ministry of Health, we estimate that the
current annual supply of plasma in China amounts to approximately 4,000 tons, as compared to 30,000 tons in the global market, with the six largest manufacturers of plasma products accounting for approximately 50% of the annual plasma collection. In
spite of the shortage of plasma supply, revenues from the sale of plasma products in China amounted to approximately $1 billion in 2006, and revenues from the sale of human albumin products amounted to about $593 million. We expect that the
plasma derivatives market to grow at a 15% rate per year through 2011.
We believe that these regulatory changes, including measures which limit illegal selling of blood, have improved the quality of blood and plasma by increasing cleanliness standards at blood collection stations. As the operation of the plasma
stations become more regulated and the donor population expands, we believe that the overall quality of raw materials, such as human albumin will continue to improve, leading to a safer, more reliable finished product.
Competition
We are subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar biopharmaceutical products as our products in the PRC. These
competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than we do. In our industry, many competitive factors may affect our sales of products, including product efficacy,
safety, price and cost effectiveness, marketing effectiveness, quality control and quality assurance of our manufacturing operations, research and development of new products and logistical capabilities.
We believe that we have strengthened our position in the marketplace with our recent acquisition of a 90% equity interest in Dalin and its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest in Huitian, Xi'an-based
biopharmaceutical company.
Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors drastically reduce prices; or (iii) competitors develop new products or product substitutes having comparable medicinal applications or therapeutic effects
which are more effective and /or less costly than those produced by us.
Our Growth Strategy
Our mission is to become a first-class biopharmaceutical enterprise in China. To achieve this objective, we have implemented the following strategies:
Securing the supply of plasma
– Due to the shortage of plasma and the reform of the ownership of plasma stations, our immediate strategy is to negotiate and acquire plasma stations in order to secure our plasma supply. In December
2006, we acquired five of the plasma stations in Shandong Province. Furthermore, in January 2007, we acquired two additional plasma stations in Guangxi Province. See "Raw Materials – Plasma" below. In June 2008, we received approval
from the Guangxi Province Bureau of Health to set up a new plasma collection station in Pu Bei County, Guangxi Province, which, when operational, will replace CBP's existing Fang Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate
Fang Cheng to a more strategic location to increase collection volumes. During the construction period, Fang Cheng will still continue with its normal operations. With the approval of the Centralized Industry Zone of Pu Bei County, once Fang Cheng
becomes operational, expected to be in the fourth quarter of 2009, we hope to expand its coverage area to secure higher collection volumes in the future. We also expect that our recent acquisition of a majority interest in Dalin and its PRC
operating subsidiary, Qianfeng, and our acquisition
of a minority interest in Huitian, will help secure our plasma supply as well as expand production capacity and market coverage.
- 5 -
Acquisition of competitors and/or other biologic related companies
– In addition to organic growth, acquisition is an important part of our expansion strategy. Although there are about 32 approved plasma- based biopharmaceutical
manufacturers in the market, we believe that there are only 26 manufacturers in operation, only about half of whom will be competitive. The top six manufacturers in China account for more than 50% market share. Furthermore, we believe that the
regulatory authorities are considering further reforming the industry and those smaller, less competitive manufacturers will face the possibility of having their manufacturing permits revoked by the regulators, making them potential targets for
acquisition. Also, if we are presented with appropriate opportunities, we may acquire additional companies, products or technologies in the biologic related sectors (including but not limited to medical, pharmaceutical and biopharmaceutical).
Further strengthening of research and development capability –
We believe that, unlike other more developed countries such as the U.S., China's plasma-based biopharmaceutical products are at the initial stage of development.
There are many other plasma-based products that are being used in the U.S. which are not currently being manufactured in China. We intend to strengthen our research and development capability so as to expand our product line to include
higher-margin, technologically more advanced plasma-based biopharmaceutical products. We believe that our increased focus on research and development will give us a competitive advantage over our competitors
Market development and network expansion
– Leveraging on the high quality and excellent safety record of our products, we intend (i) to enhance our product penetration with our existing customers by introducing new products and
(ii) to extend the reach of our products from our current market to include other provinces where we envision significant market potential.
Risk Factors
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled "Risk Factors," including for example:
our ability to overcome competition from local and overseas pharmaceutical enterprises;
decrease in the availability, or increase in the cost, of plasma;
failure to obtain PRC governmental approval to increase retail prices of certain of our biopharmaceutical products;
difficulty in servicing our debt;
loss of key members of our senior management; and
unexpected change in the PRC government's regulation of the biopharmaceutical industry in China, or changes in China's economic situation and legal environment.
Any of the above risks could materially and negatively affect our business, financial position and results of operations. An investment in our common stock involves risks. You should read and consider the information set forth in "Risk
Factors" and all other information set forth in this prospectus before investing in our common stock.
Corporate Information
China Biologic Products, Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food
Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003, merger between Shepherd and GRC Holdings, Inc. or GRC. In the merger, the company adopted the Articles of Incorporation and By-Laws of GRC and changed its
corporate name to GRC Holdings, Inc. On January 10, 2007, a Plan of Conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc. We conduct our business in China
through our indirect PRC operating subsidiaries, Shandong Taibang and Qianfeng. We also have a minority interest in Huitian, a Xi'an based biopharmaceutical company.
- 6 -
The following chart reflects our current corporate organizational structure:
Our principal executive offices are located at No. 14 East Hushan Road, Tai'an City, Shandong, the People's Republic of China 271000. Our corporate telephone number is (86)538-620-2306 and our fax number is (86)538-620-3895. We maintain a
website at
http://www.chinabiologic.com
that contains information about our operating company, but that information is not part of this prospectus.
Use of Terms
Except as otherwise indicated by the context, all references in this prospectus to:
"BVI" are to the British Virgin Islands;
"China Biologic," the "Company," "we," "us," or "our," are to the combined business of China Biologic Products, Inc., a Delaware corporation, and its direct and indirect subsidiaries;
"Dalin" are to our majority owned subsidiary, Chongqing Dalin Biologic Technologies Co., Ltd., a PRC limited company;
"Exchange Act" are to the Securities Exchange Act of 1934, as amended;
"Hong Kong" are to the Hong Kong Special Administrative Region of the People's Republic of China. "China"
"Huitian" are to Xi'an Huitian Blood Products Co., Ltd., our minority owned PRC operating subsidiary;
"Logic Express" are to our wholly owned subsidiary Logic Express Limited, a BVI company;
"Logic Holdings" a to Logic Holdings (Hong Kong) Limited, our wholly-owned Hong Kong subsidiary;
"PRC" are to the People's Republic of China;
- 7 -
"Qianfeng" are to Qianfeng Biological Products Co., Ltd., Dalin's majority
  owned PRC operating subsidiary;
"RMB" are to Renminbi, the legal currency of China; "Securities Act" are
  to the Securities Act of 1933, as amended;
"Shandong Medical" are to Shandong Taibang's wholly owned PRC subsidiary,
  Shandong Missile Medical Co., Ltd.;
"Shandong Taibang" are to our subsidiary Shandong Taibang Biological
  Products Co. Ltd., a sino-foreign joint venture incorporated in China; and
"U.S. dollar," "$," "USD" and "US$" are to the legal currency of the
  United States.
Throughout this prospectus, we have converted RMB to USD as
      follows:
December 31, 2008
Balance sheet
RMB 6.82 to US$1.00
Statement of income and comprehensive income
RMB 6.94 to US$1.00
December 31, 2007
Balance sheet
RMB 7.29 to US$1.00
Statement of income and comprehensive income
RMB 7.59 to US$1.00
As the result of foreign currency fluctuations the financial
statements if prepared as of the date of this prospectus would present different
figures. The change of the foreign currency rate of USD to RMB as of July 13,
2009 would require a translation of amounts from RMB into USD according to the
following exchange rates:
July 13, 2009
Balance sheet
RMB 6.84 to US$1.00
Statement of income and comprehensive income
RMB 6.84 to US$1.00
- 8 -
The Offering
Common stock offered by selling stockholders
3,582,803 shares of our common stock that are issuable to
      the selling stockholders, including up to 2,388,535 shares of our common
      stock issuable upon the conversion of 3.8% secured convertible notes
      issued to, and up to 1,194,268 shares of our common stock issuable upon
      the exercise of outstanding warrants held by, the selling stockholders
      named in this prospectus. This number represents 16.6% of our current
      outstanding common stock
(1)
Common stock outstanding before the offering
21,474,942 shares.
Common stock outstanding after the offering
25,057,745 shares, assuming full conversion of the
      convertible note and full exercise of the warrants held by the selling
      stockholders.
Proceeds to us
We will not receive any proceeds from the sales by the
      selling stockholders, but we will receive funds from the exercise of
      warrants, if exercised for cash, held by the selling stockholders which we
      will use for working capital purposes.
Over-the-Counter Bulletin Board Symbol:
CBPO.OB
Risk Factors:
See "Risk Factors" beginning on page 11 and the other
      information in this prospectus for a discussion of the factors you should
      consider before deciding to invest in our common stock.
(1) Based on 21,474,942 shares of common stock
outstanding at the filing of this Registration Statement.
- 9 -
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table summarizes selected financial data
regarding our business and should be read in conjunction with our consolidated
financial statements and related notes contained elsewhere in this prospectus
and the information under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The financial statement data as of and for
each of the fiscal years ended December 31, 2007 and 2008 have been derived from
our audited consolidated financial statements included elsewhere in this
prospectus. The financial statement data as of and for each of the three months
ended March 31, 2008 and 2009 have been derived from our unaudited consolidated
financial statements included elsewhere in this prospectus.
(All amounts in U.S. dollars,
      except per share data)
STATEMENT OF INCOME
Three Months Ended
      March 31,
Years Ended December
      31,
2009
2008
2008
2007
Revenues
21,148,598
7,849,007
46,751,160
32,398,669
Cost of revenues
6,214,930
1,948,898
14,040,602
9,945,921
Gross profit
14,933,668
5,900,109
32,710,558
22,452,748
Operating expenses
4,870,130
2,262,439
12,374,787
9,695,333
Income from operations
10,063,538
3,637,670
20,335,771
12,757,415
Income before taxes and noncontrolling
      Interest
9,288,594
3,614,285
19,886,115
12,245,838
Provision for
      income taxes
2,030,194
740,482
4,596,603
2,074,560
Net income attributable to noncontrolling interest
3,000,082
606,003
3,303,841
1,991,902
Net income attributable to
    controlling interest
4,258,318
2,267,800
11,985,671
8,179,376
Basic Earnings Per Share
0.20
0.11
0.56
0.38
Diluted Earnings Per Share
0.20
0.10
0.56
0.37
BALANCE SHEET DATA
March 31,
December 31,
2009
2008
2007
Working capital
2,158,853
6,267,039
9,149,810
Current assets
65,113,842
25,195,816
15,727,332
Total assets
139,110,903
67,169,392
33,305,245
Current liabilities
62,954,989
18,928,777
6,577,522
Long-term debt
8,790,000
5,868,000
-
Total liabilities
72,069,535
25,120,484
6,881,608
Shareholders' equity
39,879,829
37,243,527
22,100,179
Noncontrolling interest
25,100,490
4,805,381
4,181,338
Total liabilities and equity
139,110,903
67,169,392
33,305,245
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RISK FACTORS
The shares of our common stock are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock.  Before purchasing our common stock, you
should carefully consider the following factors relating to our business and prospects. If any of the following risks actually occurs, our business, financial condition or operating results will suffer, the trading price of our common stock could
decline, and you may lose all or part of your investment. You should also refer to the other information about us contained in this prospectus, including our financial statements and related notes.
RISKS RELATED TO OUR BUSINESS
We face risks related to general domestic and global economic conditions and to the current credit crisis. Disruptions in the capital and credit markets related to the current national and worldwide financial crisis, which may continue
indefinitely or intensify, could adversely affect our results of operations, cash flows and financial condition, or those of our customers, suppliers and creditors.
We currently generate sufficient operating cash flows, which combined with access to the credit markets, provide us with significant discretionary funding capacity. However, the current uncertainty arising out of domestic and global economic
conditions, including the recent disruption in credit markets, may impact our ability to manage normal relationships with our customers, suppliers and creditors. The current disruptions in the capital and credit markets may continue indefinitely or
intensify, and adversely impact our results of operations, cash flows and financial condition, or those of our customers, suppliers and creditors. Disruptions in the capital and credit markets as a result of uncertainty, changing or increased
regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to liquidity needed to conduct or expand our businesses or conduct acquisitions or make other discretionary investments. Such
disruptions may also adversely impact the capital needs of our customers and suppliers, which, in turn, could adversely affect our results of operations, cash flows and financial condition.
In addition, the demand for our products is largely affected by the general economic conditions in China as our products are still not affordable to many patients. As China's economy grows, we expect more Chinese people will become consumers of
medical treatments and procedures, including procedures requiring human plasma. However, we expect that the current global economic slowdown will result in slower economic growth in China and a depressed economic environment which in turn may make
our products less affordable to more patients and result in an overall decreased demand for our products. Such reductions and disruptions could have a material adverse effect on our business operations.
In order to grow at the pace expected by management, we will require additional capital to support our long-term business plan. If we are unable to obtain additional capital in future years, we may be unable to proceed with our long-term
business plan and we may be forced to curtail or cease our operations or further business expansion.
We will require additional working capital to support our long-term business plan, which includes identifying suitable targets for horizontal or vertical mergers or acquisitions, so as to enhance the overall productivity and benefit from economies
of scale. Our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our customers. We
may not be able to obtain adequate levels of additional financing, whether through equity financing, debt financing or other sources, especially in light of the current global financial crisis and the market downturn. To raise funds, we may need to
issue new equities or bonds which could result in additional dilution to our shareholders and investors. Additional financings could result in significant dilution to our earnings per share or the issuance of securities with rights superior to our
current outstanding securities or contain covenants that would restrict our operations and strategy. In addition, we may grant registration rights to investors purchasing our equity or debt securities in the future. If we are unable to raise
additional financing, we may be unable to implement our long-term business plan, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures on a timely basis, if at all. In addition, a
lack of additional financing could force us to substantially curtail or cease operations.
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We have a significant amount of debt, which could have negative consequences to us.
We have a significant amount of debt. As of March 31, 2009, we had, on a consolidated basis, approximately $17.8 million principal amount of indebtedness outstanding. Our substantial indebtedness could have important consequences, including:
increasing our vulnerability to adverse general economic and industry conditions and adverse changes in governmental regulations;
limiting our ability to obtain additional financing to fund capital expenditures and other general corporate requirements;
requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund capital expenditures or other general corporate purposes;
limiting our flexibility in planning for or reacting to changes in our business and the industry in which we operate; and
placing us at a competitive disadvantage compared to our less leveraged competitors.
Our ability to pay interest on our indebtedness and to satisfy our other debt obligations will depend upon, among other things, our future operating performance and cash flow and our ability to refinance indebtedness when necessary. Each of these
factors is, to a large extent, dependent on general economic, financial, competitive, legislative, regulatory and other factors beyond our control. If in the future we cannot generate sufficient cash from operations to make scheduled payments on our
indebtedness or to meet our liquidity needs or other obligations, we will need to refinance our existing debt, obtain additional financing or sell assets. We cannot assure you that we will be able to renegotiate or refinance any of our debt on
commercially reasonable terms or at all. In addition, our interest expense may increase if general economic conditions result in an increasing interest rate environment. We cannot assure you that our business will generate cash flow, or that we will
be able to obtain funding sufficient to satisfy our debt service requirements.
If the PRC government bans or limits plasma-based biopharmaceutical products, our operations, revenues and profitability would be adversely affected.
The principal raw materials of our existing and planned biopharmaceutical products is human source plasma, which, due to its unique nature, is subject to various quality and safety control issues which include, but are not limited to, contaminations
and blood-born diseases. In addition, limitations of current technology pose biological hazards inherent in plasma that have yet to be discovered which could result in a wide spread epidemic due to blood infusion. The primary law that regulates
plasma products in China is the PRC Pharmaceutical Law, the Implementation Rules on the PRC Pharmaceutical Law and the Regulations on the Administration of Blood Products. These rules and regulations require entities producing blood products to
strictly comply with certain hygienic standards and specifications promulgated by the government. In the event that human plasma is discovered to be noncompliant with the government's hygienic standards and specifications, the health department
may revoke the registration and/or the approval of the blood product, or otherwise limit the use of such blood product. If the PRC government bans or limits plasma-based biopharmaceutical products, our operations, revenues and profitability would be
adversely affected.
If the plasma from Shandong Province are found to be contaminated, or the supply from these plasma stations becomes restricted, our operation, revenues and profitability would be adversely affected.
We currently source plasma mainly from human donations to our plasma stations in Shandong and Guangxi Provinces, and Qianfeng sources its plasma from stations in Guizhou Province. If any of our human donors is infected with certain diseases, then
the plasma from such donor may be infected. If such contaminated plasma is not appropriately screened out, our entire plasma source may become contaminated. If the plasma from these collection stations are found to be contaminated or the supply from
these plasma stations becomes restricted, our operation, revenues and profitability would be adversely affected.
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If we are unable to adequately monitor our plasma stations our plasma supply may be tainted and we will be subject to sanctions by the government which would have a material adverse effect on our business.
As part of the industry reform initiative by the Chinese government, in 2006 we acquired the assets of five of the six then existing plasma stations in Shandong Province through our wholly owned subsidiaries, Xia Jin Plasma Company, the Qi He Plasma
Company, the He Ze Plasma Company, the Zhang Qiu Plasma Company and the Yang Gu Plasma Company. We received permits to operate these subsidiaries in January 2007. In April 2007, we acquired the assets of two additional plasma stations, one through
our newly formed subsidiary, the Huan Jiang Plasma Company, and the other through our majority owned subsidiary, the Fang Cheng Plasma Company, which is 80% owned by Shandong Taibang and 20% owned by Lin Feng, an unrelated third party. We obtained
necessary permits and commenced their operation in July and August 2007, respectively. Qianfeng, the main operating subsidiary of our recently acquired Dalin, is the 85% owner of the seven plasma stations in Guizhou province. Huitian, the 35%
minority owned by the Company, has three plasma stations operate in Shaanxi province. While we monitor our blood plasma intake procedures through frequent unscheduled inspections of our stations, there remains a risk that our blood supply may
become tainted during the collection process. Our blood supply may become tainted if we accept blood from donors whose blood shows any irregular findings including HIV, Hepatitis C and liver disease. We pre-screen all donors in order to ensure that
these diseases are not present. If our blood supply becomes tainted, the consequences for our business could be severe. We could be subject to civil liability from suits brought by consumers and to criminal liability and loss of our registration if
we are found by the government to have been criminally negligent.
Our operations, sales, profit and cash flow will be adversely affected if our albumin products fail inspection or are delayed by regulators.
Each batch of our albumin products requires inspection by Chinese government regulators before we can ship it to our customers. The PRC State Food and Drug Authority, or the SFDA, has a quality standard which considers, among other things, the
appearance, packing capacity, thermal stability, pH value, protein content and percentage of purity of the product. In order to pass inspection, our plasma must test negative for any blood irregularities, including Hepatitis C, HIV and liver
disease. The plasma must be packaged in 25 separate 600g bags and boxed with a packing list and labeled to be consistent with computer records. The plasma must then be stored at -20°C as soon as possible after collection to ensure that it will
congeal within 6 hours. Government regulators usually take one month to inspect a batch of albumin products. The process begins when the regulator randomly selects samples of our albumin products and delivers them to the National Institute for the
Control of Pharmaceutical and Biological Products, or the NICBPB, in Beijing for testing, and the process ends when the products are given final approval by the NICBPB. In the event that the regulators delay the approval of our products, change the
requirements in such a way that we are unable to comply with those requirements, or require our other products to be inspected by regulators before we can ship them to our customers, our operations, sales, profit and cash flow will be adversely
affected.
We rely on a Secondment Agreement with the Shandong Institute, which is expected to terminate upon the future privatization of the Shandong Institute, for over 39% of our Shandong Taibang employees. If the Secondment Agreement is breached or
terminated, it could have an adverse effect on our operations and on our financial results.
The Shandong Province Institute of Biological Products, or the Shandong Institute, has provided us with approximately 131 of our employees out of a total of approximately – 753 employees, pursuant to a secondment agreement, or Secondment
Agreement, dated October 28, 2002, between Shandong Taibang and the Shandong Institute. Pursuant to the Secondment Agreement, we are responsible for the salaries of these employees, as well as for their social benefits such as insurance. Our
Secondment Agreement with the Shandong Institute will expire on the sooner to occur of October 2032 or upon the privatization of the Shandong Institute, which was originally expected to occur before the end of 2008. However, the completion of
privatization of Shandong Institute has been further delayed indefinitely due to slower action taken by the Shandong Ministry of Health in implementing the privatization plan. Upon expiration or termination of the Secondment Agreement, we plan to
hire the seconded employees directly. However, we cannot be sure that all of the employees will accept our employment offers at that time. Guang Li Pang, Shandong Taibang's Deputy Chief Executive Officer, Yun Hua Gao and Dian Cong Liu, our
Senior Technical Advisors are employed through the Secondment Agreement. Although none of our seconded
employees have indicated that they do not plan to continue working for our Company after the privatization, if the Secondment Agreement is terminated or expires and we are unable to hire replacement employees on time, our operations, as well as our
financial results, may suffer.
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If the distributors who we rely on do not purchase our products, our business and results of operations will be adversely affected.
We sell all of our products in China through our network of about 397 distributors located in about 27 provinces and municipal cities throughout China. While we have established working relationships with many of our distributors and strictly
regulate their sales and marketing activities by annual distribution agreements, there are no restrictions in these distribution agreements preventing our distributors from also supplying products produced by our competitors. Our own marketing and
sales staff work to develop and maintain relationships with our distributors, but there can be no assurance that we will be able to maintain such relationships. For the years ended December 31, 2008 and 2007, direct sales to distributors represented
approximately 65.6% and 58.3%, respectively, of our total revenues. If a number of our distributors cease to purchase our products and we are unable to find suitable replacement, our business and results of operations will be adversely affected.
Our inability to successfully research and develop new
biological pharmaceutical products could have an adverse effect on our future growth.
We believe that the successful development of biological pharmaceutical products can be affected by many factors. Products that appear to be promising in the early phases of research and development may fail to be commercialized for various reasons,
including the failure to obtain the necessary regulatory approvals. In addition, the research and development cycles for new medicine for which we must obtain a Certificate of New Medicine from the PRC Ministry of Health, is a relatively lengthy
process. In our experience, the process of conducting research and various tests on new products before obtaining a Certificate of New Medicine and subsequent procedures may take approximately three to five years. There is no assurance that our
future research and development projects will be successful or that they will be completed within the anticipated time frame or budget. Also, there is no guarantee that we will receive the necessary approvals from relevant authorities for the
production of our newly developed products. Even if such products could be successfully commercialized, there is no assurance that they will be accepted by the market as anticipated.
Our financial position and operations may be materially and adversely affected, if our product liability insurance does not sufficiently cover our liabilities.
Under current PRC laws, manufacturers and vendors of defective products in the PRC may incur liability for loss and injury caused by such products. Pursuant to the General Principles of the Civil Law of the PRC or the PRC Civil Law, which became
effective in 1987, a defective product which causes property damage or physical injury to any person may subject the manufacturer or vendor of such product to civil liability.
In 1993, the PRC promulgated the Product Quality Law of the PRC or the Product Quality Law, which was revised in 2000. The Product Quality Law was enacted to protect the rights and interests of end-users and consumers and to strengthen the
supervision and control of the quality of products. Under the Product Quality Law, manufacturers who produce defective products may be subject to fines and required to cease production, and in severe cases, be subject to criminal liability and may
have their business licenses revoked.
In 1993, the Law of the PRC on the Protection of the Rights and Interests of Consumers or the Consumers' Rights Law was promulgated to further protect the legal rights and interests of consumers in connection with the purchase or use of goods
and services. All businesses, including our business, must observe and comply with the Consumers' Rights Law.
We maintain product liability insurance for sales in the PRC for all of our products in the amount of approximately $2.9 million (RMB 20 million). Although no one has filed any claims in relation to the use of our pharmaceutical products, our
financial position and operations may be materially and adversely affected, if our insurance coverage is insufficient to cover a successful claim.
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We depend heavily on key personnel, and turnover of key employees and senior management could harm our business.
Our success, to a certain extent, is attributable to the expertise and experience of our senior management and key research and technical personnel, including Chao-Ming Zhao, our Chief Executive Officer, Yu-Yun Tristan Kuo, our Chief Financial
Officer, Tung Lam, the Chief Executive Officer of Shandong Taibang and Dian Cong Liu, the Chief Technical Adviser of Shandong Taibang, who carry out key functions in our operation. If we lose the service of any of our senior management or key
research or technical personnel or fail to attract additional personnel with suitable experience and qualification, our business operations and research capability may be adversely affected.
Our senior management and employees have worked together for a short period of time, which may make it difficult for you to evaluate their effectiveness and ability to address challenges.
Due to our limited operating history and recent additions to our management team, certain of our senior management and employees have worked together at our company for only a relatively short period of time. Specifically, Chao Ming Zhao became our
Chief Executive Officer in June 2008 after serving as our Chief Financial Officer since November 2006 and Y. Tristan Kuo became our Chief Financial Officer in June 2008 and had served as our Vice President-Finance since September 2007. Siu Ling Chan
and Lin Ling Li became our directors in July 2006. In addition, while Mr. Zhao, Ms. Chen and Ms. Lin were employed in various capacities by Logic Express and Shandong Taibang, Mr. Kuo is a newcomer to our Company. As a result of these circumstances,
it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to address future challenges to our business.
Future acquisitions may have an adverse effect on our ability to manage our business.
Selective acquisitions form part of our strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional companies, products or technologies. Future acquisitions and the subsequent integration of
new companies into ours would require significant attention from our management. Our company has little experience with integrating newly acquired businesses. Potential problems encountered by each organization during mergers and acquisitions would
be unique, posing additional risks to the company. The diversion of our management's attention and any difficulties encountered in any integration process could have an adverse effect on our ability to manage our business. Future acquisitions
would expose us to potential risks, including risks associated with the assimilation of new operations, technologies and personnel, unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, the
inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, relationships with employees, customers and suppliers as a result of integration of new businesses.
We may lose our competitive advantage and our operations may suffer if we fail to prevent the loss or misappropriation of, or disputes over, our intellectual property.
None of our products are currently covered by patents, except for the trademark "Lu Yue" that has been licensed to us by the Shandong Institute for our use as in the labeling of human-use medicine, biopreparate and blood products, pursuant
to a trademark license agreement, dated February 27, 2007. We plan to apply for patents for our manufacturing processes. The patent application will be subject to approval from the relevant PRC authorities. We may not be able to successfully obtain
the approval of the PRC authorities for our patent applications. Furthermore, third parties may assert claims to our proprietary procedures, technologies and systems. These proprietary procedures, technologies and systems are important to our
business as they allow us to maintain our competitive edge over our competitors.
While we are not aware of any infringement on our intellectual property and we have not been notified by any third party that we are infringing on their intellectual property, our ability to compete successfully and to achieve future revenue growth
will depend, in significant part, on our ability to protect our proprietary technology and operate without infringing upon the intellectual property rights of others. The legal regime in China for the protection of intellectual property rights is
still at its early stage of development. Intellectual property protection became a national effort in China in 1979 when China adopted its first statute on the protection of trademarks. Since then, China has adopted its Patent Law, Trademark Law and
Copyright Law and promulgated related regulations such as Regulation on Computer Software Protection, Regulation on the Protection of Layout Designs of Integrated Circuits and Regulation on Internet Domain Names. China has also acceded to various
international treaties and conventions
in this area, such as the Paris Convention for the Protection of Industrial Property, Patent Cooperation Treaty, Madrid Agreement and its Protocol Concerning the International Registration of Marks. In addition, when China became a party to the
World Trade Organization in 2001, China amended many of its laws and regulations to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights. Despite many laws and regulations promulgated and other efforts made by China
over the years with a view to tightening up its regulation and protection of intellectual property rights, private parties may not enjoy intellectual property rights in China to the same extent as they would in many Western countries, including the
United States, and enforcement of such laws and regulations in China have not achieved the levels reached in those countries. Both the administrative agencies and the court system in China are not well-equipped to deal with violations or handle the
nuances and complexities between compliant technological innovation and non-compliant infringement.
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We rely on confidentiality agreements with our management and employees to protect our confidential proprietary information. However, the protection of our intellectual properties may be compromised as a result of:
departure of any of our management members or employees in possession of our confidential proprietary information;
breach by such departing management member or employee of his or her confidentiality and non-disclosure undertaking to us;
infringement by others of our proprietary information and intellectual property rights; or
refusal by relevant regulatory authorities to approve our patent or trademark applications.
Any of these events or occurrences may have a material adverse effect on our operations and the measures that we have put into place to protect our intellectual property rights may not be sufficient. Litigation to enforce our intellectual property
rights could result in substantial costs and may not be successful. If we are not able to successfully defend our intellectual property rights, we might lose rights to technology that we need to conduct and develop our business. This may seriously
harm our business, operating results and financial condition, and enable our competitors to use our intellectual property to compete against us.
Furthermore, if third parties claim that our products infringe their patents or other intellectual property rights, we may be required to devote substantial resources to defend against such claims. If we are unsuccessful in defending against such
infringement claims, we may be required to pay damages, modify our products or suspend the production and sale of such products. We cannot guarantee that we will be able to modify our products on commercially reasonable terms.
A disruption in the supply of utilities, fire or other calamity at our manufacturing plant would disrupt production of our products and adversely affect our sales.
Our products are manufactured solely at our production facility located in Tai'an City, Shandong Province in the PRC. While we have not in the past experienced any calamities which disrupted production, any disruption in the supply of
utilities, in particular, electricity or power supply, or any outbreak of fire, flood or other calamity resulting in significant damage at our facilities would severely affect our production and have a material adverse effect on our business,
financial condition and results of operations.
We maintain insurance policies covering losses with respect to damages to our properties and products. We do not have insurance coverage for machinery and inventories of raw materials. There is no assurance that our insurance would be sufficient to
cover all of our potential losses.
We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have the
operating effectiveness of our internal controls attested to by our independent auditors.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports on Form 10-K. A
report of our management is included under Item 9A(T) of our Form 10-K for the year ended December 31, 2008. In addition, Section 404 requires the independent registered public accounting firm auditing a
company's financial statements to also attest to and report on the operating effectiveness of such company's internal controls. However, we will not be subject to these requirements until our annual report for the fiscal year ending
December 31, 2009. We can provide no assurance that we will comply with all of the requirements imposed thereby. There can be no assurance that we will receive a positive attestation from our independent registered public accountants. In the event
we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent registered public accountants with respect to
our internal controls, investors and others may lose confidence in the reliability of our financial statements.
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There is a dispute between the former shareholders of Shandong Taibang that calls into question our ownership of 66%, or a majority, of our primary operating subsidiary, which if not resolved in our favor will adversely affect our
business.
Mr. Zu Ying Du was one of the original equity holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement, among the original equity holders, Mr. Du was obligated to make a capital contribution of RMB 20 million (or
approximately $2.6 million) for a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed to repay Beijing Chen Da for his
loan of the capital contribution amount. Mr. Du disputes that the money was due and owing. A Beijing court found that Beijing Chen Da had given money to Mr. Du but found that the loan agreement failed to comply with Chinese law. A notice was issued
on July 5, 2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a stay of the Beijing action pending their investigation into money laundering relating to the 20 million RMB loan to Zu Ying Du.
Subsequently, Beijing Chen Da entered into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB 20 million debt. This agreement
was signed by Mr. Du's brother who held a power of attorney from Mr. Du. Mr. Du disputes the legitimacy of this transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued his brother in the
court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently
the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei
Jingzhou Intermediate Court.
Missile Engineering, another original equity holder wholly controlled by Mr. Du, was obligated to contribute RMB 32.8 million (or $4.2 million) for a 41% interest in Shandong Taibang by means of cash, equipment and patent technology. It was
obligated to obtain new drug certificate and production license of its patent technology from the government within a stipulated period in order to be recognized as a valid capital contribution, or in the alternative, make a cash payment. The patent
technology was valued as RMB 26.4 million (or approximately $3.4 million). However, Missile Engineering failed to obtain the new drug certificate and production license within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders resolution on September 26, 2004, Missile Engineering agreed to sell its 41% interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB 26.4 million in cash. Missile Engineering disputes this transaction and sued the brother of Mr. Du in the court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the
power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei Jingzhou Intermediate Court.
In June 10, 2005, Beijing Chen Da also sold its equity interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a share transfer agreement, which became effective on September 2, 2005, upon approval by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our subsidiary.
In 2006, Missile Engineering applied for arbitration before the China International Economic and Trade Arbitration Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing Investments Limited, of the equity interests in
Shandong Taibang formerly owned by Missile Engineering. The equity transfer had been approved by the Shandong Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong
COFTEC. Missile Engineering later voluntarily withdrew this application and instead applied for administrative reconsideration of the equity transfer, but this application was rejected by the Ministry of Commerce in 2007. Missile Engineering applied
with the District Court of Lixia District, Jinan City, Shandong province requesting revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by Missile Engineering. Missile Engineering later voluntarily withdrew the action. In
April 2007, Logic Express initiated an arbitration proceeding before the Shandong Tai'an Arbitration Committee, to establish that Logic Express is the lawful shareholder of Shandong Taibang. The parties to that proceeding were Logic Express
Ltd. and Shandong Taibang Biological Products Co., Ltd. The Arbitration Committee's decision on September 6, 2007 confirmed that Logic Express had legitimate ownership as a result of the transfer of Shandong Taibang. Up-Wing started an action
in the Intermediate Court of Tai'an City, Shandong province requesting the court to establish that Up-Wing is the lawful shareholder of Shandong Taibang. The Intermediate Court of Tai'an City, Shandong province on December 20, 2007
rejected the application on the basis that the same matter had been tried by the arbitration panel.
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Up-Wing filed a defamation case in the District Court of Hi-technology and Industry Development District, Tai'an City, Shandong province claiming defamation against Mr. Du and the 21
st
Century Economic Report Newspaper. Judgment in
favor of Up-Wing was rendered on July 22, 2008 ordering the newspaper and Mr. Du to publish an apology to Up-Wing.
Mr. Du and Missile Engineering have filed two actions in the Intermediate Court of Wuhan City, Hubei province, against the following defendants, Du Hai Shan, his brother, Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have
requested that the Wuhan Intermediate Court to restore the equity interests originally held by the plaintiffs, 25% equity interest held by Mr. Du and 41% equity interest held by Missile Engineering. The Wuhan Intermediate Court has issued a
preliminary order attaching 66% of the equity of Shandong Taibang pending the outcome of the case.
Dr. Du has alleged that Mr. Lam, the current CEO of our subsidiary Taibang, was formerly known as Lin Zepin and that the individual, Lin Zepin, was court martialed for smuggling in Fujian in 1999. Dr. Du alleges that Lin Zepin was released from
prison in 2003. Mr. Lam denies these statements and has provided an affidavit stating that he was never know as Lin Zepin and has not been convicted of any crime. If it were determined that Mr. Lam, the CEO of Taibang, was formerly known as Lin
Zepin and was in fact convicted of a crime, our business and results of operations could be adversely affected.
Failure to resolve these disputes in our favor may adversely affect our business and operations.
RISKS RELATING TO OUR FINANCIAL CONDITION
We face risks related to general domestic and global economic conditions and to the current credit crisis.
We currently generate sufficient operating cash flows, which combined with access to the credit markets, provide us with significant discretionary funding capacity. However, the current uncertainty arising out of domestic and global economic
conditions, including the recent disruption in credit markets, has impacted accounts receivable collectivity from our customers, and may impact our ability to pay suppliers and creditors. If the current situation deteriorates significantly, we could
see a tightened cash flow position and an abnormal amount of bad debt expenses related to the general economic slow-down, or supplier or customer disruptions resulting from tighter credit markets. Such reductions and disruptions could have a
material adverse effect on our business operations.
Our cash flow could be negatively affected as a result of our extension of relatively long payment terms to customers that we believe are credit worthy.
As is customary in our industry, we extend relatively long payment terms (up to six months) to customers that we believe are credit worthy. The dollar amount of our accounts receivable, net of our allowance for doubtful accounts as of December 31,
2008 and 2007 was $313,087 and $316,869, respectively. The bad debt (credit) expenses for the years ended December 31, 2008 and 2007 were ($56,462) and $221,813, respectively. Although we attempt to establish appropriate reserves for
our receivables, those reserves may not prove to be adequate in view of actual levels of bad debts. The failure of our customers to pay us timely would negatively affect our working capital, which could in turn adversely affect our cash flow.
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Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
We have a limited operating history. Shandong Taibang as began its operation in October 2002. With the rapid growth of the industry, it has experienced a high growth rate since 2002. Furthermore, we did not acquire a controlling interest in Shandong
Taibang until September 2005. As such, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects. We may not be able to achieve a similar growth rate in future periods.
Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance.
We face risks associated with debt financing (including exposure to variation in interest rates).
Our total outstanding indebtedness, entirely comprising of long-term bank loan, as of December 31, 2008 was $5.9 million. The interest rate on this long-term bank loan is fixed at 7.02% per annum. Our obligations under our existing loans have
been mainly met through the cash flow from our operations and our financing activities. We are subject to risks normally associated with debt financing, including the risk of significant increase in interest rates and the risk that our cash flow
will be insufficient to meet required payment of principal and interest. In the past, cash flow from operations had been sufficient to meet payment obligations and/or we have been able to roll over our borrowings. There is however no assurance that
we will be able to do so in the future. We may also underestimate our capital requirements and other expenditures or overestimate our future cash flows. In such event, additional capital, debt or other forms of financing may be required for our
working capital. If any of the aforesaid events occur and we are unable for any reason to raise additional capital, debt or other financing to meet our working capital requirements, our business, operating results, liquidity and financial position
will be adversely affected.
We will incur capital expenditures in the future in connection with our growth plans and therefore may require additional financing.
To grow our sales volume, we need to increase our raw material supplies and strengthen our commitment to our research and development efforts to accelerate new product development. We plan to solve our raw materials shortage through either the
building of new plasma collection stations or through scaling up our existing collection stations, both of which will require substantial capital expenditures. We anticipate that our capital expenditure for the next 12 months will be approximately
$2.5 million. Such expenditures are likely to be incurred in advance of any increase in sales. Our revenue may not increase after these capital expenditures are incurred. This will depend on, among other factors, on our ability to maintain or
achieve high capacity utilization rates. Any failure to increase our revenue after incurring capital expenditure to expand production capacity will reduce our profitability.
We may need to obtain additional debt or equity financing which may result in dilution to our stockholders and have a material adverse economic effect on our business.
We may need to obtain additional debt or equity financing to fund our capital expenditures. Additional equity financing may result in dilution to our shareholders. Additional debt financing may be required, which, if obtained, may:
limit our ability to pay dividends or require us to seek consents for the payment of dividends;
increase our vulnerability to general adverse economic and industry conditions;
limit our ability to pursue our growth plan;
require us to dedicate a substantial portion of our cash flow from operations as payment for our debt, thereby reducing availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and/or
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limit our flexibility in planning for, or reacting to, changes in our business and our industry.
We cannot assure you that we will be able to obtain the additional financing on terms that are acceptable to us.
RISKS RELATING TO OUR INDUSTRY
If our supply of quality plasma is interrupted, our results of operations and profitability will be adversely affected.
The production of plasma-based biopharmaceutical products relies on the supply of plasma of suitable quality. For the years ended December 31, 2008 and 2007, the cost of plasma used by us for production accounted for approximately 76% and 73%,
respectively, of total production cost. The supply and market prices of plasma may be adversely affected by factors such as regulatory restrictions, weather conditions or outbreak of diseases which would impact our costs of production. We may not be
able to pass on any resulting increase in costs to our customers and therefore any substantial fluctuation in supply or market prices of plasma may adversely affect our results of operations and profitability.
The biopharmaceutical industry in the PRC is strictly regulated and changes in such regulations may have an adverse effect on our business.
The biopharmaceutical industry in the PRC is strictly regulated by the government. The regulatory regime, such as administrative approval of medicines and production approvals, comprises of series of regulations and administrative rules. The PRC
regulatory authorities may amend such regulations and administrative rules and promulgate new regulations and administrative rules from time to time. Changes in these regulations and administrative rules could have a significant impact on our
business. Such changes may have any adverse impact on our business.
We may not be able to carry on our business if we lose any of the permits and licenses required by the PRC Government in order to carry on our business.
All pharmaceutical manufacturing and distribution enterprises in the PRC are required to obtain from various PRC governmental authorities certain permits and licenses, including, in the case of manufacturing enterprises, a Pharmaceutical
Manufacturing Permit and, in the case of distribution enterprises, a Pharmaceutical Distribution Permit.
We have obtained permits and licenses and the GMP certificates, required for the manufacture of our pharmaceutical products. These permits and licenses held by us are subject to periodic renewal and/or reassessment by the relevant PRC Government
authorities and the standards of compliance required in relation thereto may from time to time be subject to changes. We intend to apply for the renewal of such permits and licenses when required by applicable laws and regulations. Any changes in
compliance standards, or any new laws or regulations that may prohibit or render it more restrictive for us to conduct our business or increase our compliance costs may adversely affect our operations or profitability. Any failure by us to obtain
such renewals may have a material adverse effect on the operation of our business. In addition, we may not be able to carry on business without such permits and business licenses being renewed.
We may encounter increased competition from both local and overseas pharmaceutical enterprises as a result of a relaxation of the PRC regulatory approval process for plasma-based biopharmaceutical products or a relaxation of international
trade restrictions. A change in our competitive environment could adversely affect our profitability and prospects.
Our continued ability to compete depends on the development of the plasma-based biopharmaceutical manufacturing industry in China. The plasma-based biopharmaceutical manufacturing industry in China is highly regulated by both provincial and central
governments. Prior to engaging in the collection and production of plasma products, companies such as ours are required to obtain collection permits from the central health department and production permits and certificates for each new product
formulation from the various provincial food and drug authorities. We have the advantage of being already approved by the state to collect plasma from human donors and manufacture and sell plasma-based biopharmaceutical products in Shandong
Province, and our research and development department has become familiar with the provincial product approval process. However, although we
believe that the regulatory requirements pose a competitive barrier to entry into the biopharmaceutical industry, over time there may be new entrants. If the government relaxes these restrictions and allow more competitors to enter into the market,
these competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than us. Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors
drastically reduce prices; or (iii) competitors develop new products having comparable medicinal applications or therapeutic effects which are more effective or less costly than those produced by us.
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In addition we expect that competition from imported products will increase as a result of a trend towards lower import tariffs and China's admission as a member of the WTO in December 2001. We believe that lower import tariffs will result in
more affordable pricing for imported biopharmaceutical products manufactured overseas as compared to domestically manufactured products such as ours. In addition, China's membership in the WTO makes it more accessible to foreign
biopharmaceutical manufacturers who may wish to set up production facilities in the PRC and compete directly with domestic manufacturers. The expected increased supply of both domestic and foreign competitively priced biopharmaceutical products in
the PRC will result in increased competition. There is no assurance that our strategies to remain competitive can be implemented successfully as scheduled or at all. Our inability to remain competitive may have an adverse effect on our profitability
and prospects.
If we do not receive PRC governmental approval to increase the retail prices of certain of our biopharmaceutical products our revenues may be adversely affected.
Retail prices of certain of our biopharmaceutical products in the PRC are subject to the control of the relevant central and provincial price administration authorities. The actual price for any given price-controlled product set by manufacturers,
wholesalers and retailers cannot exceed the price ceiling imposed in accordance with the applicable government price control rules. Only those pharmaceutical products which are included in the Insurance Catalogue administered at the central or
provincial level are subject to price control.
Our two principal product categories, human albumin and human rabies immunoglobulin, which accounted for a total of approximately 65.5% of our total revenues for the year ended December 31, 2008, were subject to national price control regulations in
the PRC. Hence, the prices of those products could not be increased at our discretion above the relevant controlled retail price ceiling without prior governmental approval. This, in turn, may affect the ex-factory prices set by us for our products
and we therefore do not have unfettered freedom to maximize our profits. It is uncertain whether we will be able to obtain necessary approvals to increase the price of any of our products.
RISKS RELATED TO DOING BUSINESS IN CHINA
Changes in China's political or economic situation could harm us and our operating results.
Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or
damage our operations and profitability. Some of the things that could have this effect are:
Level of government involvement in the economy;
Control of foreign exchange;
Methods of allocating resources;
Balance of payments position;
International trade restrictions; and
International conflict.
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways. For example, state-owned enterprises still constitute a large portion of the Chinese
economy and weak corporate governance and a lack of flexible currency exchange
policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of the OECD member countries.
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Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.
We conduct substantially all of our business through our operating subsidiaries in the PRC. Our operating subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to
foreign-invested enterprises. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly
enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of
these laws, regulations and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management
attention. In addition, all of our executive officers and all of our directors are residents of China and not of the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be
difficult for investors to affect service of process in the United States or to enforce a judgment obtained in the United States against our Chinese operations and subsidiaries.
You may have difficulty enforcing judgments against us.
We are a Delaware holding company and most of our assets are located outside of the United States. Most of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries
other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also
be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial
majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law, has advised us that the
recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties
between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United
States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national
sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.
The PRC government exerts substantial influence over the manner in which we must conduct our business activities.
The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and
regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and
regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our
part to ensure our compliance with such regulations or interpretations.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies,
could have a significant effect on economic conditions in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.
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Future inflation in China may inhibit our ability to conduct business in China.
In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2% . These factors have
led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government
to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.
Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.
The majority of our revenues will be settled in RMB and U.S. dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or
other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction
that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account
items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese
regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.
Fluctuations in exchange rates could adversely affect our business and the value of our securities.
The value of our common stock will be indirectly affected by the foreign exchange rate between U.S. dollars and RMB and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of
the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the
relative value of any dividend we issue that will be exchanged into U.S. dollars as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.
Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may
appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in
the foreign exchange market.
Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability
and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our
ability to convert RMB into foreign currencies.
Currently, some of our raw materials and major equipment are imported. In the event that the U.S. dollars appreciate against RMB, our costs will increase. If we cannot pass the resulting cost increases on to our customers, our profitability and
operating results will suffer. In addition, if our sales to international customers grow, we will be increasingly subject to the risk of foreign currency depreciation.
Restrictions under PRC law on our PRC subsidiaries' ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to
you, and otherwise fund and conduct our businesses.
Substantially all of our revenues are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. PRC legal restrictions permit payments
of dividend by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at
least 10% of our annual after-tax profits determined in
accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in
the form of loans, advances or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our
business, pay dividends and otherwise fund and conduct our business.
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Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to
inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us or otherwise materially adversely affect us.
In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China,
generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity
financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by (1)
purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire "control" over domestic companies or assets, even in the absence of legal ownership; (2) adding requirements
relating to the source of the PRC resident's funds used to establish or acquire the offshore entity; covering the use of existing offshore entities for offshore financings; (3) purporting to cover situations in which an offshore SPV establishes
a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and (4) making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration,
notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and
acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was
established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended
indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the
requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV's
affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.
We believe our stockholders who are PRC residents as defined in Circular 75 have registered with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC
subsidiaries. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals
required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For
example, our present and prospective PRC subsidiaries' ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC
resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect
stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to
fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries' ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and
prospects.
Under the New EIT Law, we may be classified as a "resident enterprise" of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.
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China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with "de facto management
bodies" within China is considered a "resident enterprise," meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto
management as "substantial and overall management and control over the production and operations, personnel, accounting, and properties" of the enterprise.
On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto
Management Bodies, or the Notice, further interpreting the application of the New EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities.  Pursuant to the Notice, an enterprise incorporated in an offshore
jurisdiction and controlled by a Chinese enterprise or group will be classified as a "non-domestically incorporated resident enterprise" if (i) its senior management in charge of daily operations reside or perform their duties mainly in
China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least
half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying
dividends to its non-PRC shareholders.  However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically
incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.
We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a "resident enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could
follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing
proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as "tax-exempt
income," we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of
outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new "resident enterprise" classification could result
in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.  We are actively monitoring the possibility of
"resident enterprise" treatment for the 2008 tax year and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.
If we were treated as a "resident enterprise" by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.
We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute,
for the purpose of obtaining or retaining business. We have operations, agreements with third parties and we make most of our sales in China. PRC also strictly prohibits bribery of government officials. Our activities in China create the risk of
unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices
by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held
responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
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RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY
Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity.
Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market
available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our
common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing.
We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain
exemptions. If our common stock becomes a "penny stock", we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses).
For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability
of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made
about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stock.
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors" above.
In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to
future events and are based on assumptions subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Also, forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus, or that we filed as exhibits to the registration
statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
- 26 -
Except as required by law, we assume no obligation to update
any forward-looking statements publicly, or to update the reasons actual results
could differ materially from those anticipated in any forward-looking
statements, even if new information becomes available in the future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock
covered by this prospectus. To the extent that the selling stockholders
exercise, for cash, all of the warrants covering the 1,194,268 shares of common
stock registered for resale under this prospectus, we would receive
approximately $5.7 million in the aggregate from such exercises. We intend to
use such proceeds for general corporate and working capital purposes, such as
for the purchase of plasma and other raw materials used in the production of our
biopharmaceutical products.
DIVIDEND POLICY
We have never declared dividends or paid cash dividends. Any
gains on an investment in our common stock will likely occur through an increase
in our stock price, which may or may not occur. Our board of directors will make
any future decisions regarding dividends. Even if our board of directors decides
to pay dividends, the form, frequency and amount will depend upon our future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that the board of
directors may deem relevant. We currently intend to retain and use any future
earnings for the development and expansion of our business and do not anticipate
paying any cash dividends in the near future.
MARKET FOR OUR COMMON STOCK
Our common stock is quoted on the OTCBB under the symbol
"CBPO," but has not been traded except on a limited and sporadic basis. The
CUSIP number is 16938C 10 6.
The following table sets forth, for the periods indicated, the
high and low closing prices of our common stock. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
Closing Prices
(1
)
High
Low
Year Ended December 31, 2009
First Quarter
2.45
1.69
Second Quarter
5.00
2.25
Third Quarter (through July
      15, 2009)
4.18
3.85
Year Ended December 31, 2008
First Quarter
5.85
3.30
Second Quarter
4.32
2.76
Third Quarter
4.70
2.00
Fourth Quarter
2.79
1.26
Year Ended December 31,
      2007
First Quarter
N/A
N/A
Second Quarter
3.15
2.70
Third Quarter
3.40
2.70
Fourth Quarter
15.00
3.80
__________________
(1)
The above tables set forth the range of high and low
      closing bid prices per share of our common stock as reported by
      www.quotemedia.com for the periods
indicated.
All of the shares being registered in this offering may be sold
without restriction under the Securities Act, so long as the registration
statement of which this prospectus is a part is, and remains, effective.
We currently have outstanding 21,474,942 shares of common
stock, all of which can currently be sold under Rule 144.
- 27 -
We plan to furnish our stockholders with an annual report for each fiscal year ending December 31 containing financial statements audited by our independent certified public accountants. We are subject to the information reporting requirements of
the Exchange Act. As such, we file annual, quarterly and current reports and other documents with the SEC. We intend to maintain compliance with the periodic reporting requirements of the Exchange Act.
As of July 15, 2009, there were approximately 450 stockholders of record of our common stock. The number of record holders does not include persons who held our common stock in nominee or "street name" accounts through brokers.
DILUTION
Our net tangible book value per share of common stock as of March 31, 2009 was $2.02. Net tangible book value per share is determined by dividing our net tangible book value (total assets less intangible assets including knowhow,
trademarks and copyrights and less total liabilities) by the number of outstanding shares of our capital stock. Since this offering is being made solely by the selling stockholders and none of the proceeds will be paid to us, our net tangible book
value will be unaffected by this offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a biopharmaceutical company and through our indirect Chinese subsidiaries, Shandong Taibang and Qianfeng, we are principally engaged in the research, development and manufacturing of plasma-based pharmaceutical products in China. Shandong
Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province and Qianfeng operates in Guizhou Province. Our minority owned subsidiary, Huitian, operates from facilities in Xi'an Province. The plasma-based
biopharmaceutical manufacturing industry in China is highly regulated by both the provincial and central governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma from human
donors to finished products. Our principal products include our approved human albumin and immunoglobulin products.
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.
We sell our products to customers in the PRC, mainly hospitals and inoculation centers. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended December
31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.
We operate and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis.
- 28 -
All our business has been conducted in Renminbi, the official currency of China.  Renminbi is still not a free floating currency. The value of Renminbi is subject to changes in the Chinese government's policies and depends to a large extent on
China's domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. dollars has generally been stable, and Renminbi
has appreciated against the U.S. dollar since July 2005.
Principal Factors Affecting Our Financial Condition
The following are key factors that affect our financial condition and results of operations and we believe them to be important to the understanding of our business:
Global Financial Crisis
The ongoing downturn in global financial markets has is expected to slow down China's GDP growth, and may have an adverse effect on the demand for our products which are still not affordable to many PRC patients. If the current global economic
slowdown continues and a depressed economic environment make our products less affordable to more patients or result in an overall decreased demand for our products, such reductions and disruptions could have a material adverse effect on our
projected total sales increase and deteriorate our profit margins.
We believe that due to the rate of attrition of non-compliant companies in the wake of increased governmental regulations imposed on our industry, we have not yet seen a decline in the demand for our products. However, we can give no assurance that
this demand for our products will continue.
Raw Material Prices
The primary raw material used in the production of our albumin and immunoglobulin products is human plasma. These products are still not affordable to many PRC patients. As China's economy grows, we expect more Chinese people will become consumers
of medical treatments and procedures, including procedures requiring the use of human plasma, resulting in increased demand for human plasma. Collection of human plasma in China is regulated and until recently, only licensed Plasmapheresis stations
owned and operated by the government could collect human plasma. Each collection station was only allowed to supply plasma to the one manufacturer that has signed the "Quality Responsibility" statement with them. The price of human plasma
is negotiated on an annual basis and is determined by a number of factors including, but not limited to, the cost of operating the collection stations, the nutritional supplement fee awarded to the donors for each donation, and the anticipated
volume of total plasma donated. However, in March 2006, the Ministry of Health promulgated certain "Measures on Reforming Plasma Collection Stations," or the Blood Collection Measures, whereby the ownership and management of PRC plasma
stations are required to be transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the State. Plasma stations that did not complete their reform by December 31, 2006, risked
revocation of their license to collect plasma.
In December 2006, we acquired five of the six then existing plasma stations in Shandong. On January 1, 2007 we obtained the permit to operate these stations. These acquisitions have allowed us to have direct influence on the operation of these
collection stations and secure a stable source of plasma supply for production. In April 2007, we acquired two plasma stations in Guangxi Province, and we obtained permit to operate them.
The foregoing acquisitions have led to an increase in our plasma supply and did not result in any material differences in our cost structure. Due to current market conditions, we have generally been able to pass substantially all cost increases in
recent years on to our customers.
Prices of and Demand for Our Products
In recent years, due to increased regulatory restrictions and market demand, we have been able to increase the selling price of most of our key products. The demand for our products is largely affected by the general economic conditions in China
because they are still not affordable to many patients. As China's economy grows, we expect more Chinese people will become consumers of medical treatments and procedures, including procedures requiring human plasma. A significant improvement in the
economic environment in China will likely improve consumer income which in turn would make our products more affordable and consequently increase the demand for our
products. We have been able to expand our product range and markets by introducing new products required by customers. We believe that our technical expertise is important in introducing products that are in demand.
- 29 -
Production Capacity
Our sales volume is limited by our annual production capacity. As we grow our business in the future, our ability to fulfill additional and larger orders will depend on our ability to increase our production capacity.  Our plan to expand our
production capacity will depend on, inter alia, the availability of capital to meet our needs of expansion or upgrading of production lines, and the availability of stable plasma supply.
As of December 2008, our production capacity was 700 metric tons per annum. We estimate that the production capacity of our major competitors ranges from 300 tons to 1,000 tons per annum.  Due to the shortage of raw material supply, our current
production capacity should be sufficient for next couple years.
Competition
We are subject to intense competition. There are both local and overseas pharmaceutical enterprises that are engaged in the manufacture and sale of potential substitute or similar biopharmaceutical products as our products in the PRC. These
competitors may have more capital, better research and development resources, manufacturing and marketing capability and experience than we do. In our industry, we compete based upon product quality, product cost, ability to produce a diverse range
of products and logistical capabilities.
We believe that we have strengthened our position in the marketplace with our recent acquisition of a 90% equity interest in Dalin and its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest in Huitian, Xi'an-based
biopharmaceutical company.
Our profitability may be adversely affected if (i) competition intensifies; (ii) competitors drastically reduce prices; or (iii) competitors develop new products or product substitutes with comparable medicinal applications or therapeutic effects
which are more effective or less costly than those produced by us. Please refer to "Competition" for more information regarding this factor.
Taxation
United States
and
British Virgin Islands
We are subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as we have no income taxable in the United States. Our subsidiary, Logic Express Ltd., was incorporated in the BVI and under
the current laws of the BVI, is not subject to income taxes.
China
Before the implementation of the New EIT Law, Foreign Invested Enterprises, or FIEs, established in the PRC are generally subject to an enterprise income tax, or EIT, rate of 33.0%, which includes a 30.0% state income tax and a 3.0% local income
tax. The New EIT Law imposes a unified EIT of 25.0% on all domestic enterprises and FIEs, unless they qualify under certain limited exceptions. Therefore, nearly all FIEs are subject to the new tax rate alongside other domestic businesses rather
than benefiting from the old tax laws applicable to FIEs, and its associated preferential tax treatments, beginning January 1, 2008.
Despite these pending changes, the New EIT Law gives the FIEs established before March 16, 2007, or Old FIEs, such as our 82.76% owned subsidiary Shandong Taibang, a five-year grandfather period during which they can continue to enjoy their existing
preferential tax treatment. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition,
the Old FIEs that are eligible for the "two-year exemption and three-year half reduction" or "five-year exemption and five-year half-reduction" under the original EIT law, are allowed to remain to enjoy their preference until
these holidays expire. The discontinuation of any such special or preferential tax treatment or other incentives would have an adverse effect on any organization's business, fiscal condition and current operations in China.
- 30 -
Under the New EIT Law, dividend distributions paid out of
earnings from our PRC subsidiaries are subject to a withholding tax at 10%. This
new dividend withholding tax, however, will only be levied on our PRC subsidiary
in respect of profits earned in 2008 onwards. Profits distributed after January
1, 2008 but related to financial results generated in the year ended December
31, 2007 and prior years will not be subject to dividend withholding tax.
In addition to the changes to the current tax structure, under
the New EIT Law, an enterprise established outside of China with "de facto
management bodies" within China is considered a resident enterprise and will
normally be subject to an EIT of 25.0% on its global income. The implementing
rules define the term "de facto management bodies" as "an establishment that
exercises, in substance, overall management and control over the production,
business, personnel, accounting, etc., of a Chinese enterprise." If the PRC tax
authorities subsequently determine that the Company should be classified as a
resident enterprise, then our global income will be subject to PRC income tax of
25.0% .
As a sino-foreign joint venture company, Shandong Taibang has
been granted a preferential tax holiday by the Tax Bureau of the PRC as of 2003.
Accordingly, Shandong Taibang is entitled to tax concessions from 2003 whereby
the profit for the first two financial years beginning with the first
profit-making year is exempt from income tax in the PRC, and the profit for each
of the subsequent three financial years is taxed at 50% of the prevailing state
income tax rate. Local income tax of 3% is exempted for five years starting from
the first profit-making year. Shandong Taibang will be allowed the benefits of
tax holidays under the grandfather treatment over a five-year transition period,
and the applicable income rate will be 25% after the tax holiday. According to
the PRC's central government policy, new or high technology companies will enjoy
preferential tax treatment of 15%, instead of 25%. On February 12, 2009,
Shandong Taibang received the new technology or high technology certification
from Shandong provincial government. The Certification allows the Company to
receive the 15% preferential income tax rate, for a period of three years
starting from January 1, 2008.
Results of Operations
The following tables set forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
revenues.
All amounts, other than percentages, in U.S. dollars
Three Months Ended
      March 31,
Years Ended December
      31,
2009
2008
2008
2007
(unaudited)
(unaudited)
Revenue
$
21,148,598
$
7,849,007
$
46,751,160
$
32,398,669
Cost of Revenue
6,214,930
1,948,898
14,040,602
9,945,921
Gross Profit
14,933,668
5,900,109
32,710,558
22,452,748
Operating Expenses:
Selling
579,496
494,529
2,212,073
4,434,721
General and
    administrative
3,795,534
1,584,128
7,684,493
4,651,434
Research and development
467,727
183,782
1,166,494
609,178
Stock-based compensation (general and administrative)
27,373
-
1,311,727
-
Total Operating Expenses
4,870,130
2,262,439
12,374,787
9,695,333
Income from Operations
10,063,538
3,637,670
20,335,771
12,757,415
Other Expense (Income):
Interest Expense (Income), net
370,853
22,973
373,497
88,686
Other Expense (Income), net
51,315
412
251,390
422,891
Equity in income of unconsolidated affiliate
(40,247
)
-
(175,231
)
-
Change in fair value of
      warrant liabilities
393,023
-
-
-
Total Other Expense
774,944
23,385
449,656
511,577
Income Before Taxes and
      Noncontrolling Interest
9,288,594
3,614,285
19,886,115
12,245,838
Provision for income taxes
2,030,194
740,482
4,596,603
2,074,560
Net income attributable to noncontrolling interest
3,000,082
606,003
3,303,841
1,991,902
Net Income attributable to
    controlling interest
4,258,318
2,267,800
11,985,671
8,179,376
- 31 -
As a percentage of Revenues
Three Months Ended
      March 31,
Years Ended December
      31,
2009
2008
(unaudited)
(unaudited)
2008
2007
Revenue:
100%
100%
100%
100%
Cost of Revenue:
29.39%
24.83%
30.03%
30.70%
Gross Profit
70.61%
75.17%
69.97%
69.30%
Operating Expenses:
Selling
2.74%
6.30%
4.73%
13.69%
General and administrative
17.95%
20.18%
16.44%
14.36%
Research and
      development
2.21%
2.34%
2.50%
1.88%
Stock-based
      compensation(general and administrative)
0.13%
-
2.81%
-
Total Operating
      Expenses
23.03%
28.82%
26.47%
29.93%
Income from Operations
47.58%
46.35%
43.50%
39.38%
Other
      Expense
(
Income
)
Interest expense(Income)
1.75%
0.29%
0.80%
0.27%
Other expense(Income)
0.24%
0.01%
0.54%
1.31%
Equity in income of unconsolidated affiliate
(0.19%
)
-
(0.37%
)
-
Change in fair value of
      warrant liabilities
1.86%
-
-
-
Total Other Expense
3.66%
0.30%
0.96%
1.58%
Income Before Taxes and
      Noncontrolling Interest
43.92%
46.05%
42.54%
37.80%
Provision for income taxes
9.60%
9.43%
9,83%
6.40%
Net income attributable to noncontrolling interest
14.19%
7.72%
7.07%
6.15%
Net Income attributable to controlling
    interest
20.14%
28.89%
25.64%
25.25%
For the Three-Month Periods Ended March 31, 2009 and 2008
(Unaudited)
The following tables set forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of
sales revenue and key components of our revenue for the periods indicated in
dollars. The financial data for the three months ended March 31, 2009 reflect
the operating results of the Company and its majority-owned subsidiaries,
including Dalin, while the financial data for the same period in 2008 only
reflect the operating results of the Company and its subsidiaries Logic Express
and Taibang.
Three Months
$
%
Ended March 31,
Increase
Increase
2009
2008
(Decrease)
(Decrease)
Revenue
$
21,148,598
$
7,849,007
$
13,299,591
169.4%
Cost of revenue
6,214,930
1,948,898
4,266,032
218.9%
Gross profit
14,933,668
5,900,109
9,033,559
153.1%
Gross profit as a percentage of revenue
70.6%
75.2%
Operating expenses
4,870,130
2,262,439
2,607,691
115.3%
Other expense
774,944
23,385
751,559
3213.9%
Income before taxes and
      noncontrolling interest
9,288,594
3,614,285
5,674,309
157.0%
Income taxes
2,030,194
740,482
1,289,712
174.2%
Net income before
      noncontrolling interest
$
7,258,400
$
2,873,803
$
4,384,597
152.6%
Revenues
. Our revenues are derived primarily from the
sales of our human albumin and immunoglobulin products. Our revenues increased
169.4%, or $13,299,591, to $21,148,598 for the three months ended March 31,
2009, compared to revenues of $7,849,007 for the three months ended March 31,
2008. The increase in revenues during the first quarter of 2009 is primarily
attributable to a general increase in the price of plasma based products, but
was partially offset by a decrease in our sales volume for two of our products.
Among the factors that contributed to the growth in revenue, foreign exchange
translation accounted for 12.4% of the increase. Our first quarter financial
results also benefited from the consolidation of Dalin, which we acquired in the
first quarter of 2009. Dalin
contributed approximately $9.5 million in revenue, which accounted for approximately 44.6% of our total revenue for the first quarter of 2009. All of our approved products, except human hepatitis B immunoglobulin, recorded price increases
ranging from 3.5% to 49.2% . For the quarter ended March 31, 2009, the average price for our approved human albumin products, which contributed 58.2% to our total revenues, increased 3.5%, the average price for our approved human immunoglobulin for
intravenous injection products, which contributed 25.4% to our revenues, increased 14.7%, and the average price for our approved human tetanus immunoglobulin products, which contributed 4.9% to our revenue, increased 34.3%, as compared to the same
period in 2008. On July 1, 2008, the SFDA implemented the new 90-day quarantine period on plasma raw material. This new measure further tightens the raw material that is available for production, and has adversely impacted the already short supply
of plasma-based products. As a result, during the first quarter of 2009, the supply of plasma-based products remained very tight industry-wide.
- 32 -
The continuing price increase of our products since 2008 was primarily attributable to the government's stringent control on the quality standard of the plasma-based production industry, which resulted in a shortage in the supply of finished
products. We were able to adjust our production plan to take advantage of the limited market supply of plasma resources to realize higher profit margins. In addition, there is a shortage in the market supply for human albumin products which has
increased the value of our products in the market place. The plasma-based industry has been immune from the impact of the on-going global financial crisis as the demand for our products has out-paced supply. As a result, our selling price, cost of
revenue and operating expenses during the first quarter of 2009 were not impacted by the global financial turmoil. With the acquisition of Dalin, and its operating subsidiary Qianfeng, the Company is better situated to serve its existing and new
customers with expanded production capacity and market coverage. Our management expects that our revenue growth will remain strong for the remainder of 2009.
Cost of Revenues
. Our cost of sales increased $4,266,032, or 218.9%, to $6,214,930 for the quarter ended March 31, 2009, from $1,948,898 during the same period in 2008. This increase was mainly due to a 14.5% increase in foreign
exchange translation, in addition to an actual 204.4% increase in cost of revenues. The increase in cost of revenues is primarily due to our consolidation of Dalin and the increase in the cost of raw materials during the 2009 period. Cost of
revenues as a percentage of sales was 29.4% for the quarter ended March 31, 2009, as compared to 24.8% during the same period in 2008. The increase in cost of revenues as a percentage of sales is primarily due to the increase in raw material costs
in connection with the expansion of our donor base during the 2009 period. Our increased cost of sales reflects approximately 10% increase of donor compensation since beginning of 2008.
Gross Profit
. Gross profit increased by $9,033,559, or 153.1%, to $14,933,668 for the quarter ended March 31, 2009, from $5,900,109 for the same period in 2008. As a percentage of sales revenue, our gross profit margin decreased
by 4.6% to 70.6% for the quarter ended March 31, 2009, from 75.2% for the same period in 2008. The decrease in our gross profit as a percentage of revenues is due primarily to the increase in our raw material costs, which was partially offset by the
general increase in the price of our products.
Operating Expenses
. Our total operating expenses increased by $2,607,691, or 115.3%, to $4,870,130 for the quarter ended March 31, 2009, from $2,262,439 for the same period in 2008. The increase was primarily attributable to the
141.3% increase in our general and administrative expenses during the 2009 period, as well as the 17.2% increase in selling expense. As a percentage of sales revenue, total operating expenses decreased by 5.8% to 23.0% for the quarter ended March
31, 2009, from 28.8% for the same period in 2008.
Selling Expenses
. For the quarter ended March 31, 2009, our selling expenses increased to $579,496, from $494,529 for the quarter ended March 31, 2008, an increase of $84,967, or 17.2% . As a
percentage of sales, our selling expenses for the quarter ended March 31, 2009 decreased by 3.6%, to 2.7%, from 6.3% for first quarter 2008. The increase in selling expenses is due primarily to our consolidation of Dalin's selling activities as
well as more efforts spent on broadening new hospital customers. The decrease in selling expenses as a percentage of sales is due to our expanded sales following the Dalin acquisition.
General and Administrative Expenses
. For the three months ended March 31, 2009, our general and administrative expenses increased to $3,822,907, from $1,584,128 for the quarter ended March 31, 2008, a
$2,238,779, or 141.0% increase. General and administrative expenses as a percentage of sales decreased by 2.1% to 18.1% for the first quarter of 2009, from 20.2% for the same period in 2008. The dollar increase was mainly due to an increase in
our personnel-related costs and extra depreciation and amortization expenses in connection with our acquisition of Dalin as result of fair value adjustments as well as additional professional service charge related to the acquisition of Dalin.
Non-cash employee compensation for the quarter ended March 31, 2009 increased to $27,373, from $0 for the same period in 2008, primarily as a result of
our adoption of the 2008 Plan and the grants to employees, consultants and
directors made thereunder. The $27,373 compensation expense, which was included
in the General and Administrative Expenses, represents the amortization of the
compensation expense related to the grant of options to the independent
directors.
- 33 -
Research and Development
Expenses
.
For the quarter ended March 31, 2009 and 2008, our research
and development expenses were $467,727 and $183,782, respectively, an increase
of $283,945 or 154.5% . As a percentage of revenues, our research and
development expenses for the quarter ended March 31, 2009 and 2008 were 2.2% and
2.3%, respectively. The dollar increase was due primarily to the consolidation
of Dalin and increased costs from continuing clinical trial on new products.
Change in Fair Value of Derivative Liability.
The
Company analyzes all financial instruments with features of both liabilities and
equity under FAS 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity," FAS 133 and EITF 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock." Before the adoption of EITF 07-5
"Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity's Own Stock", the warrants issued in 2006 did not require bifurcation or
result in liability accounting. However, with the recent adoption of EITF 07-5,
due to the strike price of outstanding warrants is denominated in USD other than
the Company's functional currency, RMB, the denomination effect feature must be
bifurcated from its host instrument and accounted for separately as a derivative
liability. The Company has followed the criteria in EITF 07-05 and recorded the
fair value of these warrants as "derivative liability" in the accompanying
consolidated financial statements. The changes in the values of these warrants
are shown in the accompanying consolidated statements of income and other
comprehensive income. For the three months ended March 31, 2009 and 2008, the
Company recognized a loss in the change in fair value of derivative liability in
the amounts of $393,023 and $0, respectively.
Interest Expense (income), net.
Our net of interest
expense increased $347,880 to $370,853 for the quarter ended March 31, 2009,
from $22,973 for the same period in 2008. The increase in interest expense is
primarily due to financing related to the acquisition of Dalin.
Income Tax Expense.
Our provision for income taxes
increased $1,289,712, or 174.2%, to $2,030,194 for the quarter ended March 31,
2009, from $740,482 for the same period in 2008. Our effective tax rate for the
quarter ended March 31, 2009 and 2008 was 21.9% and 20.5%, respectively.
Net Income before Non-Controlling Interest.
Our net
income before non-controlling interest increased $4,384,597, or 152.6%, to
$7,258,400 for the quarter ended March 31, 2009, from $2,873,803 for the same
period in 2008. Income before taxes and non-controlling interest as a percentage
of revenues was 34.3% and 36.6% for the quarter ended March 31, 2009 and 2008,
respectively. The increase is due directly to an increase in the selling prices
of our products and the consolidation of Dalin during the quarter ended March
31, 2009.
Comparison of Fiscal Years Ended December 31, 2008 and
2007
The following table sets forth key components of our results of
operations for the fiscal years ended December 31, 2008 and 2007, both in
dollars and as a percentage of our net sales.
Fiscal Years
      Ended December 31
$
Percentage
2008
2007
Increase
Increase
(Decrease)
(Decrease)
Revenue
$
46,751,160
$
32,398,669
$
14,352,491
44.3%
Cost of revenue
14,040,602
9,945,921
4,094,681
41.2%
Gross profit
32,710,558
22,452,748
10,257,810
45.7%
Gross profit as a percentage of revenue
70.0%
69.3%
0.7%
Operating expenses
12,374,787
9,695,333
2,679,454
27.6%
Other expense
449,656
511,577
(61,921
)
(12.1%
)
Income before taxes and
      noncontrolling interest
19,886,115
12,245,838
7,640,277
62.4%
Income taxes
4,596,603
2,074,560
2,522,043
121.6%
Net income before
      noncontrolling interest
$
15,289,512
$
10,171,278
$
5,118,234
50.3%
- 34 -
Revenues
.
Our revenues are derived primarily from the sales of human albumin and various types of immunoglobulin. Our revenues increased 44.3%, or $14,352,491, to $46,751,160 for the fiscal year ended December 31, 2008,
compared to revenues of $32,398,669 for the fiscal year ended December 31, 2007. The increase in revenues during fiscal year 2008 is primarily attributable to a general increase in the price of plasma based products, which was partially offset
by a decrease in our sales volume except for one of our products. Among the factors that contributed to the growth in revenue, foreign exchange translation accounted for 12.5% of the increase. All of our approved products, except human rabies
immunoglobulin, recorded price increases ranging from 29.7% to 227.7% . For the fiscal year ended December 31, 2008, the average price for our approved human albumin products, which contributed 57.8% to our total revenues, increased 29.7%, the
average price for our approved human immunoglobulin for intravenous injection, which contributed 22.0% to our revenues, increased 102.8%, and the average price for our approved human tetanus immunoglobulin, which contributed 3.2% to our revenue,
increased 76.3%, as compared to the same period in 2007. During fiscal year 2008, the SFDA implemented the new 90-day quarantine period on plasma raw material effective July 1, 2008. This new measure further tightens the raw material that is
available for production, and has adversely impacted the already short supply of plasma-based products. As a result, volume in sales for our human albumin, human hepatitis B immunoglobulin, human rabies immunoglobulin and human tetanus
immunoglobulin products decreased by 7.4%, 41.7%, 27.1% and 30.3%, respectively, while the sales volume for approved our human immunoglobulin for intravenous use increased by 39.2%, respectively, for the fiscal year ended December 31 2008, as
compared to the same period in 2007.
Price increase of our products between 2007 and 2008 was primarily attributable to the government's stringent control on the quality standard of the plasma-based production industry, which resulted in a shortage in the supply of finished
products. We were able to adjust our production plan to take advantage of the limited market supply of plasma resources to realize higher profit margins. In addition, there is a shortage in the market supply for human albumin products which has
increased the value of our products in the market place. According to the SFDA spokeswoman, Ms. Yan Jiang Ying in a September 2007 press conference, there is a critical shortage in the market supply of human albumin due to the shortage of plasma raw
material. According to Ms. Yan, the overall market supply of human albumin was 117, 127 and 48 metric tons during 2005, 2006 and the first 8 months of 2007, respectively. Our sales of human albumin products for 2005, 2006 and 2007 were 4.2, 6.0 and
5.9 metric tons, respectively, which we believe, in light of the SFDA supply data, represents a steady increase in our market share for the periods 2005, 2006 and 2007 from 3.6%, to 4.7% and to 8.2%, respectively. The plasma-based industry has been
immune from the impact of the on-going global financial crisis as the demand for our products has out-paced supply. As a result, our selling price, cost of revenue and operating expenses during the fiscal year 2008 were not impacted by the global
financial turmoil.
Cost of Revenues
.
Our cost of sales increased $4,094,681, or 41.2%, to $14,040,602 for the year ended December 31, 2008, from $9,945,921 during the same period in 2007. This increase was mainly due to a 12.2% increase in
foreign exchange translation, in addition to the actual 28.9% increase in cost of revenues. The increase in cost of revenues is primarily due to the increase in cost of raw material. The raw material cost as a percentage of total cost of revenues is
76% in 2008, as compared to the 73% in 2007. Cost of revenues as a percentage of sales was 30.0% for the fiscal year ended December 31, 2008, as compared to 30.7% during the same period in 2007. The decrease in cost of revenue as a percentage of
sales is primarily due to the favorable selling price increase, as well as our management's ability to maintain efficiencies in our production process.
Gross Profit
.
The gross profit increased by $10,257,810, or 45.7%, to $32,710,558 for the fiscal year ended December 31, 2008 from $22,452,748 for the same period in 2007. As a percentage of sales revenue, our gross profit
increased by 0.7% to 70.0% for the fiscal year ended December 31, 2008, from 69.3% for the same period in 2007. The increase in our gross profit as a percentage of revenues is due primarily to the increase in selling prices, as well as our
management's ability to maintain efficiencies in our production process.
Operating Expenses
. Our total operating expenses increased by $2,679,454, or 27.6%, to $12,374,787 for the fiscal year ended December 31, 2008, from $9,695,333 for the same period in 2007. As a percentage of sales revenue, total
expenses decreased by 3.4% to 26.5% for the fiscal year ended December 31, 2008 from 29.9% for the same period in 2007. The increase was primarily attributable to the 65.2% increase in our general and administrative expenses during the 2008 period,
which was offset by the 50.1% decrease in selling expense.
Selling Expenses
. For the fiscal year ended December 31, 2008, our selling expenses decreased to $2,212,073, from $4,434,721 for the fiscal year ended December 31, 2007, a decrease of $2,222,648, or
50.1% . As a percentage of sales, our selling expenses for the fiscal year ended December 31, 2008 decreased by 9.0%, to 4.7%, from 13.7% for the fiscal year ended December 31, 2007. The substantial decrease in selling expenses is the reflection of
the
normalization of the marketing strategy that initiated on the third quarter of 2007. Specifically, we awarded sales bonuses of $0.36 million to sales personnel for their outstanding achievement in generating revenue in 2007. Moreover, we
aggressively launched marketing efforts by holding more conferences in conjunction with our distributors in most major cities, at an additional cost of approximately $1.4 million for the year ended December 31, 2007. In connection with these
marketing efforts, our sales force also incurred additional expenses of approximately $0.3 million. With the marketing efforts in 2007, the Company was able to obtain higher sales with a substantial lower level of selling expenses in 2008.
- 35 -
General and Administrative Expenses
. For the fiscal year ended December 31, 2008, our general and administrative expenses increased to $7,684,493, from $4,651,434 for the fiscal year ended December 31,
2007, a $3,033,059, or 65.2% increase. General and administrative expenses as a percentage of sales increased by 2.0% to 16.4% for the fiscal year 2008 from 14.4% for the fiscal year 2007. The dollar and percentage increase was mainly due to the
increase of personnel cost of $0.9 million, increase of professional expenses related to the costs of being a public reporting company of $0.2 million and write off of $0.9 million bad debt.
Research and Development Expenses
.
For the fiscal years ended December 31, 2008 and 2007, our research and development expenses were $1,166,494 and $609,178, respectively, an increase of
$557,316 or 91.5% . As a percentage of revenues, our research and development expenses for the fiscal year ended December 31, 2008 and 2007 were 2.5% and 1.9%, respectively. The dollar and percentage increase was primarily due to the cost of
research activities and the clinical trial on our new products during the period.
Non-cash Employee Compensation
. Effective May 9, 2008, our board of directors adopted the 2008 Plan under which a total of 5,000,000 shares of our common stock may be issued. During the year ended December 31,
2008, we granted an aggregate of 937,500 immediately vested options to purchase shares of our common stock to our employees and consultants under the 2008 Plan and granted ten-year options to purchase an additional 60,000 shares of common stock,
with one-half scheduled to vest on January 24, 2009 and the remaining half scheduled to vest on July 24, 2009, to our three independent directors. Non-cash employee compensation for the year ended December 31, 2008 increased to $1,311,727, from
$0 for the same period in 2007, primarily as a result of our adoption of the 2008 Plan and grants to employees and consultants made thereunder. The $1,311,727 compensation expense represents the 937,500 shares of options fully vested on June
1, 2008 and the amortization of the compensation expense of options to purchase 30,000 shares that will vest on January 24, 2009.
Income Tax Expense.
Our provision for income taxes increased $2,522,043, or 121.6%, to $4,596,603 for the year ended December 31, 2008, from $2,074,560 for the same period in 2007. Our effective tax rate for the year ended
December 31, 2008 was 23.1%, and our 2007 effective tax rate was 16.9% .
Net Income before Minority Interest.
Our net income before minority interest increased $5,118,234, or 50.3%, to $15,289,512 for the year ended December 31, 2008, from $10,171,278 for the same period in 2007. Income before taxes
and minority interest as a percentage of revenues was 32.7% and 31.4% for the year ended December 31, 2008 and 2007, respectively. The increase is due directly to an increase in the selling prices of our products and the reduction of the selling
expenses during the year ended December 31, 2008.
Liquidity and Capital Resources
As of March 31, 2009, we had cash and cash equivalents of $34.0 million, primarily consisting of cash on hand and demand deposits. The following table provides detailed information about our net cash flow for all financial statement periods
presented in this prospectus. To date, we have financed our operations primarily through cash flows from operations, augmented by short-term bank borrowings and equity contributions by our stockholders. We had six bank loans outstanding as of March
31, 2009 for the amount of approximately $16,950,050 (RMB 115,700,000). The following table sets forth a summary of our cash flows for the periods indicated:
- 36 -
Cash
      Flow
(all amounts in U.S. dollars)
For the Fiscal Year Ended
For the Three-Month
      Period Ended
December 31,
March 31,
2008
2007
2009
2008
(unaudited)
(unaudited)
Net cash provided by operating
      activities
20,020,039
12,650,904
7,082,292
2,018,879
Net cash provided by (used in) investing
      activities
(21,666,504
)
(9,210,814
)
10,388,563
(1,359,682
)
Net cash provided by (used in)
      financing activities
4,785,780
(3,122,278
)
7,647,822
(698,850
)
Effects of Exchange Rate Change in Cash
665,268
424,001
72,655
182,249
Net Increase in Cash and Cash
      Equivalents
3,804,583
741,813
25,191,332
142,596
Cash and Cash Equivalents, Beginning
5,010,033
4,268,220
8,814,616
5,010,033
Cash and Cash Equivalents, End
8,814,616
5,010,033
34,005,948
5,152,629
Operating activities
Net cash provided by operating activities was $7.1 million for
the quarter ended March 31, 2009, as compared to $2.0 million net cash provided
by operating activities for the same period in 2008. The increase in net cash
provided by operating activities was mainly due to the increase in consolidated
net income of $4.4 million, to $7.3 million for the quarter ended March 31,
2009, as compared to $2.9 million in the same period of 2008. For the quarter
ended March 31, 2009, our non-cash activities of $2.0 million and the increase
in customer deposit provided $2.9 million in net cash, which was offset by a
$3.5million increase in inventory.
Net cash provided by operating activities was $20.0 million for
the fiscal year ended December 31, 2008, as compared to $12.7 million net cash
provided by operating activities for the same period in 2007. The increase in
net cash provided by operating activities was mainly due to the increase in net
income of $3.8 million to $12.0 million for the fiscal year ended December 31,
2008, as compare to $8.2 million in the same period of 2007. For the year ended
December 31, 2008, the non-cash activities of $6.7 million and the increase in
other payables and taxes payable provided $2.7 million and 3.6 million,
respectively, in net cash, which was offset by the $4.7 million increase in
inventory.
Investing activities
Net cash provided by investing activities for the quarter ended
March 31, 2009 was $10.4 million, as compared to $1.4 million net cash used in
the same period of 2008. The increase of net cash provided by investing was
mainly attributable to the acquisition of Dalin's existing cash acquired.
Net cash used for investing activities for the fiscal year
ended December 31, 2008 was $21.7 million, as compared to $9.2 million in the
same period of 2007. The increase of net cash used for investing activities was
mainly attributable to advances for potential acquisition of $14.2 million,
payment for unconsolidated affiliate of $3.2 million, and the additional capital
expenditures in plant and equipment for production and plasma collecting
operations to support continued strong growth in our business.
Financing activities
Net cash provided by financing activities for the year ended
March 31, 2009 totaled $7.6 million as compared to $0.7 million used in
financing activities in the same period of 2008. The increase of the cash
provided by financing activities was mainly attributable to the proceeds from
long-term loans of $7.6 million, which was offset by the repayment of short-term
bank loan of $0.7 million.
Net cash provided by financing activities for the year ended
December 31, 2008 totaled $4.8 million as compared to $3.1 million used in
financing activities in the same period of 2007. The increase of the cash
provided by financing activities was mainly attributable to the proceeds from
long-term loans of $5.8 million, which was offset by the repayment of short-term
bank loan of $0.7 million.
With the bank credit facilities that are available to us and
other financing activities, we expect that cash on hand, funds generated from
our operations and funds generated from companies that we may acquire in the
future will be
sufficient to satisfy our current and future commitments for at least the next twelve months. We do not believe that we have any significant short term liquidity problems. In addition, we have an approximately $5.8 million additional bank
facility that we can draw down in the event that unforeseen liquidity requirements arise. The company believes that it will be able to secure the large majority of the financing required for the two above mentioned acquisitions from domestic bank
facilities and available cash resources.
- 37 -
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes
thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an
understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management's difficult,
subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their
significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most
significant estimates and judgments used in the preparation of our financial statements.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") 107, "Disclosures about Fair Value of Financial Instruments" requires disclosure of the fair value of financial instruments held by the Company. SFAS 107 defines financial
instruments. The Company considers the carrying amount of cash, receivables, payables including accrued liabilities and short term loans to approximate their fair values because of the short period of time between the origination of such instruments
and their expected realization and if applicable, their stated rates of interest are equivalent to interest rates currently available. SFAS 157, "Fair Value Measurements", adopted January 1, 2008, which defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The three levels are defined as follow:
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of
the financial instruments.
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value.
Revenue Recognition
We recognizes revenue when products are delivered and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or
determinable, which are generally considered to be met upon delivery and acceptance of products at the customer site. Sales are presented net of any discounts given to customers. As a policy, we do not accept any product returns and based on our
records, product returns, if any, are immaterial. Sales revenue represents the invoiced value of goods, net of a value-added tax, or VAT. All products produced by us and sold in the PRC are subject to a Chinese VAT at a rate of 6% of the gross sales
price or at a rate approved by the Chinese local government. Products distributed by Shandong Medical are subjected to a 17% VAT.
- 38 -
Inventories
Due to its unique nature, our principal raw material, human blood plasma is subject to various quality and safety control issues which include, but are not limited to, contaminations and blood born diseases. In addition, limitations of current
technology pose biological hazards inherent in plasma that have yet to be discovered, which could result in a widespread epidemic due to blood infusion. In the event that human plasma is discovered to contain pathogens or infectious agents or other
bio-hazards, we would be required to write down our inventory to net realizable value. We determine the net realizable value of our inventories on the basis of anticipated sales proceeds less estimated selling expenses. At each balance sheet date,
we evaluate inventories that may be worth less than current carrying amounts. Total inventories amounted to $26.7 million and $15.0 million as of March 31, 2009 and December 31, 2008, respectively. In order to ensure that the growing demand
for our products is met, as well as the 90-day quarantine period requirement on plasma raw material implemented by the PRC government, we have been gradually increasing our inventory level of raw materials. We strictly follow the production
processes required by government regulations resulting in the relatively high level of work-in-progress customary to our industry.
Impairment of Long-Lived Assets
We review periodically the carrying amounts of long-lived assets including property, plant and equipment, and intangible assets with finite useful lives, to assess whether they are impaired. We evaluate these assets for impairment whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable such as a change of business plan, technical obsolescence, or a period of continuous losses. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by
the amount by which the carrying amount of the asset exceeds the fair value of the asset. In determining estimates of future cash flows, significant judgment in terms of projection of future cash flows and assumptions is required.
Use of Estimates
The preparation of consolidated financial statements in accordance with US GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, we review our estimates and
assumptions, including those related to the recoverability of the carrying amount and the estimated useful lives of long-lived assets, valuation allowances for accounts receivable and realizable values for inventories. Changes in facts and
circumstances may result in revised estimates.
Contingencies
In the normal course of business, we are subject to contingencies, including, legal proceedings and claims arising out of the business that relate to a wide range of matters, including among others, product liability. We recognize a liability for
such contingency if we determine that it is probable that a loss has occurred and a reasonable estimate of the loss can be made. We may consider many factors in making these assessments, including past history and the specifics of each matter. As we
have not become aware of any product liability claim since operations commenced, we have not recognized a liability for any product liability claims.
Recent Accounting Pronouncements
Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards ("SFAS") 141R, "Business Combinations" to replace SFAS 141, "Business Combinations". SFAS 141R retains the fundamental
requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R requires an acquirer
to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces SFAS 141's cost-allocation
process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved in stages
(sometimes referred to as a step acquisition) to recognize the identifiable
assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with SFAS 141R).
- 39 -
Effective January 1, 2009, the Company adopted SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51" Certain provisions of this statement are required to be adopted
retrospectively for all periods presented. Such provisions include a requirement that the carrying value of noncontrolling interests (previously referred to as minority interests) be removed from the mezzanine section of the balance sheet and
reclassified as equity. Further, as a result of adoption on SFAS 160, net income attributable to noncontrolling interests is now excluded from the determination of consolidated net income.
Effective January 1, 2009, the Company adopted the provisions of EITF 07-5, "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock", which is effective for financial statements for fiscal years
beginning after December 15, 2008 and which replaced the previous guidance on this topic in EITF 01-6. Paragraph 11(a) of FAS 133 specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the
Company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the FAS 133 paragraph 11(a) scope exception.
In January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets." FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to remove its
exclusive reliance on "market participant" estimates of future cash flows used in determining fair value. Changing the cash flows used to analyze other-than-temporary impairment from the "market participant" view to a
holder's estimate of whether there has been a "probable" adverse change in estimated cash flows allows companies to apply reasonable judgment in assessing whether an other-than-temporary impairment has occurred. The adoption of FSP
EITF 99-20-1 did not have a material impact on the Company's consolidated financial statements because all of the Company's investments in debt securities are classified as trading securities.
In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP FAS 157-4). FSP FAS
157-4 amends SFAS 157 and provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value measurements. This FSP shall be applied prospectively with retrospective application not permitted. This FSP shall be effective for interim and annual periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting this FSP must also early adopt FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments" (FSP
FAS 115-2 and FAS 124-2). Additionally, if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments" (FSP FAS 107-1 and APB 28-1) or FSP FAS 115-2 and FAS 124-2, it
must also elect to early adopt this FSP. Effective July 1, 2009, the Company adopted FSP FAS 157-4, management is currently evaluating this new FSP but does not believe that it will have a significant impact on the determination or reporting of the
financial results.
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities," SFAS 124, "Accounting for Certain Investments Held by Not-for-Profit
Organizations," and EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets," to make the
other-than-temporary impairments guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. This FSP will replace the existing requirement that the entity's management assert it
has both the intent and ability to hold an impaired debt security until recovery with a requirement that management assert it does not have the intent to sell the security, and it is more likely than not it will not have to sell the security before
recovery of its cost basis. This FSP provides increased disclosure about the credit and noncredit components of impaired debt securities that are not expected to be sold and also requires increased and more frequent disclosures regarding expected
cash flows, credit losses, and an aging of securities with unrealized losses. Although this FSP does not result in a change in the carrying amount of debt securities, it does require that the portion of an other-than-temporary impairment not related
to a credit loss for a held-to-maturity
security be recognized in a new category of other comprehensive income and be amortized over the remaining life of the debt security as an increase in the carrying value of the security. This FSP shall be effective for interim and annual periods
ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity elects to early adopt either FSP FAS 157-4
or FSP FAS 107-1 and APB 28-1, the entity also is required to early adopt this FSP. Effective July 1, 2009, the Company adopted FSP FAS 115-2 and FAS 124-2, management is currently evaluating this new FSP but does not believe that it will have a
significant impact on the determination or reporting of the financial results.
- 40 -
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," to require disclosures about fair value of financial instruments not measured on the balance
sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this FSP, fair values for these assets and liabilities were only disclosed annually. This FSP applies to all financial instruments within the
scope of SFAS 107 and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This FSP shall be effective for interim periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2. This FSP does not require disclosures for earlier periods presented
for comparative purposes at initial adoption. In periods after initial adoption, this FSP requires comparative disclosures only for periods ending after initial adoption. Effective July 1, 2009, the Company adopted FSP FAS 107-1 and APB 28-1
Management is currently evaluating the disclosure requirements of this new FSP.
Seasonality of our Sales
Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.
Inflation
Inflation does not materially affect our business or the results of our operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our investors.
CORPORATE STRUCTURE AND HISTORY
Our Corporate Structure
We are a biopharmaceutical company and, through our indirect Chinese subsidiaries, we are principally engaged in the research, development, production and manufacturing of plasma-based pharmaceutical products in China. Shandong Taibang, our 82.8%
majority owned subsidiary, operates from our manufacturing facility located in Shandong Province, Qianfeng, the 54% majority owned subsidiary of Dalin, our 90% majority owned subsdiary, operates from facilities in Guizhou Province and Huitian, our
35% minority-owned subsidiary operates its collection facilities in Xi'an Province.
Our Corporate History
China Biologic Products, Inc. was originally incorporated on December 20, 1989 under the laws of the State of Texas as Shepherd Food Equipment, Inc. On November 20, 2000, Shepherd Food Equipment, Inc. changed its corporate name to Shepherd Food
Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003, merger between Shepherd and GRC Holdings, Inc. or GRC. In the merger, the company adopted the Articles of Incorporation and By-Laws of GRC and changed its
corporate name to GRC Holdings, Inc. On January 10, 2007, a Plan of Conversion became effective pursuant to which GRC was converted into a Delaware corporation and changed its name to China Biologic Products, Inc.
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Our Acquisition of Logic Express
On July 19, 2006, we completed a reverse acquisition with Logic Express, whereby we issued to the shareholders of Logic Express 18,484,715 shares of our common stock in exchange for 100% of the issued and outstanding shares of capital stock of Logic
Express and its majority-owned Chinese operating subsidiary, Shandong Taibang. As a result of the reverse acquisition, Logic Express became our 100% owned subsidiary and the former shareholders of Logic Express became our controlling stockholders
with 96.1% of our common stock. Shandong Taibang became our 82.76% majority-owned indirect subsidiary and is the operating company for all of our commercial operations. Shandong Taibang is a sino-foreign joint venture company established on October
23, 2002 with a registered capital of RMB80 million (then approximately $10.3 million).
The reverse acquisition is considered to be a recapitalization (issuance of stock by Logic Express for our net monetary assets) in substance, rather than a business combination. Logic Express is treated as the continuing reporting entity that
acquired the Company.
Acquisition of Plasma Stations
In December 2006, our subsidiary, Shandong Taibang, acquired all the assets of five plasma stations in Shandong Province. We obtained the permit to operate the stations in January 2007. In April 2007, Shandong Taibang acquired certain assets of two
plasma stations in Guangxi Province. The two plasma stations obtained their operating permits in February and April 2007, respectively.
We acquired the assets of these plasma stations through separate Shandong Taibang subsidiaries, specially formed for this purpose. The subsidiaries holding six of our new plasma stations are the Xia Jin Plasma Company, the Qi He Plasma Company, the
He Ze Plasma Company, the Huan Jiang Plasma Company, the Yang Gu Plasma Company, and the Zhang Qiu Plasma Company. The seventh plasma station is held in the Fang Cheng Plasma Company, which is 80% owned by Shandong Taibang and 20% owned by Lin Feng,
an unrelated third party. In January 2007, Shandong Taibang also signed a letter of intent to acquire certain assets from a third plasma station in Guangxi Province. However, we have not consummated this acquisition as the permit for this station is
in dispute, as described in "Legal Proceedings."
In June 2008, we received approval from the Guangxi Province Bureau of Health to set up a new plasma collection station in Pu Bei County, Guangxi Province. The new plasma collection station will be located in the Centralized Industry Zone of Pu Bei
County and when it becomes operational, it will replace CBP's existing Fang Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate Fang Cheng to a more strategic location to increase collection volumes.
Establishment of Shandong Medical
In September 2006, Shandong Taibang applied to establish a wholly owned subsidiary, Shandong Missile Medical Co., Ltd., or Shandong Medical, with registered capital of $384,600, fully paid on March 1, 2007. On February 7, 2007, Shandong Medical
obtained a distribution license for biological products, except for vaccine, from the Shandong Food and Drug Administration, for a license period of five years from the date of obtaining the license. The registration of Shandong Medical was
ultimately approved by Shandong Provincial Department of Foreign Trade and Economic Cooperation on July 4, 2007 and Shandong Medical was formally registered on July 19, 2007. The scope of business is wholesale of biological products, except
vaccines, with a license period of 25 years from the date of registration.
Formation of Hong Kong Subsidiary
On December 12, 2008, we established Logic Holdings (Hong Kong) Limited, or Logic Holding, our wholly-owned Hong Kong subsidiary, for the purpose of being a holding company for our majority interest in Dalin.
Dalin Acquisition and Entrustment Agreement
We completed the acquisition of 90% interest in Dalin in April 2009 upon payment of 90% of the purchase price. We are obligated to pay the remaining 10% of the purchase price, RMB 19,440,000 (approximately $2,847,960), on
or before April 9, 2010, the one-year anniversary of the local Administration for Industry and Commerce's approval of the equity transfer.
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On April 6, 2009, Logic Express entered into an equity transfer and entrustment agreement, or Entrustment Agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of Biological Products, or the Shandong Institute, the holder of
the minority interests in Shandong Taibang, pursuant to which, Logic Express agreed to permit Shandong Taibang and the Shandong Institute to participate in the indirect purchase of Qianfeng's equity interests. Under the terms of the Entrustment
Agreement, Shandong Taibang agreed to contribute 18% or RMB 35,000,000 (approximately $5,116,184) of the Dalin purchase price and the Shandong Institute agreed to contribute 12.86% or RMB 25,000,000 (approximately $3,654,917) of the Dalin
purchase price. Logic Express is obligated to repay to Shandong Taibang and the Shandong Institute their respective investment amounts on or before April 6th, 2010, along with their pro rata share, based on their percentage of the Dalin purchase
price contributed, of any distribution on the indirect equity investment in Qianfeng payable to Logic Express during 2009. Logic Express has agreed that if these investment amounts are not repaid within five days of the payment due date, then Logic
Express is obligated to pay Shandong Taibang and the Shandong Institute liquidated damages equal to 0.03% of the overdue portion of the amount due until such time as it is paid. Logic Express has also agreed to pledge 30% of its ownership in
Shandong Taibang to the Shandong Institute as security for nonpayment. If failure to repay continues for longer than 3 months after the payment due date, then the Shandong Institute will be entitled to any rights associated with the pledged
interests, including but not limited to rights of disposition and profit distribution, until such time as the investment amount has been repaid. Logic Express also provided a guarantee that Shandong Taibang and the Shandong Institute will receive no
less than a 6% return based on their original investment amount.
As part of our due diligence investigation into Dalin and Qianfeng, we discovered that our indirect interest in Qianfeng acquired under the equity transfer agreement may be diluted in the future, pending the outcome of a lawsuit brought by a
Qianfeng shareholder. The local AIC records show Dalin as a 54% shareholder of Qianfeng, however, the AIC records do not reflect a May 2007 issuance of Qianfeng's equity interests to certain investors, pursuant to a capital increase agreement.
Qianfeng received the consideration for the equity interests, but the increase in registered capital and the related issuance of the equity interest has not yet been registered with the local AIC, pending the outcome of a minority shareholder suit
against Qianfeng and its shareholders, alleging violation of the shareholder's right of first refusal in connection with the new equity issuance. For details regarding the Qianfeng shareholder suit see our disclosure under "Legal
Proceedings" herein. When the capital increase is registered with AIC, Dalin's equity interest in Qianfeng will be reduced to approximately 43.3%, and if the minority shareholder prevails in its suit against Qianfeng and its shareholders,
Dalin's interests in Qianfeng could be diluted to as low as 41.3% . Even if the minority shareholder were to prevail in its suit, the Company will be able to retain control over Qianfeng as a result of our right to appoint a majority of
Qianfeng's directors. Management does not expect this dispute to impact our ability to complete the acquisition.
Qianfeng is one of the largest plasma-based biopharmaceutical companies in China and is the only manufacturer currently operating in Guizhou Province. With a population of 39 million, Guizhou Province has historically produced the highest volumes of
plasma collection in China, because a higher proportion of its population has been willing to engage in the collection process. Guizhou Province has a total of 19 plasma collection stations in operation, collecting approximately 1,200 tons of plasma
supply every year. Qianfeng owns seven of these plasma collection stations, of which six are currently in operation and collecting approximately 250 tons of plasma supply per year, with an annual capacity of 400 tons. We intend to employ more
advanced collection techniques at these stations to improve yields and generate additional plasma supply. We believe that Qianfeng currently controls approximately 9.5% of the market for plasma-based biopharmaceutical products in China. Qianfeng is
in compliance with Good Manufacturing Practices, or GMP, standards, and has been approved by the PRC's State Food and Drug Administration or the SFDA to produce six types of plasma-based products including Human Albumin, Human Immunoglobulin,
Human Intravenous Immunoglobulin, Human Hepatitis B Immunoglobulin, Human Tetanus Immunoglobulin and Human Rabies Immune Globulin.
Huitian Acquisition
We purchased a 35% interest in Huitian at a purchase price of RMB 44,000,000 (approximately $6,446,000) in June 2009. Huitian is a manufacturer of plasma-based biopharmaceutical products in Shaanxi Province and is one of only 32 such
manufacturers in China who are government approved. Shaanxi Province, which has a population of 37 million, has had a historically high collection volume with approximately ten plasma collection stations in operation, collecting approximately 300
tons of plasma supply each year. Only four of the collection stations in Shaanxi Province are government approved and three of these are owned by Huitian. Huitian produces about 80 tons of
plasma-based products per year and has 200 tons of annual production capacity. Huitian believes that it currently controls approximately 1.2% of the market for plasma-based biopharmaceutical products in China; a factor which we believe provides
strong long-term growth potential. Huitian is in compliance with GMP standards and it is also approved by the SFDA for the production of Human Albumin, Human Immunoglobulin, Human Immunoglobulin for Intravenous Injection, and Human Hepatitis B
Immunoglobulin products.
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OUR BUSINESS
Overview
We are a biopharmaceutical company and through our indirect majority-owned Chinese subsidiary, Shandong Taibang and Qianfeng, we are principally engaged in the research, development, production and manufacturing of plasma-based pharmaceutical
products in China. Shandong Taibang operates from our manufacturing facility located in Tai'an City, Shandong Province. The plasma-based biopharmaceutical manufacturing industry in China is highly restricted by both the provincial and central
governments. Accordingly, the manufacturing process of our products is strictly monitored from the initial collection of plasma from human donors to finished products. Our principal products include our approved human albumin and immunoglobulin
products.  We also have a 35% interest in Huitian, a biopharmaceutical company based in Xi'an, Shaanxi Province, China.
We are approved to sell human albumin 20%/10ml, 20%/25ml and 20%/50ml. Human albumin is our top-selling product. Sales of these human albumin products represented approximately 57.8% and 63.5% of our total revenues, respectively, for the each of the
years ended December 31, 2008 and 2007, and approximately 58.2% and 58.1% of our total revenues, respectively, for the three months ended March 31, 2009 and 2008. Human albumin is principally used to increase blood volume while immunoglobulin is
used for certain disease preventions and cures. Shandong Taibang's approved human albumin and immunoglobulin products use human plasma as the basic raw material. Albumin has been used for almost 50 years to treat critically ill patients by
replacing lost fluid and maintaining adequate blood volume and pressure. All of our products are prescription medicines administered in the form of injections.
We sell our products to customers in the PRC, to hospitals directly or through distributors. Our sales have historically been made on the basis of short-term arrangements and our largest customers have changed over the years. For the years ended
December 31, 2008 and 2007, our top 5 customers accounted for approximately 16.2% and 14.9%, respectively, of our total revenue, and for the three months ended March 31, 2009 and 2008, our top 5 customers accounted for approximately 20.5% and 27.4%,
respectively, of our total revenue. For the years ended December 31, 2008 and 2007, our largest customer accounted for approximately 6.4% and 5.3%, of our revenue, respectively, and for the three months ended March 31, 2009 and 2008, our largest
customer accounted for approximately 7.8% and 14.9%, of our revenue, respectively. As we continue to diversify our geographic presence, customer base and product mix, we expect that our largest customers will continue to change from year to
year.
We operate and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis.
All our business has been conducted in Renminbi, the official currency of China.  Renminbi is still not a free floating currency. The value of Renminbi is subject to changes in the Chinese government's policies and depends to a large extent on
China's domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. dollars has generally been stable, and Renminbi
has appreciated against the U.S. dollar since July 2005.
Our Industry
Plasma Collection in China
The collection of human plasma in China is generally influenced by factors such as government regulations, geographical locations of collection stations, sanitary conditions of collection stations, living standards of the donors, and cultural and
religious beliefs. Until recently, only licensed Plasmapheresis stations owned and operated by the government could collect human plasma. Furthermore, each collection station was only allowed to supply plasma to the one manufacturer that had signed
the "Quality Responsibility" statement with them. However, in March 2006, the Ministry of Health promulgated certain "Measures on Reforming Plasma Collection Stations," or the Blood
Collection Measures, whereby the ownership and management of PRC plasma stations are required to be transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the PRC government.
Plasma stations that did not complete their reform by December 31, 2006 risked revocation of their license to collect plasma.
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The supply of plasma for plasma-based products in the PRC has been on the decline since 2003 from the historical high of annual supply of approximately 7,000 tons to approximately 4,000 tons. We believe that this decline is a direct result of the
government's industry reforms of the country's collection practices which led to the closure of many stations that did not meet the new industry standards. Based on reports promulgated by the PRC Ministry of Health, we estimate that the
current annual supply of plasma in China amounts to approximately 4,000 tons, as compared to 30,000 tons in the global market, with the six largest manufacturers of plasma products accounting for approximately 50% of the annual plasma collection. In
2008, revenues from the sale of plasma products in China amounted to approximately $700 million and revenues from the sale of human albumin products amounted to about $400 million. We expect that the plasma derivatives market is expect to
grow at 15% per year through 2011.
We believe that these regulatory changes have improved the quality of blood and plasma by increasing cleanliness standards at blood collection stations and instituting measures which limit illegal selling of blood. As the operation of the plasma
stations become more regulated and the donor population expands, we believe that the overall quality of raw materials, such as human albumin will continue to increase, leading to a safer, more reliable finished product.
Plasma-Based Products Industry in China
We produce approved human albumin and immunoglobulin products, with human plasma as the main ingredient. In addition to the low usage ratio of such products in China as compared to other more developed countries, there is a significant difference in
the make up and range of the plasma-based pharmaceutical products. Based on our analysis, in most developed countries like the United States, clotting factor products accounts for the majority of the plasma-based biopharmaceutical products, while in
China, human albumin products accounts for the vast majority of such products. Specifically, total clotting factor products and human albumin products, account for approximately 40% and 25%, respectively, of total the United States' annual
plasma-derived products, and account for approximately 8% and 62%, respectively, of China.
Our Business Strategy
Our mission is to become a first-class biopharmaceutical enterprise in China. To achieve this objective, we have implemented the following strategies:
Securing the supply of plasma
– Due to the shortage of plasma and the reform of the ownership of plasma stations, our immediate strategy is to negotiate and acquire plasma stations in order to secure our plasma supply. In June,
2006, we entered into letters of intent with five of the plasma stations in Shandong Province to acquire certain of their assets and we acquired those plasma stations in December 2006. Furthermore, in January 2007, we entered into three letters of
intent to acquire certain assets of three additional plasma stations in Guangxi Province, two of which we have acquired. See "Raw Materials – Plasma" below. In June 2008, we received approval from the Guangxi Province Bureau of Health
to set up a new plasma collection station in Pu Bei County, Guangxi Province. The new plasma collection station will be located in the Centralized Industry Zone of Pu Bei County and when it becomes operational, it will replace CBP's existing Fang
Cheng Plasma Collection Station, or Fang Cheng. We decided to relocate Fang Cheng to a more strategic location to increase collection volumes. During the construction period, Fang Cheng will still continue with its normal operations. With the
approval of the Centralized Industry Zone of Pu Bei County, once Fang Cheng becomes operational, we hope to expand its coverage area to secure higher collection volumes in the future.
Acquisition of competitors and/or other biologic related companies
– In addition to organic growth, acquisition is an important part of our expansion strategy. Although there are about 32 approved plasma- based biopharmaceutical
manufacturers in the market, we believe that there are only 26 manufacturers in operation, only about half of whom will be competitive. The top six manufacturers in China account for more than 50% market share. Furthermore, we believe that the
regulatory authorities are considering further reforming the industry and those smaller, less competitive manufacturers will face the possibility of having their manufacturing permits revoked by the regulators, making them potential targets for
acquisition. Also, if we are presented with appropriate
  opportunities, we may acquire additional companies, products or technologies
  in the biologic related sectors (including but not limited to medical,
  pharmaceutical and biopharmaceutical).
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Further strengthening of research and development capability –
We believe that, unlike other more developed countries like the U.S.,
  China's plasma-based biopharmaceutical products are at the initial stage of
  development. There are many other plasma-based products that are being used in
  the U.S. which are not currently being manufactured in China. We intend to
  strengthen our research and development capability so as to expand our product
  line to include higher-margin, technologically more advanced plasma-based
  biopharmaceutical products. We believe that our increased focus on research
  and development will give us a competitive advantage over our competitors
Market development and network expansion
– Leveraging on the
  high quality and excellent safety record of our products, we intend (i) to
  enhance our product penetration with our existing customers by introducing new
  products and (ii) to extend the reach of our products from our current market
  to include other provinces where we envision significant market potential.
Our Products
Our principal products are our approved human albumin and
immunoglobulin products. We are currently approved to produce 16
biopharmaceutical products in eight major categories as follows:
Approved Products
(1)(2)
Cure/Use
Human Albumin: - 20%/10ml, 20%/25ml and
      20%/50ml
Shock caused by blood loss
      trauma or burn; raised intracranial pressure caused by hydrocephalus or
      trauma; Oedema or ascites caused by hepatocirrhosis and nephropathy;
      prevention and cure of low-density- lipoproteinemia; and Neonatal
      hyperbilirubinemia.
Human Hepatitis B Immunoglobulin – 100
      International Units, or IU, 200IU, 400IU
Prevention of measles and
      contagious hepatitis. When applied together with antibiotics, its curative
      effect on certain severe bacteria or virus infection may be improved.
Human Immunoglobulin – 10%/3ml and
      10%/1.5ml
Original immunoglobulin
      deficiency, such as X chain low immunoglobulin, familiar variable immune
      deficiency, immunoglobulin G secondary deficiency; Secondary
      immunoglobulin deficiency: such as severe infection, newborn sepsis; and
      Auto-immune deficiency diseases, such as original thrombocytopenia purpura
      or kawasaki disease.
Human Immunoglobulin for Intravenous
      Injection – 5%/50ml
Same as above
Human Immunoglobulin-5g/vial
Same as above
Thymopolypeptides Injection –
      20mg/2ml,5mg/2ml
Cure for various original and
      secondary T-cell deficiency syndromes, some auto-immune deficiency
      diseases and various cell immunity deficiency diseases, and assists in the
      treatment for tumors.
Human Rabies Immunoglobulin – 100IU, 200IU
      and 500IU
Mainly for passive immunity
      from bites or claws by rabies or other infected animals. All patients
      suspected of being exposed to rabies will be treated with a combined dose
      of rabies vaccine and human rabies immunoglobulin.
Human Tetanus Immunoglobulin – 250IU
Mainly used for the prevention
      and therapy of tetanus. Particularly applied to patients who have allergic
      reactions to Tetanus Antitoxin.
(3)
1. " %" represents the degree of dosage
concentration for the product and each product has its own dosage requirement.
For example, Human Albumin 20%/10ml means 2g of Human Albumin is contained in
each 10ml packaging and Human Immunoglobulin 10%/3ml means 300mg of Human
Immunoglobulin is contained in each 3ml packaging. Under PRC law, each variation
in the packaging, dosage and concentration of medical products requires
registration and approval by the SFDA. During this process the altered product
is not commercially available for sale. For example, among our Human Albumin
products only Human Albumin 20%/10ml, 20%/25ml and 20%/50ml products are
currently approved and are commercially available.
2. "IU" means International Units, or IU. IU
is a unit used to measure the activity of many vitamins, hormones, enzymes, and
drugs. An IU is the amount of a substance that has a certain biological effect.
For each substance there is an international agreement on the biological effect
that is expected for 1 IU. In the case of Immunoglobulin, it means the number of
effective units of antibodies in each package. When exposed to an antigen, the
body views it as foreign material, and takes steps to neutralize the antigen.
Typically, the body accomplishes this by making antibodies, which are intended
to defend the body from invasion by potentially dangerous substances. These
antibodies can be beneficial, as is the case when the body learns to fight a
virus, or they can be harmful, in the instance of allergies. In a situation when
the body cannot effectively react with these antigens, injection of our product
will provide sufficient antibodies to neutralize the antigens.
3. "Tetanus Antitoxin" is a cheaper injection
treatment for tetanus. However it is not widely used because most people are
allergic to it.
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Human albumin is principally used to increase blood volume
while immunoglobulin is used for certain disease preventions and cures. Albumin
is also used to treat critically ill patients by replacing lost fluid and
maintaining adequate blood volume and pressure. Our approved human albumin and
immunoglobulin products use human plasma as the basic raw material. All of our
approved products are prescription medicines administered in the form of
injections.
Under PRC law, each variation in the packaging, dosage and
concentration of medical products requires registration and approval by the
SFDA. During this process the altered product is not commercially available for
sale. For example, among our human albumin products only Human Albumin 20%/10ml,
20%/25ml and 20%/50ml products are currently approved and are commercially
available. Accordingly, all references, in this prospectus, to our manufacture
and sale of human albumin relate to our approved human albumin products.
We have product liability insurance covering all of our
products in the amount of approximately $2,934,000 (RMB 20,000,000). However,
since our establishment in 2002, there has not been any product liability claims
nor has any legal action been filed against us by patients related to the use of
our products.
Raw Materials
Plasma
Plasma is the principal raw material for our biopharmaceutical
products. Until the end of 2006, all plasma collection stations were owned by
the PRC government. Following the mandated privatization of plasma stations
resulted from the Ministry of Health's Blood Collection Measures, we acquired
our stable of plasma collection stations. We believe that the acquisitions of
plasma stations will give us a controlled source of plasma and better control
over the quality and quantity produced. We will also be able to have increased
control over the cost of plasma. Finally, we believe that we will enjoy benefits
of economies of scale with respect to the administration and management expenses
of our several plasma stations.
We spent $14,000,000 and $9,200,000 on plasma in 2008 and 2007,
respectively. Currently we own five plasma collection stations in Shandong, two
in Guanxi and six in Guizhou. When our production requirements exceed the plasma
supply from the stations that we own or that we will acquire in the future, we
will procure the supply deficiency from the blood centers operated by the
regulators of Shandong and other Provinces.
We currently maintain sufficient plasma supply for
approximately 90 days of production. In March 2007, the PRC Food and Drug
Administration implemented new measures on biopharmaceutical industry effective
as of July 1, 2008, requiring plasma raw material to be kept for at least three
months before being put into production. In view of the new measures, in due
course we will extend our plasma supply for approximately four months. We have
not experienced any interruptions to our production due to shortage of
plasma.
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Other Raw Materials and Packaging
Materials
Other raw materials used in the production of our
biopharmaceutical products include: reagents, consumables and packaging
materials. The principal packaging materials we use include glass bottles for
our injection products, external packaging and printed instructions for our
biopharmaceutical products. We acquire our raw materials and packaging materials
from our approved suppliers in China and overseas. We select our suppliers based
on quality, consistency, price and delivery of the raw materials which they
supply.
We have not experienced any shortage of supply on these raw
materials and packaging materials and there has not been any significant problem
with the quality of materials supplied by these suppliers.
Our Major Suppliers
The table below lists our major suppliers as of December 31,
2008, showing the cumulative dollar amount of raw materials purchased from them
during the fiscal year ended December 31, 2008, and the percentage of raw
materials purchased from each supplier as compared to procurement of all raw
materials.
Percentage of
Cumulative
Total
Amount Purchased
Purchases
During Fiscal Year
During Fiscal
Rank
Supplier's name
2008
(US$)
Year 2008
1
Chongqing Sanda Weiye Pharmaceutical Products
569,653
15.6%
2
Zibo
      Zhong Bao Kang Medical Equipment Company
381,277
10.4%
3
Liao Cheng Tiantan Plasma Station
380,920
10.4%
4
Tai'an
      City Ruifeng Company
377,375
10.3%
5
Shandong Medical Bottling Company
218,558
6.0%
6
Pall
      Corporation(Beijing)
155,938
4.3%
7
Shin Tai Yong Feng Company
144,170
3.9%
8
Beijing Zhongtianbaiyi Technology Development Company
133,498
3.7%
9
Wenzhou City Jiacheng Company
133,482
3.7%
10
Tai'an
      Shengrong Stainless Steel Company
129,264
3.5%
Total
2,624,135
71.8%
Prior to our acquisition of the assets of Qi He, Xiajin and
Zhang Qiu, we had entered into material supply agreements with them for the
purchase of raw materials. We have replaced these material supply agreements
with plasma processing agreements, dated January 2, 2007, between Shandong
Taibang and each of Qi He, Xia Jin and Zhang Qiu, pursuant to which we formally
appointed each of these stations as our agent to purchase, collect, examine and
deepfreeze plasma on behalf of Shandong Taibang, subject to rules and
specifications that meet the State Province Food and Drug Administration's
requirements for quality, packaging and storage. Pursuant to the plasma
processing agreements, the stations must only collect plasma from healthy donors
within their respective districts and in accordance with a time table set by
Shandong Taibang. The plasma must: be negative HbsAg, anti-HCV, anti-HIV and
reaction of serum to RPR; contain an ALT ≤25 units (ALT), plasma protein ≥55g/l;
contain no virus pollution or visible erythrolysis, lipemia, macroscopic red
blood cell or any other irregular finding. In addition, the plasma must be
packaged in 25 separate 600g bags, boxed with a packing list and labeled to be
consistent with computer records and must be stored at -20°C as soon as possible
after collection to ensure that it will congeal within 6 hours. Shandong Taibang
is fully responsible for the overall technical guidance and quality supervision.
Shandong Taibang pays each of the stations a rate of RMB15 (approximately $2.0)
per bag of plasma collected, with the payment for each batch due within 10 days
after the delivery of the following batch of plasma. Each of the plasma
processing agreements with Qi He, Xia Jin and Zhang Qiu, will all expire on
December 31, 2011.
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Our Major Customers
Due to the nature of our products and the current regulations,
all of our customers are located in China. We have established relationships
with most of our key customers since our establishment in 2002. For the fiscal
year ended December 31, 2008, our top five customers, based on sales revenue and
the percentage of their contribution to our revenues, were as follows:
Revenues During
Percentage of Total
Fiscal Year 2008
Sales During
Customer
(US$)
Fiscal Year 2008
Handan Zhiying Medical Company
2,915,461
6.2%
Zibo KangHua
      Medical Supply Company
1,422,967
3.1%
Linyi Luoxin Medical Company
1,411,582
3.0%
HeZe Mudan Medical
      Company
931,538
2.0%
Wuhan JiuZhengShiJi Medical Company
887,338
1.9%
Total
7,568,886
16.2%
Sales, Marketing and Distribution
Because all of our products are prescription drugs, we can only
sell to hospitals and inoculation centers directly or through approved
distributors. For the years ended December 31, 2008 and 2007, direct sales to
distributors represented approximately 65.6% and 58.3%, respectively, of our
revenues.
Our five largest customers in the aggregate accounted for
approximately 16.2% and 14.9% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our largest customer accounted for
approximately 6.2% and 5.3% of our total revenues for the years ended December
31, 2008 and 2007, respectively.
As part of our effort to ensure the quality of our
distributors, we conduct due diligence to verify whether potential distributors
have obtained necessary permits and licenses and facilities (such as cold
storage) for the distribution of our biopharmaceutical products. We also assess
the distributors' financial condition before appointing them as distributors. We
normally enter into annual supply contracts with our hospital customers and
regional distributors. Certain of our regional distributors are appointed on an
exclusive basis within a specified area. The supply contracts normally set out
the quantity and price of products. For distributors, they also contain
guidelines for the sale and distribution of our products, including restrictions
on the geographical area to which the products could be sold. We provide our
distributors with training in relation to our products and on sales techniques.
We have implemented a coding system for our products for easy tracking.
Depending on the relationship and the creditability of the distributors, we
generally grant a credit period of no longer than 30 days to distributors with
some exceptions. For hospitals and clinics, we generally grant a credit period
of no longer than 90 days. We have bad debt credit of $0.1 million for 2008 and
bad debt expense of $0.2 million for 2007. The $0.1 million bad debt credit for
2008 is due to recovery of bad debt previously reserved.
Our current key market is in Shandong province, representing
approximately 48.1% and 42.0% of our total revenues for the years ended December
31, 2008 and 2007, respectively. Our strategy is to focus our market marketing
efforts in Jiangsu, Zhejiang, Henan and the northeastern part of China.
Our marketing and after-sales services department currently
employs approximately 56 employees.
We believe that due to the unique nature of our products, the
key emphasis on our marketing efforts centers on product safety, brand
recognition, timely availability and pricing. As all of our products are
prescription medicines, we are not allowed to advertise our products in the mass
media. For the years ended December 31, 2008 and 2007, total sales and marketing
expenses amounted to approximately $2.2 million and $4.4 million, respectively,
representing approximately 4.7% and 13.7%, respectively, of our revenues.
- 49 -
Our Research and Development Efforts
Shandong Taibang's predecessor, the Shandong Institute, was
established in 1971. The Shandong Institute is the research arm established by
and directly administrated by the Shandong Provincial health department. It was
the only entity approved for the research, development and production of
biological and plasma-based biopharmaceutical products in Shandong Province, the
second largest province in China. Since 1998, it promoted GMP management in the
production process of blood products and became one of the first blood products
manufacturing enterprises to obtain GMP Certification in China. In 2002, the
Shandong Institute transferred all of its business and the licenses necessary to
carry on its business to our subsidiary, Shandong Taibang. In 2005 and 2006, we
were awarded the advanced high-tech enterprise certification by the Department
of Science and Technology of Shandong Province and the Ministry of Science and
Technology of China, respectively. In 2007, we were admitted as a member of the
Shandong Institute of Medicine and awarded the "Advanced Enterprise" accolade by
the Shandong Blood Center.
We employ a market driven approach to initiate research and
development projects including both product and production technique
development. We believe that the key to the industry revolves around (i) safety
of products and (ii) maximizing the yield per unit volume of plasma. Our
research and development efforts are focused around the following areas:
Broaden the breadth and depth of our portfolio of plasma-based
  biopharmaceutical products;
Enhance the yield per unit volume of plasma through new collection
  techniques;
Maximize manufacturing efficiency and safety;
Promote product safety through implementation of new technologies; and
Refine production technology for existing products.
Our research center is located on the same premises as the
factory, which is located in Tai'an City, Shandong Province. The research center
is equipped with specialized equipment including advanced testing and analytical
equipment, such as atomic absorptimeter, fully automated blood coagulation
analyzer, high performance liquid chromatograph, gas chromatograph,
radioimmunoassay analyzer, ultraviolet-visible spectrophotometer, and protein
chromatograph, most of which have been imported from the US, Japan, Italy,
Germany and Australia. Our research and development department is comprised of
about 30 researchers. All of them hold degrees in areas such as medicine,
pharmacy, biology, and biochemistry. Our research center carries out development
and registration of our products.
All the products we currently manufacture have been developed
in-house. The following table outlines our research and development work in
progress:
Products Currently in
Development
Cure/Use
Status of Product
Development
Stage **
Human Albumin- 12.5g/vial*
Shock caused by blood loss
      trauma or burn; raised intracranial pressure caused by hydrocephalus or
      trauma; Oedema or ascites caused by hepatocirrhosis and nephropathy;
      prevention and cure of low-density- lipoproteinemia; and Neonatal
      hyperbilirubinemia
Awaiting approval by the SFDA.
9
Human Hepatitis B
Immunoglobulin (PH4) for
Intravenous
      Injection
Same as Human Albumin.
Approved to commence clinical trial.
8
Human Immunoglobulin for
Intravenous
      Injection – 10%
Same as Human Albumin
A technical feasibility study
      and our laboratory study on the manufacturing procedure is about to begin.
2
-50-
Human Prothrombin Complex Concentrate
Use for coagulopathie such as Hemophilia B and
      increase concentration of coagulation factor VII, IX and X.
Approved to commence clinical trial.
8
Human Coagulation Factor VIII
Use for coagulopathie such as
      Hemophilia A and increase concentration of coagulation factor VIII.
Clinical research sample and
      report submitted; in the process of onsite random sampling.
5
Human Fibrinogen
Cure for lack of fibrinogen and increase human
      fibrinogen concentration.
We have commenced laboratory studies of a
      manufacturing procedure.
2
_________________
* Under PRC law, each variation in the packaging,
dosage and concentration of medical products requires registration and approval
by the SFDA. During this process the altered product is not commercially
available for sale. For example, among our Human Albumin products only Human
Albumin 20%/10ml, 20%/25ml and 20%/50ml products are currently approved and are
commercially available. Our Human Albumin 12.5g/vial product is at Stage 9 of
the drug approval process, i.e. we are awaiting the SFDA's approval.
Accordingly, all references, in this prospectus, to our manufacture and sale of
Human Albumin relates to our approved Human Albumin products.
** These stages refer to the stages in the
regulatory approval process for our products disclosed under the heading
"Regulation" in this prospectus.
For the fiscal years ended December 31, 2008 and 2007, total
research and development expenses amounted to approximately $1.2 million and
$0.6 million, respectively, representing approximately 2.5% and 1.9%,
respectively, of our revenues.
Our Competition
We are subject to intense competition. There are both local and
overseas pharmaceutical enterprises that are engaged in the manufacture and sale
of potential substitute or similar biopharmaceutical products as our products in
the PRC. These competitors may have more capital, better research and
development resources, manufacturing and marketing capability and experience
than we do. In our industry, we compete based upon product quality, product
cost, ability to produce a diverse range of products and logistical
capabilities.
We believe that we have strengthened our position in the
marketplace with our recent acquisition of a 90% equity interest in Dalin and
its 54% majority-owned operating subsidiary, Qianfeng and a 35% equity interest
in Huitian, Xi'an-based biopharmaceutical company. In accordance with terms of
the Dalin equity transfer agreement, as of January 1, 2009, we were entitled to
all the rights and privileges of a Dalin shareholder, including the right to
receive a pro rata share of the profits generated by Qianfeng, and pursuant to
the terms of the Huitian equity transfer agreement, we are now entitled to all
the rights and privileges of a 35% shareholder in Huitian, including the right
to receive our pro rata share of the profits generated. Our profitability may be
adversely affected if (i) competition intensifies; (ii) competitors drastically
reduce prices; or (iii) competitors develop new products or product substitutes
having comparable medicinal applications or therapeutic effects which are more
effective and /or less costly than those produced by us.
Our profitability may be adversely affected if (i) competition
intensifies; (ii) competitors drastically reduce prices; or (iii) competitors
develop new products or product substitutes having comparable medicinal
applications or therapeutic effects which are more effective and /or less costly
than those produced by us.
Other approved biopharmaceutical manufacturers in the PRC are
entitled to produce many of the products produced by us. There are currently
about 32 approved manufacturers of plasma-based pharmaceutical products in
China. Many of these manufacturers are essentially producing the same type of
products that we produce: human albumin and various types of immunoglobulin.
However, due to recent Ministry of Health regulations, we believe that it is
difficult for new manufacturers to enter into the industry. We believe that our
major competitors in the albumin and immunoglobulin market in China are Hua Lan
Biological Engineering, Shanghai Institute of Biological Products, Shanghai RAAS
Blood Products Co. Ltd., Chengdu Ronsheng Pharmaceuticals, and Sichuan Yuanda
Shuyang Pharmaceutical Co.
- 51 -
In addition, competition from imported products and China's admission as a member of the WTO creates increased competition. The PRC became a member of the WTO in December 2001. Competition in the biopharmaceutical industry in the PRC will
intensify generally in two respects. With lower import tariffs, we anticipate that imported biopharmaceutical products manufactured overseas may become increasingly competitive with domestically produced products in terms of pricing. We also believe
that well-established foreign biopharmaceutical manufacturers may set up production facilities in the PRC and compete with domestic manufacturers directly. With the expected increased supply of competitively priced biopharmaceutical products in the
PRC, we may face with increased competition from foreign biopharmaceutical products, including the types of products manufactured by US manufacturers and other manufacturers.
According to a 2006 Hua Yuan Medicine Net survey of the profit ranking of companies in the Chinese biological products industry, we are ranked the 20
th
in 2006 and 25
th
in 2005, and in the plasma products area, we were ranked
5
th
in 2006. We believe that we have maintained the same ranking in 2008 based on our analysis data regarding the approval for sales of plasma-derived products published by China National Institute for the Control of Pharmaceutical and
Biological Products throughout of the year. Our past financial performance is attributable to our market position in the industry. Furthermore, while each of the plasma products related companies have their own product composition which include 3
main categories namely human albumin, human immunoglobulin and lyophilized human factor, we are currently developing lyophilized human factor products which we expect to launch in 2009. We will continue to meet challenges and secure our market
position by enhancing our existing products, introducing new products to meet customer demand, delivering quality products to our customers in a timely manner and maintaining our established industry reputation.
Our Intellectual Property
Pursuant to a Trademark License Agreement with the Shandong Institute, we hold the exclusive license to a Trademark Registration Certificate (No.3375484) issued by the PRC Industry and Commerce Administration Trademark Bureau. The class of goods on
which the trademark has been approved to use include: drug for human beings, serum, microorganism products for medicine and veterinary medicine, plasma, medical blood, and medical biological product. The registration will expire in June 2014, the
Shandong Institute has allowed us to use the trademark for free until May 2011. We expect to develop and register our own trademark before the termination of this license.
In addition, we have registered the following domain name:
www.chinabiologic.com
and
www.ctbb.com.cn
.
Regulations
Due to the nature of our products, we are supervised by various levels of the PRC Ministry of Health and/or Food and Drug Administration. Such supervision includes the safety standards regulating our source supplies (mainly plasma), our
manufacturing process through the issuance of our GMP Certification and the inspection of our finished products.
Plasma Collection
Substantially all plasma donations for commercialized plasma-based biopharmaceutical products are done through plasmapheresis donation stations. Plasmapheresis donation means donors give only selected blood components —platelets, plasma, red
cells, infection-fighting white cells called granulocytes, or a combination of these, depending on donors blood type and the needs of the community. Plasmapheresis stations in China are commonly used to collect plasma. In China, current regulations
only allow an individual donor to donate blood in 14-day intervals, with a maximum quantity of 580ml (or about 600 gram) per donation.
The following are the regulatory requirements to establish a plasmapheresis station in China:
meet the overall plan in terms of the total number, distribution, and operational scale of plasmapheresis stations;
have the required professional health care technicians to operate a station;
have the facility and a hygienic environment to operate a station;
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have an identification system to identify donors;
have the equipment to operate a station; and
have the equipment and quality control technicians to ensure the quality of the plasma collected.
As a result of the overhaul by the four ministries of the State Council in May 2004, we estimate that the number of collection stations (including plasma stations) that meet the standards imposed by the PRC has been reduced from approximately 156 to
approximately 120. Plasma stations are customarily owned and managed by the PRC health authorities. In March 2006, the Ministry of Health promulgated the Blood Collection Measures whereby the ownership and management of the plasma stations must be
transferred to plasma-based biopharmaceutical companies while the regulatory supervision and administrative control remain with the government. For those plasma stations which do not complete their reform by December 31, 2006, their license to
collect plasma will be revoked.
Set out below are some of the safety features at China's collection stations:
Collection stations can only source plasma from donors within the assigned district approved by the provincial health authorities.
Collection stations must perform a health check on the donor. Once the donor passes the health check, a "donor permit" is issued to the donor. The standards of the health check are established by the health authorities at the State Council
level.
The design and printing of the "donor permit" is administrated by the provincial health authorities, autonomous region or municipality government, as the case maybe. The "donor permit" cannot be altered, copied or assigned.
Before donors can donate plasma, the station must verify their identities and the validity of their "donor permits." The donors must pass the verification procedures before they are given a health check and blood test. For those donors who
have passed the verification, health check and blood test and whose plasma were donated according to prescribed procedures, the station will setup a record.
All collection stations are subject to the regulations on transmittable diseases prevention. They must strictly adhere to the sanitary requirements and reporting procedures in the event of an epidemic situation.
The operation of plasma collection stations is strictly regulated by the PRC government.
Importation of Blood Products
According to current Chinese regulations, the following blood products are banned from importation to China:
Plasma – frozen, liquid and freeze-dried Human Plasma;
Immunoglobulin – Human Normal Immunoglobulin, Specific Immunoglobulin, Human Anti-Tetanus Immunoglobulin, Human Anti-hemophilia Globulin, Human Anti-HBs Immunoglobulin, Human Anti- D(Rho) Immunoglobulin and Immunoglobulin For Intravenous
Administration;
Factor VIII – Cryoprecipitated Factor VIII and Factor VIII Concentrate (only Bayer is allowed, under a special arrangement with PRC government, to import this product into PRC, commencing November 2007);
Factor IX Concentrate;
Human Fibrinogen;
Platelet Concentrate;
Human Prothrombin Complex;
Whole blood or blood components.
- 53 -
Production of Plasma-based Products
The manufacture and sale of plasma-based biopharmaceutical
products is strictly regulated by the PRC government. For example, under PRC
law, each variation in the packaging, dosage and concentration of medical
products requires registration and approval by the SFDA. During this process the
altered product is not commercially available for sale. For example, among our
human albumin products only Human Albumin 20%/10ml, 20%/25ml and 20%/50ml
products are currently approved and are commercially available. Accordingly, all
references, in this prospectus, to our manufacture and sale of human albumin
relate to our approved human albumin products. The table below shows the PRC
approval process for the manufacture and sale of new medicines:
Stage (Estimated Time Period)
Activities
1
Planning Stage (1 month)
Prior to the development of
      potential new products, our Research & Development department will
      engage in a comprehensive review of existing medical literature, patent
      status and market information, including expected product demand and other
      competition, in order to determine the feasibility of development and
      production of a new product offering. Although this typically takes about
      1 month to complete, this stage precedes development efforts for a new
      product, which could take several months or even years to complete. For
      products with lengthy development periods, we may be required to
      periodically revisit this stage to confirm the feasibility of continued
      development efforts.
2
Feasibility study and
      assumption clarification (2 months)
If we determine that
    development, ownership and marketing of a potential new product is possible
    and potentially advantageous, we proceed with development efforts. However,
    potential new products are typically developed in a laboratory or small
    batch setting, and in order to obtain approval for potential new products
    and to market new products, we must develop a plan for testing and producing
    the new product. The first step in developing such plan is a feasibility
    study and assumption clarification. This study is conducted following or
    during development of a new product, and involves a review and study of the
    feasibility of our technical, production and financial capabilities,
    production conditions and financial forecasts. We also review the
    feasibility of preparing and conducting a clinical study, or a Clinical
    Trial program, during this stage.
3
Develop scope and technique for
      testing the new medicine (6 months)
If following completion of
    a Stage 2 study we make a determination that producing and testing a
    potential new product is feasible and potentially advantageous, we will
    develop the scope and techniques for testing the potential new product. This
      involves confirming the sourcing of materials needed for production and
      marketing of the potential new product and development of the method of
      production, dosage design and prescription selections. During this stage,
      we will also develop a clinical research sample.
4
Preparation of a virus
      inactivation report and submission to the NICPBP for preliminary review
(4-6
months)
If following development of
      testing methods for the potential new product we determine that testing
      can be successfully completed, we will prepare and finalize the virus
      inactivation method for the potential new product. We are then required to
      prepare a report with details on the production method and procedures and
      basis of quality evaluation for preliminary review by the NICPBP. NICPBP
      staff usually makes an onsite visit during this stage to supervise testing
      and re-testing of the virus inactivation process. Tested samples will be
      sent back to the NICPBP central office in Beijing for evaluation.
5
R&D test product
      information submitted to the SFDA for preliminary assessment (4-6 months)
Before the NICPBP can determine
      that our clinical research sampling and virus inactivation method and
      procedures are successful, we are required to submit our clinical research
      sampling and virus inactivation method and procedures to the SFDA via the
      provincial FDA for preliminary assessment. We also develop the parameters
      for a Clinical Trial program at this stage. Our program usually requires the
      establishment of a committee comprised of our Research and Development
      staff whose responsibility it will be to communicate with the hospitals
      and doctors who are invited to participate in the trial.
After our
      submission of information to the SFDA we will become subject to random
      onsite sampling by the SFDA as they review our reports and procedures
      regarding testing of the potential product. The SFDA will usually inform
      us of the exact sampling date and SFDA staff will randomly select certain
      samples during their visit for additional testing. The SFDA will then
      provide us with their preliminary assessment of our new product and our
      related procedures. Depending on the results of its preliminary assessment
      the SFDA may recommend that we alter certain aspects of our reports and
      proposed Clinical Trial programs, or even repeat our Stage 3 and Stage 4
      trials and resubmit related reports. The SFDA review process typically
      takes 4-6 months, but this process could take longer if we are required to
      amend or repeat our trials or if we amend our reports in order to obtain
      more a favorable preliminary assessment.
- 54 -
6
Formal
      application to the NICPBP for test of virus inactivation and for CDE
      certification of Clinical Trial (6-7 months)
Once we receive a favorable or
      satisfactory preliminary assessment from the SFDA, the NICPBP will
      continue the process begun at Stage 4. The NICPBP will conduct tests of
      virus inactivation based on defined medical literature and on our
      prescribed procedures and method of production. If the tests are
      successful, the NICPBP will transfer the application to the CDE for review
      of our prescribed procedures and method of production and the CDE may
      request additional information before making a determination. If the CDE
      is satisfied with our procedures and method of production it will certify
      the new product for production for Clinical Trial.
7
SFDA review of
      Clinical Trial program for approval (1 month)
Following provision of the CDE
      product certification, we must submit our Clinical Trial program
      (developed at Stage 5 and 6) to the SFDA for formal approval. The SFDA may
      request additional information regarding our proposed Clinical Trial
      program. If the SFDA rejects our Clinical Trial program or requires
      changes to any of our procedures and methods, we may be required to amend
      our Clinical Trial program, which may require repeating several of the
      processes previously conducted. The criteria for SFDA approval for
      Clinical Trial programs are based on Good Clinical Practice which is
      publicly available in the PRC.
- 55 -
8
Clinical Trial: Phases 1 to 4
      (3 years for a new drug and 2 years for a generic drug)
Following approval of our Clinical Trial program by the
      SFDA, we will begin Clinical Trials of the potential new product. There
      are four phases to the clinical trial process and any failure of the
      potential new product at any of the Clinical Trial phases, could cause a
      significant delay in approval of the new product, or termination of the
      new product launch:
Phase 1
: Basic clinical pharmacology and human
      safety evaluation studies are conducted by the Company. Prior to
      determining the effectiveness of our potential new product, we must
      determine that certain pharmacological and safety standards are met by our
      potential new product. These standards are set in stage 4 or according to
      medical literature. If the clinical trial indicates that such standards
      are met, we then move on to Phase 2 of the trials. If the Phase 1
      standards are not met, we may be required to conduct further R&D on
      the potential new product, alter the new product formulation and amend the
      Clinical Trial program, which could require that we repeat several of the
      stages referenced above.
Phase 2
: A preliminary exploration of the
      product's therapeutic efficacy is conducted by the Company. If we
      determine at this stage that the potential new product is not effective,
      we may conduct further R&D on the potential new product, alter the new
      product formulation and amend the Clinical Trial program, which would
      require that we repeat several of the stages referenced above.
Phase
      3
: If we determine that the potential new product meets the required
      standards of Phases 1 and 2 above, we must then submit a report of the
      Clinical Trial results to the SFDA together with an application for trial
      production of the product. If the SFDA rejects application for trial
      production or otherwise requires a repeat of our Clinical Trials, we may
      be required to repeat all or a portion of our Clinical Trial program,
      which may require repeating several of the processes previously conducted.
Phase 4
: If we receive SFDA approval to conduct a trial production
      of the new product, we will then conduct a larger test of approximately
      2,000 samples. We will conduct this test while also conducting a new drug
      post- marketing study.
9
Application to the SFDA for
      official production permit and product certification (8-9 months)
The trial production of the
      potential new product will be monitored by an SFDA inspector who will also
      make onsite visits and assess the results of the trial production. We will
      also be required to prepare and submit to the SFDA a report of the trial
      production results by gathering statistical information obtained during
      the trial period.
The CDE will also conduct a final review of the trial
      production for the potential new product. Upon satisfactory completion of
      the trial production, the CDE will inform the SFDA. The SFDA will then
      issue a permit to us for official production, the issuance of which is
      announced on the SFDA's website, and copied to the NICPBP and the
      provincial FDA. The SFDA will also issue the new product a Good
      Manufacturing Practice, or GMP, certification. The provincial FDA will
      follow with the issuance of a provincial production permit for the new
      product.
Although the SFDA's criteria for final approval of new products
      are not publicly available in the PRC, if a manufacturer makes the
      adjustments to its methods and procedures recommended by the SFDA earlier
      on in the product approval process, it is likely that the SFDA will
      approve the new product for production.
10
Commercial Production
Following issuance of state and
      provincial production permits and certifications, we may begin production
      of the new product.
Pricing
In addition, there are regulations regarding the retail price,
rather than regulations of wholesale prices, of our products. According to the
"Regulations on controlling blood products" promulgated by the State Council in
1996,
the price (retail) setting standard and regulatory functions reside with regional offices of the Pricing Bureau and the Ministry of Health. Presently, there are retail pricing guidelines for hospitals which sell our human albumin and immunoglobulin
products to patients as prescribed by the relevant regulators in each region. The retail pricing guidelines are established based on, amongst other things, the regional living standards and the cost of production of the manufacturers. The hospitals
cannot sell the products to patients at prices exceeding the highest retail price prescribed by the relevant regulators. There is no pricing guideline on the ex-factory price to the hospital and the distributors. The highest retail price guideline
is revised occasionally.
- 56 -
Our Properties and Facilities
All land in China is owned by the government. Individuals and companies are permitted to acquire land use rights for specific purposes. Industrial land use rights are granted for a period of 50 years. This period may be renewed at the expiration of
the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.
In July 2003, Shandong Taibang obtained certain land use rights from the PRC municipal government to 43,663 square meters consisting of manufacturing facilities, warehouses and office buildings in Tai'an City, Shandong Province. Shandong Taibang is
required to make payments totaling approximately $20,015 (RMB138,848) per year to the local state-owned entity, for the 50 year life of the rights or until the Shandong Institute completes its privatization process. We recorded "land use
rights" equal to "other payable – land use rights" totaling $325,390 and $305,571 as of December 31, 2008 and 2007, respectively, determined using present value of annual payments over 50 years.
The Company's 48.6% indirectly owned subsidiary, Qianfeng, entered into a lease agreement on June 1, 2006 with a group of individuals in an area located next to its production facility, to lease and use the space for processing industrial
wastes for 10 years. The annual lease amount is approximately $1,529 (RMB 10,438).
We believe that all of our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.
Some of our properties are leased from third parties. We have entered into formal lease agreements with two of them. The remaining leases are on a verbal basis. In all cases, the lessors have not been able to provide copies of documentation
evidencing their rights to use the leased property. In most cases, the leased properties are small operating spaces we leased for our sales offices in different parts of China. In the event of any future dispute over the ownership of the leased
properties, we believe we could easily and quickly find replacement premises so that the operations would not be affected.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise
from time to time that may harm our business. Except as disclosed below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating
results.
Transfers of Equity Interests
Mr. Zu Ying Du was one of the original equity holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement, among the original equity holders, Mr. Du was obligated to make a capital contribution of RMB 20 million (or
approximately $2.6 million) for a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed to repay Beijing Chen Da for his
loan of the capital contribution amount. Mr. Du disputes that the money was due and owing. A Beijing court found that Beijing Chen Da had given money to Mr. Du but found that the loan agreement failed to comply with Chinese law. A notice was issued
on July 5, 2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a stay of the Beijing action pending their investigation into money laundering relating to the 20 million RMB loan to Zu Ying Du.
- 57 -
Subsequently, Beijing Chen Da entered into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB 20 million debt. This agreement
was signed by Mr. Du's brother who held a power of attorney from Mr. Du. Mr. Du disputes the legitimacy of this transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the power of attorney. Mr. Du sued his brother in the
court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently
the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei
Jingzhou Intermediate Court.
Missile Engineering, another original equity holder wholly controlled by Mr. Du, was obligated to contribute RMB 32.8 million (or $4.2 million) for a 41% interest in Shandong Taibang by means of cash, equipment and patent technology. It was
obligated to obtain new drug certificate and production license of its patent technology from the government within a stipulated period in order to be recognized as a valid capital contribution, or in the alternative, make a cash payment. The patent
technology was valued as RMB 26.4 million (or approximately $3.4 million). However, Missile Engineering failed to obtain the new drug certificate and production license within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders resolution on September 26, 2004, Missile Engineering agreed to sell its 41% interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB 26.4 million in cash. Missile Engineering disputes this transaction and sued the brother of Mr. Du in the court of Jianli County, Hubei province, relating to the propriety of the brother's actions under the
power of attorney. Initially the county court found in its judgment that the act had exceeded the scope of the power of attorney. Subsequently the Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to hear the case. The case is slated to be reviewed again by the Hubei Jingzhou Intermediate Court.
In June 10, 2005, Beijing Chen Da also sold its equity interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing, pursuant to a share transfer agreement, which became effective on September 2, 2005, upon approval by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our subsidiary.
In 2006, Missile Engineering applied for arbitration before the China International Economic and Trade Arbitration Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing Investments Limited, of the equity interests in
Shandong Taibang formerly owned by Missile Engineering. The equity transfer had been approved by the Shandong Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile Engineering later voluntarily withdrew
this application and instead applied for administrative reconsideration of the equity transfer, but this application was rejected by the Ministry of Commerce in 2007. Missile Engineering applied with the District Court of Lixia District, Jinan City,
Shandong province requesting revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by Missile Engineering. Missile Engineering later voluntarily withdrew the action. In April 2007, Logic Express initiated an arbitration
proceeding before the Shandong Tai'an Arbitration Committee, to establish that Logic Express is the lawful shareholder of Shandong Taibang. The parties to that proceeding were Logic Express Ltd. and Shandong Taibang Biological Products Co.,
Ltd. The Arbitration Committee's decision on September 6, 2007 confirmed that Logic Express had legitimate ownership as a result of the transfer of Shandong Taibang. Up-Wing started an action in the Intermediate Court of Tai'an City,
Shandong province requesting the court to establish that Up-Wing is the lawful shareholder of Shandong Taibang. The Intermediate Court of Tai'an City, Shandong province on December 20, 2007 rejected the application on the basis that the same
matter had been tried by the arbitration panel.
Up-Wing filed a defamation case in the District Court of Hi-technology and Industry Development District, Tai'an City, Shandong province claiming defamation against Mr. Du and the 21
st
Century Economic Report Newspaper. Judgment in
favor of Up-Wing was rendered on July 22, 2008 ordering the newspaper and Mr. Du to publish an apology to Up-Wing.
Mr. Du and Missile Engineering have filed two actions in the Intermediate Court of Wuhan City, Hubei province, against the following defendants, Du Hai Shan, his brother, Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have
requested that the Wuhan Intermediate Court to restore the equity interests originally held by the plaintiffs, 25% equity interest held by Mr. Du and 41% equity interest held by Missile Engineering. The Wuhan Intermediate Court has issued a
preliminary order attaching 66% of the equity of Shandong Taibang pending the outcome of the case.
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Dr. Du has alleged that Mr. Lam, the current CEO of our subsidiary Taibang, was formerly known as Lin Zepin and that the individual, Lin Zepin, was court martialed for smuggling in Fujian in 1999. Dr. Du alleges that Lin Zepin was released from
prison in 2003. Mr. Lam denies these statements and has provided an affidavit stating that he was never know as Lin Zepin and has not been convicted of any crime. If it were determined that Mr. Lam, the CEO of Taibang, was formerly known as Lin
Zepin and was in fact convicted of a crime, our business and results of operations could be adversely affected.
Failure to resolve these disputes in our favor may adversely affect our business and operations.
Bobai County Collection Station
In January 2007, the Company's PRC subsidiary, Shandong Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20% minority shareholder in Fang Cheng Plasma Company, the Company's majority owned subsidiary, for the purpose of
establishing or acquiring a plasma collection station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan Plasma Collection Co., Ltd. ("Bobai") in Bobai County, Guangxi and on January 18, 2007, Shandong Taibang signed a
letter of intent to acquire the assets of the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr. Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co., Ltd. ("Hua Lan") filed suit in the District
Court of Hong Qi District, Xin Xiang City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang established and/or sought to operate the Bobai Plasma Collection Station using a permit for collecting and supplying human plasma
in Bobai County, that was originally granted to Hua Lan by the government of the Guangxi region, without Hua Lan's permission. The establishment and registration of Bobai was never realized as a result of this law suit. On January 29, 2007, on
Hua Lan's motion, the District Court entered an order to freeze funds in the amount of approximately $386,100 (RMB3,000,000) held by the defendants in the case, including approximately $65,750 (RMB500,000) in funds held in Shandong
Taibang's bank account in Tai'an City. A hearing was held on June 25, 2007 and judgment was entered against the defendants along with a $226,780 (RMB1,700,000) joint financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the judgment against the three defendants and increased the amount of the joint financial judgment to approximately $405,954 (RMB3,000,000).
In January 2008, Hua Lan enforced the judgment granted by the High Court to freeze the Company's bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Tai'an City District Court to seek recovery of any losses in
connection with Hua Lan's claim and to request that the Tai'an City District Court preserve Hua Lan's property or freeze up to approximately $411,300 (RMB 3 million) of Hua Lan's assets to secure the return of such funds to the
Company. The intermediate court in Tai'an City accepted the application on February 14, 2008 but the matter is still pending. Pending the outcome of the proceedings, Shandong Taibang increased its loss contingency reserve during its fourth quarter of
2007 from approximately $75,593 (RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the enforcement of this judgment. During the fourth quarter of 2008, full amount of the judgment, including Feng Lin and Keliang Huang's
portions of the judgment and the related fees, approximately $456,222 (RMB 3,109,900) has been withdrawn from Shandong Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of the judgment, approximately
$304,143 (RMB2,073,234), as receivable as a result of the withdraw. As of December 31, 2008, the Company determined that it is unlikely that the Company will be able to recover such receivable from those two individuals and wrote off the
receivable as bad debt expense.
In light of the foregoing, it is unlikely that the Company's planned acquisition of the assets of Bobai will go forward.
Dispute among Qianfeng Shareholders over Raising Additional Capital
On May 28, 2007, a 91% majority of Qianfeng's shareholders approved a plan to raise additional capital from private strategic investors through the issuance of an additional 20,000,000 shares of Qianfeng equity interests at RMB 2.80 per share.
The plan required all existing Qianfeng shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority holder of Qianfeng's shares, the Guizhou Jie'an Company, or Jie'an, did not
support the plan and did not agree to waive its right of first refusal. On May 29, 2007, the majority shareholders caused Qianfeng to sign an Equity Purchase Agreement with certain investors, pursuant to which the investors agreed to invest an
aggregate of RMB 50,960,000 (approximately $7,475,832) in exchange for 18,200,000 shares, or 21.4%, of Qianfeng's equity interests. At the same time, Jie'an also subscribed for 1,800,000
shares, representing its 9% pro rata share of the 20,000,000 shares being offered. The proceeds from all parties were received by Qianfeng in accordance with the agreement.
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In June 2007, Jie'an brought suit in the High Court of Guizhou
province, China, against Qianfeng and the three other original Qianfeng
shareholders, alleging the illegality of the Equity Purchase Agreement. In its
complaint, Jie'an alleged that it had a right to acquire the shares waived by
the original Qianfeng shareholders and offered to the investors in connection
with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High
Court ruled against Jie'an and sustained the Equity Purchase Agreement, but on
November 2008, Jie'an appealed the Guizhou High Court judgment to the People's
Supreme Court in Beijing. On May 13, 2009, the People's Supreme Court sustained
the ruling of the High Court of Guizhou and denied Jie'an's right of first
refusal claim over shares with respect to which the original Qianfeng
shareholders waived their right of first refusal. The registration of the new
investors as Qianfeng's shareholders and the related increase in registered
capital of Qianfeng with the Administration for Industry and Commerce is still
pending. Qianfeng is evaluating whether it has the right to rescind the Equity
Purchase Agreement and the transactions contemplated by that agreement, or the
2007 Financing. If Qianfeng does not have such rescission right, Dalin's
interests in Qianfeng would be reduced to approximately 41.3%. However, we will
be able to retain control over Qianfeng due to our right to appoint a majority
of Qianfeng's directors. Meanwhile, Qianfeng has set aside amounts received from the
investors and Jie'an in the 2007 Financing as well as amounts of dividends to
which the investors and Jie'an will be entitled if Qianfeng does not have the
right to rescind the 2007 Financing.
Dispute over Qianfeng Technical Consulting Agreement
In 1997, Qianfeng entered into a Technical Cooperation Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide certain fractionation equipment and transfer processing know-how to Qianfeng. In August 2004, Sin filed a law suit against
Qianfeng with the Intermediate Court in Guiyang City, China, alleging non-payment of RMB 100,000 (approximately, $14,670) for his fractionation equipment and RMB 5,000,000 (approximately, $733,500) for the transfer of his technological
know-how. The Intermediate Court ruled in favor of Sin and found that Qianfeng owed Sin RMB 10,376,160 (approximately, $ 1,522,183), but Qianfeng appealed the Intermediate Court ruling to the Guizhou High Court. The Guizhou High Court agreed in
part with Qianfeng's grounds for appeal and reduced the amount of know-how transfer fee to RMB 1,970,413 (approximately, $289,060). In May 2007, Sin appealed the Guizhou High Court's decision to the People's Supreme Court in
Beijing. The People's Supreme Court heard in April 2008, but had not issued its decision as of the date of this prospectus.
Qianfeng Product Liability Claims
In January 2008, Qianfeng, along with two local hospitals and a local blood center, was sued in the Zhuhui District Court in Hengyang, Hunan province, China, by a resident of Hunan province, for RMB 1,749,358 (approximately, $256,631) in
damages, in connection with his alleged HIV contamination via blood transfusion during the plaintiff's treatment following an April 2006 traffic accident. The Zhuhui District Court awarded the plaintiff RMB 200,000 (approximately, $29,340),
but found that the defendants were not responsible for his HIV contamination. All parties appealed to the Zhuhui Middle Court. On December 4, 2008, the Zhuhui Middle Court remanded the case to the lower court for retrial, on grounds that the HIV
contamination could not be directly linked to the plaintiff's treatment by the hospitals or to Qianfeng's products. There have been no further developments on this case as of the date of this prospectus.
On November 10, 2006, Qianfeng and eight other defendants were sued in the Sigu District Court of Hengyang County, Hunan province, China, by a resident of Hunan province, for RMB 725,606 (approximately, $106,446) in damages, in connection with
his alleged Hepatitis C contamination via blood transfusion and injection of plasma-based products, during the plaintiff's August 2004 treatment for hemophilia. On December 8, 2008, the Sigu District Court ruled in favor of the plaintiff and
held Qianfeng liable for 10% of the total RMB 18,293 (approximately, $2,680) judgment against three of the defendants. All three defendants, including Qianfeng appealed the district court ruling to the Intermediate Court of the Hengyang County.
On May 4, 2009, the Intermediate Court ruled against the defendants and sustained the original district court ruling. As of result, Qianfeng is liable and obligated to pay the plaintiff RMB 18,293 (approximately, $2,680 in damages and related
court fees.
Administration Interference
Qianfeng is party to an administrative proceeding against the government of the Qiandongnan Autonomous Region, or the Qiandongnan Authorities, in Guizhou Province, China, in connection with the ownership of three of Qianfeng's eight plasma
stations in Guizhou Province. Qianfeng was authorized to acquire a total of eight plasma stations in Guizhou Province based on several national and provincial administrative authorizations issued by the PRC State Council and the Guizhou Ministry of
Health between 2006 and 2007, but to date, the governmental authorizations have not been fully implemented by the
Qiandongnan Authorities. In early 2007, Qianfeng submitted RMB 8,010,000
(approximately $1,173,465) to the local finance department of Sansui County,
Qiandongnan, for acquiring the Sansui Plasma Collection Station ("Sansui"), but
the local finance department refused to honor the purchase and returned the full
consideration to Qianfeng. Furthermore, subsequent local rulings published by
the Qiandongnan Authorities February 28, 2008 appear to authorize another
private company to acquire the Sansui and two other stations, the Zhengyuan
Plasma Collection Station and the Shibing Plasma Collection Station. In December
2008 Qianfeng filed an administrative review application with the People's
Government of Guizhou Province, or the Guizhou Provincial Government, but the
Guizhou Provincial Government has delayed making a final decision pending
further review of regulations regarding administrative authorizations. Qianfeng
has received verbal notification from staff in the Guizhou Provincial Government
that the Qiandongnan Authorities have withdrawn the local rulings authorizing
acquisition of the three plasma stations, but management has not received any
written confirmation of such withdrawal. As a result, Qianfeng has maintained
its application with the Guizhou Provincial Government for a formal
administrative ruling on its right to acquire all eight plasma stations in
Guizhou Province. In addition, Qianfeng has set aside the purchase price payable
for Sansui pending the outcome of the administrative review.
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Our Employees
As of March 31, 2009, we employed approximately 753 full-time
employees, including the recently established plasma companies and Shandong
Medical, of which approximately 113 were seconded to us by the Shandong
Institute.
We believe that we maintain a satisfactory working relationship
with our employees and we have not experienced any significant labor disputes or
any difficulties in recruiting staff for our operations.
As required by applicable Chinese law, we have entered into
employment contracts with most of our officers, managers and employees. We are
working towards entering into employment contracts with those employees who do
not currently have employment contracts with us.
The PRC enacted a new Labor Contract Law, which became
effective on January 1, 2008. We have updated our employment contracts and
employee handbook and are in compliance with the new law. We will work with the
employees and the labor union to insure that our employees obtain the full
benefit of the law. We do not anticipate that changes in the law will materially
impact our balance sheet and cash flows.
Our employees in China participate in a state pension plan
organized by Chinese municipal and provincial governments. We are required to
contribute to the plan at the rates ranging of the average monthly salary of
20%. The compensation expenses related to this plan were $220,493 and $171,802
for the fiscal years 2008 and 2007, respectively. Other major contributions
include medical insurance (7%), unemployment insurance (2%) and housing
provision fund (8%) for employees seconded from the Shandong Institute. In
addition, we are required by Chinese law to cover employees in China with
various types of social insurance. We have purchased social insurances for all
of our employees.
MANAGEMENT
Directors and Executive Officers
The following sets forth the name and position of each of our
current executive officers and directors.
NAME
AGE
POSITION
Siu Ling Chan
45
Chairwoman of the Board
Chao Ming Zhao
35
Chief
      Executive Officer and President
Yu-Yun Tristan Kuo
54
Chief Financial Officer
Lin Ling Li
45
Director
Sean Shao
52
Director
Jie Gan
40
Director
Tong Jun Lin
45
Director
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Siu Ling Chan
. Ms. Chan has been our director since July 19, 2006. She has been our chairwoman since January 1, 2007 and served as our CEO from January 2007 to March 2007. Ms. Chan is also currently a director of our subsidiary Logic Express.
She was also appointed as the director of Shandong Taibang in April 2006. Prior to joining us, Ms. Chan worked from 1991 to 2005, as an administrator at the Fujian Academy of Social Sciences, and from 1989 to 1991 as a statistician at the Fujian
Pingtan Economy Committee. She received her diploma in Statistics from Xiamen University in 1989 and a diploma in management from the Fujian Party Committee School in 2004.
Chao Ming Zhao
. Mr. Zhao has been our Chief Executive Officer since June 1, 2008. Mr. Zhao was our Chief Financial Officer from November 2006 to until his appointment as our Chief Executive Officer, and has been the Chief Financial Officer of
our operating subsidiary, Shandong Taibang since September 2003. From February 2002 to June 2003, Mr. Zhao was the financial manager at EF English First (Fuzhou) School, where he was responsible for managing the school's accounting and its
internal control. He was a manager and auditor at Fujian (CFC) Group from July 1996 to January 2002, and was in charge of internal audit. Mr. Zhao is a certified accountant in the PRC and is an international registered internal auditor. Mr. Zhao
obtained his Bachelor's degree in Investment Economy Management from Fuzhou University in 1996 and received his MBA from the Chinese University of Hong Kong in 2006.
Yu-Yun Tristan Kuo
. Mr. Kuo has been our Chief Financial Officer since June 1, 2008 and has served as the Vice President-Finance of Shandong Taibang since September 2007. Mr. Kuo has more than 27 years of experience in accounting, financing
and information system for companies in the manufacturing, commodity trading and banking industries and has served in the capacity of CFO, CIO and Controller. Of these 27 years, Mr. Kuo has worked in the United States for 25 years and in Asia for 2
years. Prior to joining our company, Mr. Kuo worked for the Noble Group in Hong Kong as the IT Director from February through August 2007. Prior to that, Mr. Kuo served as the CFO of Cuisine Solution, Inc., a publicly traded company in Alexandria,
Virginia, from December 2002 to January 2007. Mr. Kuo also served as the Vice President of Information System for Zinc Corporation of America in Monaca, Pennsylvania from 2001 and 2007 and as Chief Information Officer and Controller of Wise Metals
Group in Baltimore, Maryland, the largest independent aluminum sheet producer in the U.S., from 1991 to 2001. Mr. Kuo obtained his Master's degree in Accounting from the Ohio State University and Bachelors degree in Economics from Soochow
University in Taipei.
Lin Ling Li
. Ms. Li has been a member of our board of directors since July 19, 2006. Since February 2006, Ms. Li has been the director of our subsidiary Logic Express, and since May 2004, she has been a director at Up-Wing Investment Limited,
a predecessor to Logic Express. Ms. Li was a technician at Fuzhou Fuxing Pharmaceutical Company from 1980 to 2000. From October 1998 to April 2006, she was a senior manager at Fuzhou Chengxin Dian Dang Company Limited, where she was involved in
financing, mortgage and loan industry. She holds a diploma in accounting from the Fujian Party Committee School of Finance and Accounting in October 1994.
Sean Shao
. Mr. Shao has been a member of our board of directors since July 24, 2008. He currently serves as an independent director of Agria Corporation, a China-based agricultural company listed in the U.S. He has served as the Chief
Financial Officer of Trina Solar Limited since August 2006, where he assisted them in listing on the NYSE in December 2006. Prior to that, Mr. Shao served, from September 2005 to August 2006, as the Chief Financial Officer of ChinaEdu Corporation, a
Chinese educational service provider, and from August 2004 to September 2005, as the Chief Financial Officer of Watchdata Technologies Ltd., a Chinese security software company. Prior to that Mr. Shao served, from October 1998 to July 2004, as a
senior manager at Deloitte Touche Tohmatsu CPA Ltd., Beijing, and from December 1994 to November 1997, as an assistant manager at Deloitte & Touche, Toronto. Mr. Shao received his Master's degree in Health Care Administration from the
University of California at Los Angeles in 1988 and his Bachelor's degree in Art from East China Normal University in 1982. Mr. Shao is an associate member of the American Institute of Certified Public Accountants. Mr. Shao also serves as a
director of China Information Security Technology, Inc., a provider of public security services in China.
Dr. Jie Gan
. Dr. Gan has been a member of our board of directors since July 24, 2008.
She has served as an associate professor of finance in the School of Business and Management at Hong Kong University of Science and Technology
(HKUST) since 2002. Prior to joining HKUST, Dr. Gan served, from 2000 to 2002, as an assistant professor at the Columbia University, Graduate School of Business. Dr. Gan has also worked as a consultant for CRA International (formerly Charles River
Associates), one of the largest finance and economics consulting firms in the U.S., and her consulting experience spans company valuation, securities fraud and anti-trust, in a range of industries including financial services, consumer goods and
energy. Dr. Gan holds a Master Degree of Urban Economics from Beijing University and a PhD in Financial Economics from Massachusetts Institute of Technology and has been published in top academic journals such as the
Journal of Financial Economics and the Review of Financial Studies.
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Dr. Tong Jun Lin
. Dr. Lin has been a member of our board
of directors since July 24, 2008. He has served as an Associate Professor in the
Departments of Microbiology and Immunology and Pediatrics, Dalhousie University
since 2000 and has focused his research in immune response to microbial
pathogens. Dr. Lin received his MD (1984) and PhD (1990) degrees from the
Institute of Materia Medica at the Chinese Academy of Medical Sciences, and his
post-doctoral training at the University of Alberta (1993-1997), Duke University
(1997-1998) and Dalhousie University (1998-2000). He has published 43
peer-reviewed research articles in leading journals and is a member of the
American Association of Immunologists and the Canadian Society for
Immunologists. Dr. Lin is a recipient of the New Investigator Award from
Canadian Institutes of Health Research (2003-2008) and an Award of Excellence in
Medical Research from Dalhousie University (2004).
There are no agreements or understandings for any of our
executive officers or directors to resign at the request of another person and
no officer or director is acting on behalf of nor will any of them act at the
direction of any other person. To the best of our knowledge and belief, there
are no arrangements or understandings with any of our principal stockholders,
customers, suppliers, or any other person, pursuant to which any of our
directors or executive officers were appointed.
Directors are elected until their successors are duly elected
and qualified.
Significant Employees
The following sets forth the name and position of each of our
current significant employees.
NAME
AGE
POSITION
Tung Lam
46
Chief Executive Officer of
      Shandong Taibang
Yun Hua Gao
55
Chief
      Technical Adviser of Shandong Taibang
Dian Cong Liu
54
Chief Technical Adviser of
      Shandong Taibang
Tung Lam
. Mr. Lam has been the Chief Executive Officer
of our operating subsidiary, Shandong Taibang, since October 2003, and is
responsible for the entire operation. Prior to joining the Company, Mr. Lam
served, from November 1999 to August 2003, as the vice president of Fujian
Province Fei Yue Group, where he was in charge of management investment.
Yun Hua Gao
. Mr. Gao is the Chief Technical Advisor of
our operating subsidiary, Shandong Taibang. In 1975, Mr. Gao was assigned to the
Shandong Institute and has been involved in the research and development work of
plasma products. From January 2000 to October 2000, he was head of the
production department at Shandong Biological Products Institute, and from
November 2002 to April 2004, he served as manager of the production department.
He graduated from Shandong Medical University majoring in medicine in 1975.
Dian Cong Liu
. Mr. Liu is the Chief Technical Adviser of
our operating subsidiary, Shandong Taibang. Mr. Liu has spent many years in the
area of biopharmaceutical research. Mr. Liu joined the Shandong Institute in
1978, and served as manager of the institute's placenta product department from
1986 to 1992 and as department head for the institute's quality assurance
department from December 2000 to September 2002. Mr. Liu was one of our founding
employees in 2002. He obtained his Bachelor's degree in Medicine from Shandong Weifang Medical School in 1978. Mr. Liu has also been certified as pharmacist by
the Shandong Food and Drug Administration since 2003.
Board Composition and Committees
Our Board is currently composed of five members, three of whom
are "independent" directors, as that term is defined in Rule 5605(a)(2) of the
Listing Rules of The Nasdaq Stock Market, Inc., or the NASDAQ Listing Rules. All
actions of the board of directors require the approval of a majority of the
directors in attendance at a meeting at which a quorum is present. Our directors
have a duty of to act in good faith with a view to our interests. In fulfilling
their duty of care to us, our directors must ensure compliance with our
Certificate of Incorporation. Board action requires the approval of a majority
of the directors in attendance at a meeting at which a
quorum is present. During 2008, our board met 6 times and except for two, who missed one meeting, no director missed more than 25% of the meetings of the board or any committee on which he or she sat.
- 63 -
Our Board currently has three standing committees which, pursuant to delegated authority, perform various duties on behalf of and report to the Board: the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee.
Each of these Committees are comprised entirely of independent directors. From time to time, the Board may establish other committees. Each of the Compensation Committee and Corporate Governance and Nominating Committee were formed on August 7, 2008
and the Audit Committee was formed on July 24, 2008. During the fiscal year ended December 31, 2008, the audit committees met 3 times. Copies of the charters for each of our standing committees may be obtained from our website at
http://www.chinabiologic.com
.
Compensation Committee
Our compensation committee consists of Mr. Tong Jun Lin, Dr. Jie Gan, and Mr. Sean Shao, each of whom is "independent" as that term is defined under the NASDAQ Listing Rules. Our compensation committee assists the Board in reviewing and
approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during
which his compensation is deliberated. Dr. Gan was appointed as Chair of the compensation committee.
The compensation committee is responsible for, among other things:
approving and overseeing the compensation package for our executive officers;
reviewing and making recommendations to the Board with respect to the compensation of our directors;
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives, and setting the compensation level
of our chief executive officer based on this evaluation; and
reviewing periodically and making recommendations to the Board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
The Compensation Committee has sole authority to retain and terminate outside counsel, compensation consultants retained to assist the Compensation Committee in determining the compensation of the Chief Executive Officer or senior executive
officers, or other experts or consultants, as it deems appropriate, including sole authority to approve the firms' fees and other retention terms. The Compensation Committee may also form and delegate authority to subcommittees and may delegate
authority to one or more designated members of the Compensation Committee. The Compensation Committee may from time to time seek recommendations from the executive officers of the Company regarding matters under the purview of the Compensation
Committee, though the authority to act on such recommendations rests solely with the Compensation Committee.
Corporate Governance and Nominating Committee
Our corporate governance and nominating committee consists of Mr. Tong Jun Lin, Dr. Jie Gan, and Mr. Sean Shao, each of whom is "independent" as that term is defined in the NASDAQ Listing Rules. The corporate governance and nominating
committee assists the Board of Directors in identifying individuals qualified to become our directors and in determining the composition of the Board and its committees. Dr. Lin was appointed as Chair of the corporate governance and nominating
committee.
The corporate governance and nominating committee is responsible for, among other things:
identifying and recommending to the Board nominees for election or re-election to the board, or for appointment to fill any vacancy;
reviewing annually with the Board the current composition of the Board in light of the characteristics of independence, age, skills, experience and availability of service to us;
identifying and recommending to the Board the directors to serve as members of the Board's committees; and
monitoring compliance with our code of business conduct and ethics.
- 64 -
Audit Committee and Audit Committee Financial Expert
Our board of directors established an audit committee on July 24, 2008 and appointed Mr. Sean Shao, Dr. Jie Gan, and Dr. Tong Jun Lin to serve as members of the committee, each of whom our board determined to be "independent" as that term
is defined by the NASDAQ Listing Rules. Mr. Shao was appointed as the Chair of the audit committee.
Our audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit committee is responsible for, among other things:
selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors;
reviewing with our independent auditors any audit problems or difficulties and management's response;
reviewing and approving all proposed related-party transactions;
discussing the annual audited financial statements with management and our independent auditors;
reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant internal control deficiencies;
annually reviewing and reassessing the adequacy of our audit committee charter;
such other matters that are specifically delegated to our audit committee by our board of directors from time to time;
meeting separately and periodically with management and our internal and independent auditors; and
reporting regularly to the full board of directors.
Our board of directors has determined that Mr. Shao possesses the accounting or related financial management experience that qualifies him as financially sophisticated within the meaning of Rule 5605(c)(2)(A) of the NASDAQ Listing Rules and that he
is an "audit committee financial expert" as defined by the rules and regulations of the SEC.
Family Relationships
Ms. Siu Ling Chan is the wife of Mr. Tung Lam. There are no other family relationships among any of our officers and directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the
past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities
laws, except for matters that were dismissed without sanction or settlement.  Except as set forth in our discussion below in "Transactions with Related Persons, Promoters and Certain Control Persons; Corporate Governance," none of our
directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the
SEC.
Code of Ethics
On March 25, 2008, our board of directors adopted a code of ethics, which applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, and principal accounting officer. The code of
ethics is designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships; full, fair, accurate, timely and
understandable disclosure in reports and documents that we file with, or submit
to, the SEC, and in other public communications that we made; compliance with
applicable government laws, rules and regulations; the prompt internal reporting
of violations of the code to the appropriate person or persons; and
accountability for adherence to the code.
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The Code of Ethics requires the highest standard of ethical
conduct and fair dealing of its senior financial officers, or SFO, defined as
the Chief Executive Officer and Chief Financial Officer. While this policy is
intended to only cover the actions of the SFO, we expect our other officers,
directors and employees will also review our code and abide by its provisions.
We believe that our reputation is a valuable asset and must continually be
guarded by all associated with us so as to cam the trust, confidence and respect
of our suppliers, customers and stockholders.
A copy of the Code of Ethics has been filed as Exhibit 14 of
our annual report on Form 10-KSB, filed on March 28, 2008.
EXECUTIVE COMPENSATION
Summary Compensation Table – 2008 and 2007
The following table sets forth information concerning all cash
and non-cash compensation awarded to, earned by or paid to the named persons for
services rendered in all capacities during the noted periods. No other executive
officers received total annual salary and bonus compensation in excess of
$100,000.
Non-
Non-
Equity
qualified
Incentive Plan
Deferred
Stock
Option
Compensation
Compensation
All
Other
Name
Salary
Bonus
Awards
Awards
Earnings
Earnings
Compensation
Total
and
Year
($)
($)
($)
($)
($)
($)
($)
($)
Principal
Position
Stanley Wong,
former CEO
(1)
2008
$ 65,493
$38,684
-
$67,370
-
-
$2,346
$173,893
2007
$100,611
$10,637
-
-
-
-
$4,082
$115,330
Chao Ming Zhao,
CEO and
former
CFO
(2)
2008
$148,208
$34,377
-
$154,954
-
-
-
$337,539
2007
$84,674
$16,126
-
-
-
-
$8,288
$109,088
Yu-Yun
Tristan Kuo, CFO
(3)
2008
$179,805
$20,582
-
$101,055
-
-
-
$301,442
2007
$43,950
-
-
-
-
-
-
$43,950
_____________
(1)
Stanley Wong served as our CEO from March 2007 until June
      1, 2008.
(2)
Chao Ming Zhao has served as our CEO since June 1, 2008
      and has also served as the Chief Financial Officer of our subsidiary
      Shandong Taibang since September 2003. He served as our CFO from November
      2006 until June 1, 2008.
(3)
Yu-Yun Tristan Kuo has served as our Chief Financial
      Officer since June 1, 2008 and has served as the Vice President- Finance
      of Shandong Taibang since September 2007
- 66 -
Summary of Employment Agreements and Material Terms
Pursuant to an employment agreement which became effective
March 8, 2007, as consideration for his services as our Chief Executive Officer,
Mr. Wong received a monthly salary of $12,800, plus a bonus equals to one month
of salary payable at the end of each year and monthly round trip tickets from
Jinan to Hong Kong. Mr. Wong's employment agreement terminated upon his
resignation as or Chief Executive Officer on June 1, 2008. On May 9, 2008, we
entered into a consulting agreement with Mr. Wong, pursuant to which we agreed
to pay Mr. Wong a monthly fee of RMB 40,000 or its HK$ equivalent (approximately
$5,725), as consideration for performance of his duties as consultant. We also
agreed to grant Mr. Wong a ten-year non-qualified option under the 2008 Plan,
for the purchase of 50,000 shares our common stock, at an exercise price of
$4.00 per share. The term of the consulting agreement commenced on June 1, 2008,
and expired on December 31, 2008, in accordance with its terms.
Pursuant to an employment agreement, as consideration for his
services as our Chief Financial Officer and as a director, Chao Ming Zhao
received a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400), payable on December 31 of each year.
On May 9, 2008, we entered into a new employment agreement with Mr. Zhao,
pursuant to which we agreed to pay him an annual salary of RMB 1,060,000
(approximately $151,368) per annum, as consideration for performance of his
duties as Chief Executive Officer. We also agreed to pay Mr. Zhao an annual
bonus equal to one month's salary and Mr. Zhao may be eligible to receive
additional bonus compensation as may be awarded by our board of directors at
their sole discretion. We also agreed to grant to Mr. Zhao a ten-year nonstatutory stock option under the 2008 Plan, for the purchase of 115,000
shares of our common stock, at an exercise price of $4.00 per share. The stock
option immediately vested.
Pursuant to the terms of Mr. Yu-Yun Tristan Kuo's employment
agreement, dated May 9, 2008, we agreed to pay Mr. Kuo an annual salary of RMB
1,320,000 (approximately $188,900), as consideration for performance of his
duties as Chief Financial Officer. We also agreed to pay Mr. Kuo an annual bonus
equal to one month's salary and Mr. Kuo may be eligible to receive additional
bonus compensation as may be awarded by our board of directors at their sole
discretion. We also agreed to grant to Mr. Kuo a ten-year nonstatutory stock
option under the 2008 Plan, for the purchase of 75,000 shares of our common
stock, at an exercise price of $4.00 per share. The stock option immediately
vested. In addition, we agreed to pay Mr. Kuo, within a month of the completion
of a private placement financing by the Company, a cash bonus equal to one
percent of the gross proceeds raised via such financing, or at the sole
discretion of Mr. Kuo, the number of shares of our common stock equivalent to
such cash amount. Furthermore, we are obligated to grant Mr. Kuo, within a month
of our listing on NASDAQ, NYSE or AMEX, an option to purchase 50,000 shares of
our common stock pursuant to the 2008 Plan. The exercise price of such option
will be the fair market value at the date of the grant and the option will be
immediately vested and exercisable on the date of the grant.
Outstanding Equity Awards at Fiscal Year End
Other than as set forth below, none of our executive officers
received unexercised options, stock that has not vested or equity incentive plan
awards that remained outstanding as of the end of the fiscal year ended December
31, 2008.
Name
Number of
securities
underlying
unexercised options
exercisable
Number of
securities
underlying
unexercised
options
unexercisable
Equity incentive
plan
    awards:
Number of securities
underlying
unexercised
    unearned options
Option
exercise
price ($)
Option
expiration date
Number of shares or
units of stock that have not
vested
Market value
of shares
    of
units of stock that have not vested
($)
Equity incentive
plan
    awards:
Number of
unearned shares,
units or other
rights that have not vested
Equity incentive
plan
    awards:
Market or payout
value of unearned shares, units or
    other rights that
have not vested
($)
Chao Ming Zhao
115,000
-
-
4.00
6/1/2018
-
-
-
-
Yu-Yun Tristan Kuo
75,000
-
-
4.00
6/1/2048
-
-
-
-
- 67 -
We use the Black-Scholes option pricing model to measure the
fair value of stock options, granted in 2008. The determination of the fair
value of stock-based compensation awards on the date of grant using an
option-pricing model is affected by our stock price as well as assumptions
regarding a number of complex and subjective variables, including the expected
volatility of our stock price over the term of the awards, actual and projected
employee stock option exercise behaviors, risk-free interest rate and expected
dividends.
Compensation of Directors
The following table sets forth certain information concerning
the compensation paid to our directors for services rendered to us during the
fiscal year ending December 31, 2008:
Fees
Nonqualified
earned
Non-Equity
Deferred
or paid in
Stock
Option
Incentive Plan
Compensation
All
      Other
cash
Awards
Awards
Compensation
Earnings
Compensation
Total
Name
($)
($)
($)
($)
($)
($)
($)
Siu Ling Chan
103,648
67,370
171,018
Lin Ling Li
103,648
67,370
171,018
Sean Shao
10,516
36,940
47,456
Jie Gan
7,887
36,940
44,827
Tong Jun Lin
7,887
36,940
44,827
All directors receive reimbursements from us for expenses which
are necessarily and reasonably incurred by them for providing services to us or
in the performance of their duties. Our directors who are also our employees
receive compensation in the form of salaries, housing allowances, employee
insurance and benefits in kind. Our executive directors do not receive any
compensation in addition to their salaries in their capacity as directors or
other remunerations as members of our management team. However, we do pay their
expenses related to attending board meetings and participating in board
functions.
On July 19, 2006, we entered into director employment
agreements with Ms. Siu Ling Chan and Ms. Lin Ling Li, pursuant to which they
receive a monthly salary of HK$50,000 (approximately $6,400), plus a guaranteed
bonus of HK$50,000 (approximately $6,400) payable on December 31 of each year,
as consideration for their services as directors.
On July 24, 2008, we entered into independent director
agreements with Mr. Sean Shao, Dr. Jie Gan, and Dr. Tong Jun Lin. Under the
terms of the independent director agreements, we agreed to pay each an annual
salary of $18,000 as compensation for the services to be provided by them as
independent directors, except that Mr. Shao will receive an additional $6,000 as
compensation for his role as head of our Audit Committee. In addition, we agreed
to grant to each independent director an option to purchase 20,000 shares of our
common stock, with an exercise price of $4.00 per share, of which 10,000 shares
vested on January 25, 2009 and the remaining 10,000 shares will be vested on
July 25, 2009.
- 68 -
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN
CONTROL PERSONS; CORPORATE GOVERNANCE
Transactions with Related Persons
The following includes a summary of transactions since the beginning of the 2008 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved that exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item
11. "Executive Compensation"). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid
or received, as applicable, in arm's-length transactions.
On May 9, 2008, we entered into a consulting agreement with Mr. Stanley Wong, our former Chief Executive Officer until June 1, 2008, pursuant to which we agreed to pay Mr. Wong a monthly fee of RMB 40,000 or its HK$ equivalent (approximately
$5,725), as consideration for performance of his duties as consultant. We also agreed to grant Mr. Wong a ten-year non-qualified option under the 2008 Plan, for the purchase of 50,000 shares our common stock, at an exercise price of $4.00
per share. The term of the consulting agreement commenced on June 1, 2008, and expired on December 31, 2008, in accordance with its terms.
During 2007, the Company advanced in total RMB 3,007,481 (approximately $413,697) in cash to a 20% minority shareholder of one of the Company's plasma companies for the purchases of plasma collection license and certain equipments for its
Fang Cheng Plasma Company. However, the title transfer of those equipments, with the estimated value of approximately RMB 122,481 (approximately $16,871), has not been realized. The Company determined that the likelihood of the minority
shareholder's ability to deliver the title of those equipments is minimal and made a provision for the amount of $16,871 as of December 31, 2008. The Company also determined that the future cash flows expected to be generated from the Fang
Cheng plasma collection license had impaired as the plasma collected in 2008 did not warrant any carrying amount for the license. As a result, the Company recorded an impairment write-down of intangible assets for approximately RMB 2,885,000
(approximately $415,873).
In 2007, the Company also prepaid $516,456 to the same minority shareholder of one of the plasma companies. The prepayment is for the purpose of acquiring certain assets. Assets are expected to be received by January 2009. However, at December
31, 2008, the Company determined that the likelihood of recovering these advances and prepayment is minimal, due to the minority shareholder's ability to secure the title of the assets and the personal financial difficulty as a result of the
economic downturn, and made a provision for both amounts as bad debt expense as of December 31, 2008. The Company is currently negotiating with the shareholder in attempt to recover the fund. On April 6, 2009, our BVI subsidiary, Logic Express
entered into an equity transfer and entrustment agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of Biological Products, or the Shandong Institute, the holder of the minority interests in Shandong Taibang, pursuant to
which, Logic Express agreed to permit Shandong Taibang and the Shandong Institute to participate in the indirect purchase of Qianfeng's equity interests. Under the terms of the Entrustment Agreement, Shandong Taibang agreed to contribute 18% or
RMB 35,000,000 (approximately $5,116,184) of the Dalin purchase price and the Shandong Institute agreed to contribute 12.86% or RMB 25,000,000 (approximately $3,654,917) of the Dalin purchase price. Logic Express is obligated to repay to
Shandong Taibang and the Shandong Institute their respective investment amounts on or before April 6th, 2010, along with their pro rata share, based on their percentage of the Dalin purchase price contributed, of any distribution on the indirect
equity investment in Qianfeng payable to Logic Express during 2009. Logic Express has agreed that if these investment amounts are not repaid within five days of the payment due date, then Logic Express is obligated to pay Shandong Taibang and the
Shandong Institute liquidated damages equal to 0.03% of the overdue portion of the amount due until such time as it is paid. Logic Express has also agreed to pledge 30% of its ownership in Shandong Taibang to the Shandong Institute as security for
nonpayment. If failure to repay continues for longer than 3 months after the payment due date, then the Shandong Institute will be entitled to any rights associated with the pledged interests, including but not limited to rights of disposition and
profit distribution, until such time as the investment amount has been repaid. Logic Express also provided a guarantee that Shandong Taibang and the Shandong Institute will receive no less than a 6% return based on their original investment
amount.
Except as set forth in our discussion above, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be
disclosed pursuant to the rules and regulations of the SEC.
- 69 -
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
CHANGE IN ACCOUNTANTS
None.
SELLING STOCKHOLDERS
This prospectus relates to the resale by the selling stockholders named below from time to time of up to a total of 3,582,803 shares of our common stock that are issuable to the selling stockholders pursuant to transaction described below which are
exempt from registration under the Securities Act.  All of the common stock offered by this prospectus is being offered by the selling stockholders for their own accounts.
June 2009 Private Placement
On June 10, 2009, we completed a private placement transaction with a group of accredited investors. Pursuant to the securities purchase agreement, we issued to the investors, or their designees, 3.8% senior secured convertible notes in the
aggregate principal amount of $9,554,140, convertible into shares of our common stock and warrants to purchase up to 1,194,268 shares of our common stock at an exercise price of $4.80 per share. The securities issued represented
approximately 13.41% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after closing date.
As part of compensation for its services, Oppenheimer & Co. Inc., or Opco, our placement agent in the transaction also received a three-year warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased
by first-time investors in the Company, at an exercise price of $6.00 per share.
The foregoing securities were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering and Rule 506 of Regulation D promulgated thereunder.
In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement.  The shares of our common stock issuable upon conversion or exercise of the convertible notes and warrants are being registered herein.
Selling Stockholders
The following table sets forth certain information regarding the selling stockholders and the shares offered by them in this prospectus. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholder and the percentage of ownership of that selling stockholder, shares of common stock underlying shares of convertible preferred stock, options or warrants held by that selling stockholder that are
convertible or exercisable, as the case may be, within 60 days of July 15, 2009 are included.  Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder. Each selling
stockholder's percentage of ownership in the following table is based upon 21,474,942 shares of common stock outstanding as of July 15, 2009.
Except as specifically set forth in the footnotes to the table, none of the selling stockholders has held a position as an officer or director of the Company, nor has any selling stockholder had any material relationship of any kind with us or any
of our affiliates.  All information with respect to share ownership has been furnished by the selling stockholders. The shares being offered are being registered to permit public secondary trading of the shares and each selling stockholder may offer
all or part of the shares owned for resale from time to time. In addition, none of the selling stockholders has any family relationships with our officers, directors or controlling stockholders. Furthermore, except as specifically set forth in the
footnote to the table below, no selling stockholder is a registered broker-dealer or an affiliate of a registered broker-dealer. The selling stockholders who are also broker dealers are underwriters with respect to the shares that they are offering
for resale.
For additional information, refer to "Security Ownership of Certain Beneficial Owners and Management" below.
- 70 -
The term "selling stockholders" also includes any transferees,
pledges, donees, or other successors in interest to the selling stockholders
named in the table below. To our knowledge, subject to applicable community
property laws, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such
person's name. We will file a supplement to this prospectus to name successors
to any named selling stockholders who are able to use this prospectus to resell
the securities registered hereby.
We will not receive any of the proceeds from the sale of any
shares by the selling stockholders. We have agreed to bear expenses incurred by
the selling stockholders that relate to the registration of the shares being
offered and sold by the selling stockholders, including the SEC registration fee
and legal, accounting, printing and other expenses of this offering.
Shares
Shares
Maximum
Beneficially
Percentage
Beneficially
Number of
Owned
Ownership
Owned Prior to
Shares to be
After
After
Name of Selling Stockholder
Offering
Sold
Offering
(1
)
Offering
(2
)
Jayhawk Private Equity Fund,
L.P.
1,892,338
(3)
724,676
1,167,662
5.33%
Jayhawk Private Equity
      Co-Invest Fund, L.P.
118,198
(4)
45,627
72,571
*
Essence International
      Investment LTD
2,812,500
(5)
2,812,500
-
*
Total
4,823,036
3,582,803
1,240,233
*
_______________________
* means less than 1%.
(1)
Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to the shares of our common stock.
(2)
As of July 15, 2009, a total of 21,474,942 shares of our
    common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)
    (1). Warrants that are exercisable and notes that are convertible within 60
    days have been included in the denominator.
(3)
Consists of (i) 719,543 shares of our common stock owned
    as of July 15, 2009, (ii) 483,117 shares of our common stock issuable upon
    conversion of our 3.8% convertible notes issued in the 2009 financing; (iii)
    448,119 shares of common stock issuable upon the exercise of five-year
    warrants to purchase common stock at an exercise price of $2.8425 per share;
    and (iv) 241,559 shares of common stock issuable upon the exercise of
    three-year warrants to purchase common stock at an exercise price of $4.80
    per share. The General Partner of Jayhawk Private Equity Fund, L.P. is
    Jayhawk Private Equity GP, L.P., whose General Partner is Jayhawk Capital
    Management, LLC. Jayhawk Capital Management, LLC is controlled by Kent C.
    McCarthy.
(4)
Consists of (i) 44,357 shares of our common stock owned
    as of July 15, 2009, (ii) 30,418 shares of our common stock issuable upon
    conversion of our 3.8% convertible notes issued in the 2009 financing; (iii)
    28,214 shares of common stock issuable upon the exercise of five-year
    warrants to purchase common stock at an exercise price of $2.8425 per share;
    and (iv) 15,209 shares of common stock issuable upon the exercise of
    three-year warrants to purchase common stock at an exercise price of $4.80
    per share. The General Partner of Jayhawk Private Equity Co-Invest Fund,
    L.P. is Jayhawk Private Equity GP, L.P., whose General Partner is Jayhawk
    Capital Management, LLC. Jayhawk Capital Management, LLC is controlled by
    Kent C. McCarthy.
(5)
Consists of (i) 1,875,000 shares of our common stock
      issuable upon conversion of our 3.8% convertible notes issued in the 2009
      financing; and (ii) 937,500 shares of common stock issuable upon the
      exercise of three-year warrants to purchase common stock at an exercise
      price of $4.80 per share. The General Partner of Essence International
      Investment LTD is DT Capital Management Limited which is controlled by
      Lixin Tian.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding beneficial ownership of
our common stock as of July 15, 2009 (i) by each person who is known by us to
beneficially own more than 5% of our common stock; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group.
Unless otherwise specified, the address of each of the persons set forth
below is in care of China Biologic Products, Inc., No. 14 East Hushan Road, Tai
f
an
City, Shandong, People's Republic of China 271000.
- 71 -
Amount and
Nature of
Name & Address of
Beneficial
Percent of
Beneficial Owner
Office, If Any
Title of Class
Ownership
(1)
Class
(2)
Officers and Directors
Siu Ling Chan
Chairwoman of the Board
Common stock $.0001 par
      value
6,912,624
(3)
31.9%
Chao Ming Zhao
Chief Executive Officer
Common stock $.0001 par value
1,186,787
(4)
5.0%
Yu-Yun Tristan Kuo
Chief
      Financial Officer
Common
      stock $.0001 par value
75,000
(5)
0.3%
Lin Ling Li
Director
Common stock $.0001 par value
6,912,624
(3)
31.9%
Sean Shao
Director
Common stock $.0001 par
      value
10,000
(6)
0.0%
Jie Gan
Director
Common stock $.0001 par value
10,000
(6)
0.0%
Tong Jun Lin
Director
Common stock $.0001 par
      value
10,000
(6)
0.0%
All officers and
directors as a group (7
persons named
      above)
Common stock
$.0001 par value
15,117,035
69.1%
5% Securities Holders
Siu
      Ling Chan
Chairwoman of the Board
Common stock $.0001 par value
6,912,624
(3)
31.9%
Lin Ling Li
Director
Common stock $.0001 par value
6,912,624
(3)
31.9%
Chao
      Ming Zhao
Chief Executive Officer and Director
Common stock $.0001 par value
1,186,787
(4)
5.0%
IDG-Accel China Growth Fund II LP.
(7)
-
Common stock $.0001 par value
1,448,216
6.7%
Patrick J. McGoven
(8)
-
Common stock $.0001 par value
1,566,655
7.3%
Quan Zhou
(8)
-
Common stock $.0001 par value
1,566,655
7.3%
________________
*Less than 1%
(1)
Beneficial Ownership is determined in accordance with the
      rules of the SEC and generally includes voting or investment power with
      respect to securities. Each of the beneficial owners listed above has
      direct ownership of and sole voting power and investment power with
      respect to the shares of our common stock.
(2)
As of July 15, 2009, a total of 21,474,942 shares of our
      common stock are considered to be outstanding pursuant to SEC Rule
      13d-3(d)(1). For each Beneficial Owner above, any options exercisable
      within 60 days have been included in the denominator.
(3)
Includes 50,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.
(4)
Includes 115,000 shares underlying a ten-year
      nonstatutory stock option granted under the 2008 Plan, exercisable at
      $4.00 per share.
(5)
Includes 75,000 shares underlying a ten-year nonstatutory
      stock option granted under the 2008 Plan, exercisable at $4.00 per
      share.
(6)
Includes 10,000 shares underlying an option to purchase
      20,000 shares of our common stock, with an exercise price of $4.00 per
      share, of which 10,000 shares vested on January 25, 2009 and the remaining
      10,000 shares will be vested on July 25,
2009.
(7)
Patrick J.
    McGoven and Quan Zhou are directors and executive officers of IDG-Accel
    China Growth Fund GP II Associates Ltd., which is the ultimate general
    partner of IDG-Accel China Growth Fund II LP. By virtue of acting together
    to direct the management and operations of the general partner of IDG-Accel
    China Growth Fund II LP., Patrick J. McGoven and Quan Zhou may be deemed to
    have shared voting and dispositive power with respect to the securities of
    the Company held by IDG-Accel China Growth Fund II LP. Each of Patrick J.
    McGoven and Quan Zhou disclaims beneficial ownership of the securities of
    the Company held by IDG-Accel China Growth Fund II LP.
(8)
Represents
    118,439 shares of common stock held by IDG-Accel China Investors II L.P. and
    1,448,216 shares of common stock held by IDG-Accel China Growth Fund II LP.
    Patrick J. McGoven and Quan Zhou are directors and executive officers of
    IDG-Accel China Growth Fund GP II Associates Ltd., which is the general
    partner of IDG-Accel China Investors II L.P. and IDG-Accel China Growth Fund
    II LP. By virtue of acting together to direct the management and operations
    of the general partner of IDG-Accel China Investors II L.P. and IDG-Accel
    China Growth Fund II LP., Patrick J. McGoven and Quan Zhou may be deemed to
    have shared voting and dispositive power with respect to the securities of
    the Company held by each of them. Each of Patrick J. McGoven and Quan Zhou
    disclaims beneficial ownership of the securities of the Company held by
    IDG-Accel China Investors II L. P. and IDG-Accel China Growth Fund II LP.
- 72 -
DESCRIPTION OF SECURITIES TO BE REGISTERED
In this offering, we are registering shares of our common stock, par value $.0001 per share, issuable upon conversion or exercise of the convertible notes and warrants sold in the June 2009 private placement.
Capital Stock
We are currently authorized to issue 100,000,000 shares of common stock, par value $.0001 per share, of which 21,474,942 shares were issued and outstanding as of July 15, 2009. Each common share entitles the holder to one vote on all matters
submitted to a vote of our stockholders. When a dividend is declared by the Board, all stockholders are entitled to receive a fixed dividend. All shares of our common stock issued by the company are of the same class, and have equal liquidation,
preference, and adjustment rights. Holders of outstanding shares of our common stock have no preemptive, conversion or redemptive rights.
All of the issued and outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. To the extent that additional shares of our common stock are issued, the relative interests of existing stockholders
will be diluted.
Warrants, Convertible Notes, and Registration Right
On July 19, 2006, we issued to the investors in the 2006 private placement warrants to purchase an aggregate of 1,070,000 shares of our Common Stock which are exercisable by the holders at $2.8425 per share for a period of five years following
the closing of the private placement.  In the event the market price of our Common Stock exceeds 160% of the exercise price of the warrants at any time after 45 days following the effective date of the registration statement of which this prospectus
forms a part, then we may require the holder of such warrants to exercise any unexercised warrants so long as this registration statement remains effective and certain other conditions are met. The warrants may not be exercised – including
pursuant to these forced exercise provisions -- if it would result in the holder beneficially owning more than (i) 4.9999% of our outstanding Common Stock (which provision may be waived by the holder thereof with upon notice to us 61 days prior to
such exercise); or (ii) 9.9999% of our outstanding Common Stock (which provision may not be waived by any party). In the event we issue shares of our Common Stock or any type of securities convertible or exercisable into shares of our Common Stock
at a price below $2.8425, the exercise price of the warrants shall be adjusted downwards on a "weighted average" basis.  In connection with the 2006 private placement, we issued to Lane Capital Markets, LLC, the placement agent for the
transaction, warrants for the purchase of 214,000 shares of our common stock in the aggregate, for its services as placement agent. A total of 1,244,000 warrants remain unexercised under the 2006 private placement as of July 15, 2009.
On June 10, 2009, we issued to the investors in the 2009 private placement warrants to purchase an aggregate of 1,194,268 shares of our Common Stock which are exercisable by the holders at $4.80 per share for a period of three years following
the closing of the private placement. The warrants are also subject to customary adjustments for stock splits, dividends, recapitalizations, and other antidilution events. In connection with the 2009 private placement, we also issued to Oppenheimer
& Co. Inc., or Opco, a three-year warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased by first-time investors in the Company, at an exercise price of $6.00 per share. Opco also received
certain registration rights with respect to the common stock underlying its warrant, which rights include: one demand to register such shares for resale, provided that we are eligible to use a registration statement on Form S-3; an unlimited number
of piggyback registration rights; "cashless exercise" rights with respect to the warrant; and customary anti-dilution provisions.  We will have the right to repurchase any shares underlying Opco's warrant to be included in a
registration statement, at 95% of the difference between the market price per share at the time of such repurchase and the applicable exercise price per share for such shares. All 1,194,268 of these warrants remain unexercised as of July 15, 2009.
On June 10, 2009, we also issued to the investors in the 2009 private placement senior secured convertible notes in the aggregate principal amount of $9,554,140.  The notes carry interest of 3.8% per annum.  The notes are convertible into shares
of our common stock at the conversion rate of $4.00 per share, subject to customary adjustments for any recapitalizations, stock combinations, stock dividends, stock splits and other antidilution events. Pursuant to the terms of the notes, the
investors have rights to participate in any future offerings by the Company until June 10, 2010, except for underwritten public offerings, equity compensation grants, issuances of stock upon the conversion or exchange of convertible securities
outstanding on the closing of the 2009 private placement, and certain acquisitions. Investors also have a right of first refusal to participate in the purchase of any securities of the
Company proposed to be transferred by a controlling stockholder or another investor in the June 2009 private placement occurring on or before June 10, 2010. Any investors that do not exercise their right of first refusal may exercise a customary
right of co-sale. The Company may not register any transfers subject to these rights unless the transferors comply with certain notice procedures provided in the terms of the notes.  If these rights are not exercised, the transferors may transfer
their securities on the proposed terms for 60 calendar days from the expiration of these rights.
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In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement. If we do not file the required registration statement in a timely manner, or if we fail to file a pre-effective amendment to such registration statements and respond
in writing to any comments made by the SEC within a pre-defined period, then the investors have the right, by providing four weeks' written notice to require us, to redeem all or a portion of the notes held by them at a redemption price,
payable in cash, equal to the outstanding principal amount of the note, plus an amount equal to two years of interest payments (compounded semi-annually) on such principal amount, less any amount of interest actually and previously paid on such
outstanding principal amount. The notes are also redeemable upon an event of default, a change of control, liquidation, dissolution or wind-up of the affairs of the Company or any subsidiary, the amendment, alteration or repeal of any provision of
the Certificate of Incorporation or bylaws of the Company or any subsidiary in a manner that materially adversely affects the rights or preferences of the investor (including but not limited to increasing or decreasing the authorized number of
members of the board of directors of the Company or any subsidiary without the consent of the investors), or the failure to complete any of the post-closing conditions of the Dalin/Huitian Acquisitions within six months of the closing date.
Preferred Stock
We are currently authorized to issue up to 10,000,000 shares of preferred stock, par value $.0001 per share, in one or more classes or series within a class as may be determined by our board of directors, who may establish the number of shares
to be included in each class or series, may fix the designation, powers, preferences and rights of the shares of each such class or series and any qualifications, limitations or restrictions thereof. Any preferred stock so issued by the board of
directors may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of us, or both. Moreover, under certain circumstances, the issuance of preferred stock or the existence of
the un-issued preferred stock might tend to discourage or render more difficult a merger or other change in control. We currently have no shares of preferred stock outstanding.
Transfer Agent and Registrar
Our independent stock transfer agent and registrar for our common stock is Securities Transfer Corporation. Their mailing address is 2591 Dallas Parkway, Suite #102, Frisco, Texas, 75034, and their telephone number is (469) 633-0101.
SHARES ELIGIBLE FOR FUTURE SALE
As of July 15, 2009, we had outstanding 21,474,942 shares of common stock.
Shares Covered by this Prospectus
All of the 3,582,803 shares of common stock being registered in this offering may be sold without restriction under the Securities Act, so long as the registration statement of this prospectus is a part is, and remains, effective.
Rule 144
Under Rule 144, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time
of, or at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we
provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to
additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
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1% of the total number of securities of the same class then outstanding, which will equal approximately 214,749 shares immediately after this offering; or
the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
provided,
in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale.
However, since our shares are quoted on the Over-the-Counter Bulletin Board, which is not an "automated quotation system," our stockholders will not be able to rely on the market-based volume limitation described in the second bullet
above. If, in the future, our securities are listed on an exchange or quoted on NASDAQ, then our stockholders would be able to rely on the market-based volume limitation. Unless and until our stock is so listed or quoted, our stockholders can only
rely on the percentage based volume limitation described in the first bullet above.
Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144. All but the 3,582,803 of our issued and outstanding shares covered in this prospectus may currently be sold in reliance
on Rule 144. The selling stockholders will not be governed by the foregoing restrictions when selling their shares pursuant to this prospectus.
Lock-Up Agreements
One of our controlling stockholder entered into a share pledge agreement in connection with the June 2009 private placement, pursuant to which, she agreed that, so long as at least 50% of the original principal amount of the Notes remains
outstanding for the two year period following the closing, she will not dispose of more than 500,000 shares of the Company's common stock in any one year period or more than 1,000,000 shares of the Company's common stock throughout the
two-year term. She also agreed to provide the investors in the private placement with the right of first refusal during the two-year term with respect to any transfer of her securities. This lock-up provision will expire on June 10, 2011.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are
traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated
prices.
The selling stockholders will sell our shares at prevailing market prices or at privately negotiated prices. The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
privately negotiated transactions;
short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;
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through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
sales pursuant to Rule 144;
a combination of any such methods of sale; and
any other means permitted by applicable law.
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or
other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in
the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering.
Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the
purchase of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule.
Any underwriters, agents or broker-dealers, and any selling stockholders who are affiliates of broker-dealers, that participate in the sale of the common stock or interests therein may be "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are "underwriters" within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. We know of no existing arrangements between any of the selling stockholders and any other stockholder, broker, dealer,
underwriter, or agent relating to the sale or distribution of the shares, nor can we presently estimate the amount, if any, of such compensation. See "Selling Stockholders" for description of any material relationship that a stockholder
has with us and the description of such relationship.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealers or underwriters and any applicable commissions or
discounts with respect to a particular offer will be set forth in an accompanying
prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
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In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold
unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, we will
make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may
indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to pay certain fees and expenses incurred by us incident to the registration of the shares. Such fees and expenses are estimated to be $71,824. We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144 of the Securities Act.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP, Washington, D.C.
EXPERTS
Our audited consolidated financial statements as of December 31, 2008
and 2007 and for each of the two years in the period ended December 31, 2008 included in this prospectus and elsewhere and in the registration statement have been so
included in reliance upon the report of Moore Stephens Wurth Frazer & Torbet, LLP, independent auditors, appearing in this registration statement, and their authority as experts in accounting and auditing.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in China Biologic or any of its parents or subsidiaries. Nor was any such
person connected with China Biologic or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Bylaws provide for the indemnification of our directors and officers, past, present and future, under certain circumstances, against attorney's fees, judgments, fines and other expenses incurred by them in any litigation to which they become a
party arising from their association with or activities on behalf of us. We will also bear expenses of such litigation for any of our directors, officers, employees or agents upon such persons promise to repay us therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup.
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Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934 may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise,
we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the
successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For
further information with respect to us and the common stock offered in this offering, we refer you to the registration statement and to the attached exhibits. With respect to each such document filed as an exhibit to the registration statement, we
refer you to the exhibit for a more complete description of the matters involved.
You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our
registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SEC's website at www.sec.gov, which contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC.
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CHINA BIOLOGIC PRODUCTS, INC.
3,582,803 Shares of Common Stock
PROSPECTUS
_______, 2009
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable by us in connection with
the sale of common stock being registered. All amounts, other than the SEC
registration fee, are estimates. We will pay all these expenses.
Amount to be Paid
SEC Registration Fee
$
824.00
Printing Fees and Expenses
2,500.00
Legal Fees and Expenses
50,000.00
Accounting Fees and Expenses
10,000.00
Blue Sky Fees and Expenses
5,000.00
Transfer Agent and Registrar Fees
2,000.00
Miscellaneous
1,500.00
Total
$
71,824.00
Item 14. Indemnification of Directors and Officers
China Biologic Products, Inc. is a Delaware corporation.
Section 102(b)(7) of the Delaware General Corporation Law or the DGCL, permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability for any of the following:
any breach of the director's duty of loyalty to the corporation or its
  stockholders;
acts or omissions not in good faith or which involve intentional
  misconduct or a knowing violation of law;
payments of unlawful dividends or unlawful stock repurchases or
  redemptions under Section 174 of the DGCL; or
any transaction from which the director derived an improper personal
  benefit.
Under the DGCL, any repeal or modification of such provisions
will not adversely affect any right or protection of a director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
Our certificate of incorporation provides that no director
shall be personally liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty by such director as a director, except for any (a)
breach of the director's duty of loyalty to the Corporation or its stockholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) pursuant to Section 174 or the DGCL; or (d) for any transaction from which the director derived an improper
benefit.
Under Section 145 of the DGCL, a corporation may indemnify any
individual made a party or threatened to be made a party to any type of
proceeding, other than an action by or in the right of the corporation, because
he or she is or was an officer, director, employee or agent of the corporation
or was serving at the request of the corporation as an officer, director,
employee or agent of another corporation or entity against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with such proceeding: (1) if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation; or (2) in the case of a criminal proceeding, he or
she had no reasonable cause to believe that his or her conduct was unlawful. A
corporation may indemnify any individual made a party or threatened to be made a
party to any threatened, pending or completed action or suit brought by or in
the right of the corporation because he or she was an officer, director,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, provided that such indemnification will be denied if the individual
is found liable to the corporation unless, in such a case, the court determines
the person is nonetheless entitled to indemnification for such expenses. A
corporation must indemnify a present or former director or officer who
successfully defends himself or herself in a proceeding to which he or she
was a party because he or she was a director or officer of the corporation against expenses actually and reasonably incurred by him or her. Expenses incurred by an officer or director, or any employees or agents as deemed appropriate by the board of
directors, in defending civil or criminal proceedings may be paid by the corporation in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of such director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. The Delaware law regarding indemnification and expense advancement is not exclusive of any other rights which may be granted by our
restated certificate of incorporation or restated bylaws, a vote of stockholders or disinterested directors, agreement or otherwise.
II-1
Our restated bylaws provide that we must indemnify our former and present directors and officers against any and all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by any such director or officer in
connection with any threatened, pending or completed action, suit or proceeding, to the fullest extent permitted by the laws of Delaware. We have undertaken to pay any expenses reasonably incurred by a director or officer in defending a civil or
criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount, if it is ultimately determined that he or
she is not entitled to be indemnified by us. The provision of indemnification to persons under our restated bylaws does not limit or restrict in any way our power to indemnify them in any other way permitted by law. The Company has also entered into
separate agreements with certain directors indemnifying them to the fullest extent permitted by the foregoing. The Company has purchased director and officer liability insurance, as permitted by its bylaws.
Insofar as indemnification by us for liabilities arising under the Exchange Act may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Exchange Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted.  We are not aware of any threatened litigation or proceeding
which may result in a claim for such indemnification.
Item 15. Recent Sales of Unregistered Securities
On June 10, 2009, we completed a private placement transaction with a group of accredited investors. Pursuant to the securities purchase agreement, we issued to the investors, or their designees, 3.8% senior secured convertible notes in the
aggregate principal amount of $9,554,140, convertible into shares of our common stock and warrants to purchase up to 1,194,268 shares of our common stock at an exercise price of $4.80 per share. The securities issued represented
approximately 13.41% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after closing date. For details regarding the Purchase Agreement and the related transaction documents, see our Current Report on Form
8-K filed on June 5, 2009 and the exhibits thereto.
As compensation for its services, Oppenheimer & Co. Inc., or Opco, our placement agent in the transaction will receive a cash fee equal to 6.1% of the gross proceeds received from the sale of the Securities. Opco will also receive a three-year
warrant to purchase up to 93,750 shares of our common stock, representing 5% of the Securities purchased by first-time investors in the Company, at an exercise price of $6.00 per share. Opco also received certain registration rights with respect
to the common stock underlying its warrant, which rights include: one demand to register such shares for resale, provided that we are eligible to use a registration statement on Form S-3; an unlimited number of piggyback registration rights;
"cashless exercise" rights with respect to the warrant; and customary anti-dilution provisions. We will have the right to repurchase any shares underlying Opco's warrant to be included in a registration statement, at 95% of the
difference between the market price per share at the time of such repurchase and the applicable exercise price per share for such shares.
In connection with the private placement transaction, on June 10, 2009, we also entered into a registration rights agreement with the investors, pursuant to which we agreed to file within 45 days of the closing date, a registration statement
registering for resale the shares issued to the investors in the private placement. If we not file the required registration statement in a timely manner, or if we fail to
file pre-effective amendment to such registration statements and respond in
writing to any comments made by the SEC within a pre-defined period, then the
investors have the right, by providing four weeks' written notice to require us,
to redeem all or a portion of the notes held by them at a redemption price,
payable in cash, equal to the outstanding principal amount of the note, plus an
amount equal to two years of interest payments (compounded semi-annually) on
such principal amount, less any amount of interest actually and previously paid
on such outstanding principal amount. The shares of our common stock underlying
warrants issued in connection with the 2009 private placement are being
registered herein.
II-2
The foregoing securities were issued pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act for the offer
and sale of securities not involving a public offering and Rule 506 of
Regulation D promulgated thereunder. The investors agreed, pursuant to the terms
and conditions of the securities purchase agreement, as applicable, that (a)
they had access to all of the Company's information pertaining to the investment
and were provided with the opportunity to ask questions and receive answers
regarding the offering, (b) they acquired the securities, as applicable, for
their own account for investment and not for the account of any other person and
not with a view to or for any distribution within the meaning of the Securities
Act and (c) they will not sell or otherwise transfer the securities, as
applicable, unless in compliance with state and federal securities laws. Each of
the investors represented, pursuant to the terms and conditions of the Purchase
Agreement, that they are accredited investors as defined in Rule 501(a) under
the Securities Act and that there was no general solicitation or advertising in
connection with the offer and sale of the Securities.
Item 16. Exhibits and Financial Statement
Schedules
The following exhibits are included as part of this Form
S-1.
Exhibit
No.
Description
2.1
Share Exchange Agreement between the Company, Logic
      Express Limited and the selling stockholders signatory thereto, dated as
      of July 18, 2006 (incorporated by reference to Exhibit 2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
3.1
Certificate of Incorporation of the Company (incorporated
      by reference to Exhibit 3.1 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)
3.2
Amended and Restated By-Laws, adopted on March 31, 2009
      (incorporated by reference to Exhibit 3.2 of the Annual Report on Form
      10-K filed by the Company on March 31, 2009).
4.1
Securities Purchase Agreement between the Company, Logic
      Express Limited, Shandong Taibang Biological Products Co., Ltd., and the
      selling stockholders and investors signatory thereto, dated as of July 18,
      2006 (incorporated by reference to Exhibit 4.1 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)
4.2
Registration Rights Agreement, between the Company and
      certain investors signatory thereto, dated as of July 18, 2006
      (incorporated by reference to Exhibit 4.2 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.3
Form of Stockholder Warrant to purchase Common Stock,
      dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
4.4
Lane Warrant, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.4 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)
4.5
Share Escrow Agreement, between the Company, Lane, as
      investor representative, the Escrow Agent, and the selling stockholders
      signatory thereto, dated as of July 19, 2006 (incorporated by reference to
      Exhibit 4.5 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)
4.6
Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.6 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)
II-3
4.7
Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.8
Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.9
Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.10
Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)
4.11
Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)
4.12
Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
4.13
Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
4.14
Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
4.15
Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)
4.16
Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
4.17
Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).
4.18
Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5,
      2009).
5.1*
Opinion of Pillsbury Winthrop Shaw Pitman LLP
10.1.
China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)
10.2.
Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K, filed by
      the Company on May 13, 2008)
II-4
10.3.
Group Secondment Agreement, dated October 28, 2002,
      between Shandong Taibang Biological Products Co., Ltd. and the Shandong
      Institute (English Translation) (incorporated by reference to Exhibit 10.1
      of the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.4.
Amended and Restated Joint Venture Agreement, between
      Logic Express Limited and the Shandong Institute, dated as of March 12,
      2006 (English Translation) (incorporated by reference to Exhibit 10.2 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
10.5.
Letter of Intent for Equity Transfer, between Logic
      Express Limited and the Shandong Institute, dated as of June 10, 2006
      (English Translation) (incorporated by reference to Exhibit 10.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
10.6.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qihei Plasma Collection Station, dated
      as of December 30, 2005 (English Translation) (incorporated by reference
      to Exhibit 10.4 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)
10.7.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xiajin Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.5 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)
10.8.
Raw Plasma Supply Agreement, between Shandong Taibang and
      the Zhangqiu Plasma Collection Station, dated as of December 30, 2005
      (English Translation) (incorporated by reference to Exhibit 10.6 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
10.9.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qi He An Tai Plasma Collection Co.,
      Ltd., dated as of January 2, 1007 (English Translation) (incorporated by
      reference to Exhibit 10.9 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.10.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xia Jin An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.10 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)
10.11.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Zhang Qiu An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.11 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)
10.12.
Asset Purchase Agreement, between Zhang Qiu An Tai Plasma
      Collection Co., Ltd. and Zhang Qiu Plasma Collection Station, dated as of
      December 31, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.12 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)
10.13.
Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of April 24, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.14.
Asset Purchase Agreement, between Qi He An Tai Plasma
      Collection Co., Ltd. and Qi He County Plasma Collection Station, dated as
      of November 9, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.14 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)
10.15.
Asset Purchase Agreement, between Xia Jin An Tai Plasma
      Collection Co., Ltd. and Xia Jin County Plasma Collection Station, dated
      as of October 20, 2006 (English Translation) (incorporated
  by reference to Exhibit 10.15 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)
II-5
10.16.
Asset Purchase Agreement, between Liao Cheng An Tai
      Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station,
      dated as of November 3, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.16 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.17.
Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.18.
Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)
10.19.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)
10.20.
Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.21.
Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)
10.22.
Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)
10.23.
Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)
10.24.
Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)
10.25.
Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)
10.26.
Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)
10.27.
Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)
II-6
10.28.
(Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)
10.29.
Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.30.
Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.31.
Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.32.
Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Tai'an Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.33.
China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Tai'an Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)
10.34.
Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)
10.35.
Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.36.
Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.37.
Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.38.
Form of Director's Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)
10.39.
Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)
10.40.
Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2 of the current report
      on Form 8-K, filed by the Company on July 30, 2008)
10.41
Form of Securities Purchase Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 10.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
10.42
Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2 of the Current Report
      on Form 8-K filed by the Company on June 5, 2009).
10.43
Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
II-7
14
Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)
21
Subsidiaries of China Biologic Products, Inc.
      (Incorporated by reference to Exhibit 21 to the registrant's quarterly
      report on Form 10-Q filed on May 15, 2009)
23.1*
Consent of Moore Stephens Wurth Frazer and Torbet, LLP
23.2*
Consent of Pillsbury Winthrop Shaw Pittman LLP, included
      in Exhibit 5.
24*
Power of Attorney (included on the signature page of this
      registration statement).
_________________________
* Filed herewith
Item 17. Undertakings
(A) The undersigned registrant hereby undertakes:
(1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement to:
(a) Include any prospectus required by Section 10(a)(3) of the
Securities Act, and
(b) Reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement; and
(c) Include any additional or changed material information with
respect to the plan of distribution not previously disclosed in Registration
Statement;
(2) That, for the purpose of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial
bona fide
offering thereof.
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) If the registrant is subject
to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of
and included in the registration statement as of the date it is first used after
effectiveness.
Provided, however,
that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(B) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Tai'an City, Shandong
Province, China, on the 24th day of July, 2009.
CHINA BIOLOGIC PRODUCTS, INC.
By:
/s/
      Chao Ming Zhao
Chao Ming Zhao
Chief Executive Officer
      (Principal Executive Officer)
By:
/s/ Y.
      Tristan Kuo
Y. Tristan Kuo
Chief Financial Officer (Principal Financial
      and Accounting Officer)
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
constitutes and appoints Chao Ming Zhao and Y. Tristan Kuo, and each of them
individually, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature
Title
Date
/s/ Siu Ling Chan
Chairwoman of the Board
July 24, 2009
Siu Ling Chan
/s/ Chao Ming Zhao
Chief Executive Officer
July 24, 2009
Chao Ming Zhao
(Principal Executive Officer)
/s/ Yu-Yun Tristan Kuo
Chief Financial Officer
July 24, 2009
Yu-Yun Tristan Kuo
(Principal Financial and Accounting Officer)
/s/ Lin Ling Li
Director
July 24, 2009
Lin Ling Li
/s/ Sean Shao
Director
July 24, 2009
Sean Shao
/s/ Jie Gan
Director
July 24, 2009
Jie Gan
/s/ Tong Jun Lin
Director
July 24, 2009
Tong Jun Lin
EXHIBIT INDEX
Exhibit
No.
Description
2.1
Share Exchange Agreement between the Company, Logic
      Express Limited and the selling stockholders signatory thereto, dated as
      of July 18, 2006 (incorporated by reference to Exhibit 2 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
3.1
Certificate of Incorporation of the Company (incorporated
      by reference to Exhibit 3.1 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)
3.2
Amended and Restated By-Laws, adopted on March 31, 2009
      (incorporated by reference to Exhibit 3.2 of the Annual Report on Form
      10-K filed by the Company on March 31, 2009).
4.1
Securities Purchase Agreement between the Company, Logic
      Express Limited, Shandong Taibang Biological Products Co., Ltd., and the
      selling stockholders and investors signatory thereto, dated as of July 18,
      2006 (incorporated by reference to Exhibit 4.1 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)
4.2
Registration Rights Agreement, between the Company and
      certain investors signatory thereto, dated as of July 18, 2006
      (incorporated by reference to Exhibit 4.2 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.3
Form of Stockholder Warrant to purchase Common Stock,
      dated as of July 19, 2006 (incorporated by reference to Exhibit 4.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
4.4
Lane Warrant, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.4 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)
4.5
Share Escrow Agreement, between the Company, Lane, as
      investor representative, the Escrow Agent, and the selling stockholders
      signatory thereto, dated as of July 19, 2006 (incorporated by reference to
      Exhibit 4.5 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)
4.6
Escrow Agreement, between the Company, the Escrow Agent,
      and the selling stockholders signatory thereto, dated as of July 19, 2006 (incorporated by
      reference to Exhibit 4.6 of the registration statement on Form SB-2, filed
      by the Company on September 5, 2007)
4.7
Amendment No. 1 to the Share Escrow Agreement, between
      the Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of February 16, 2007
      (incorporated by reference to Exhibit 4.7 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.8
Amendment No. 2 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of March 27, 2007
      (incorporated by reference to Exhibit 4.8 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.9
Amendment No. 3 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of April 2, 2007
      (incorporated by reference to Exhibit 4.9 of the registration statement on
      Form SB-2, filed by the Company on September 5, 2007)
4.10
Amendment No. 4 to Share Escrow Agreement, between the
      Company, Lane, as investor representative, the Escrow Agent, and the
      selling stockholders signatory thereto, dated as of May 9, 2007
      (incorporated by reference to Exhibit 4.10 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)
4.11
Amendment No. 1 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of February 16, 2007 (incorporated by reference to Exhibit 4.11
      of the registration statement on Form SB-2, filed by the Company on
      September 5, 2007)
4.12
Amendment No. 2 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of March 27, 2007 (incorporated by reference to Exhibit 4.12 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
4.13
Amendment No. 3 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of April 2, 2007 (incorporated by reference to Exhibit 4.13 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
4.14
Amendment No. 4 to Securities Purchase Agreement, between
      the Company, Logic Express Limited, Shandong Taibang Biological Products
      Co., Ltd. and the selling stockholders and investors signatory thereto,
      dated as of May 9, 2007 (incorporated by reference to Exhibit 4.14 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
4.15
Amendment No. 5 to Securities Purchase Agreement, between
      the Company and investors signatory thereto, dated as of August 20, 2007
      (incorporated by reference to Exhibit 4.15 of the registration statement
      on Form SB-2, filed by the Company on September 5, 2007)
4.16
Form of Registration Rights Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 4.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
4.17
Form of 3.8% Convertible Senior Secured Note due
      2011(incorporated by reference to Exhibit 4.2 of the Current Report on
      Form 8-K filed by the Company on June 5, 2009).
4.18
Form of Warrant (incorporated by reference to Exhibit 4.3
      of the Current Report on Form 8-K filed by the Company on June 5,
      2009).
5.1*
Opinion of Pillsbury Winthrop Shaw Pitman LLP
10.1.
China Biologic Products, Inc. 2008 Equity Incentive Plan
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on May 13, 2008)
10.2.
Form of Stock Option Award Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.5 of the current report on Form 8-K, filed by
      the Company on May 13, 2008)
10.3.
Group Secondment Agreement, dated October 28, 2002,
      between Shandong Taibang Biological Products Co., Ltd. and the Shandong
      Institute (English Translation) (incorporated by reference to Exhibit 10.1
      of the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.4.
Amended and Restated Joint Venture Agreement, between
      Logic Express Limited and the Shandong Institute, dated as of March 12,
      2006 (English Translation) (incorporated by reference to Exhibit 10.2 of
      the registration statement on Form SB-2, filed by the Company on September
      5, 2007)
10.5.
Letter of Intent for Equity Transfer, between Logic
      Express Limited and the Shandong Institute, dated as of June 10, 2006
      (English Translation) (incorporated by reference to Exhibit 10.3 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
10.6.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qihei Plasma Collection Station, dated
      as of December 30, 2005 (English Translation) (incorporated by reference
      to Exhibit 10.4 of the registration statement on Form SB-2, filed by the
      Company on September 5, 2007)
10.7.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xiajin Plasma Collection Station,
      dated as of December 30, 2005 (English Translation) (incorporated by
      reference to Exhibit 10.5 of the registration statement on Form SB-2,
      filed by the Company on September 5, 2007)
10.8.
Raw Plasma Supply Agreement, between Shandong Taibang and
      the Zhangqiu Plasma Collection Station, dated as of December 30, 2005
      (English Translation) (incorporated by reference to Exhibit 10.6 of the
      registration statement on Form SB-2, filed by the Company on September 5,
      2007)
10.9.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Qi He An Tai Plasma Collection Co.,
      Ltd., dated as of January 2, 1007 (English Translation) (incorporated by
      reference to Exhibit 10.9 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.10.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Xia Jin An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.10 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)
10.11.
Plasma Processing Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and the Zhang Qiu An Tai Plasma Collection
      Co., Ltd., dated as of January 2, 2007 (English Translation) (incorporated
      by reference to Exhibit 10.11 of the registration statement on Form
      SB-2/A, filed by the Company on December 3, 2007)
10.12.
Asset Purchase Agreement, between Zhang Qiu An Tai Plasma
      Collection Co., Ltd. and Zhang Qiu Plasma Collection Station, dated as of
      December 31, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.12 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)
10.13.
Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of April 24, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.14.
Asset Purchase Agreement, between Qi He An Tai Plasma
      Collection Co., Ltd. and Qi He County Plasma Collection Station, dated as
      of November 9, 2006 (English Translation) (incorporated by reference to
      Exhibit 10.14 of the registration statement on Form SB-2/A, filed by the
      Company on December 3, 2007)
10.15.
Asset Purchase Agreement, between Xia Jin An Tai Plasma
      Collection Co., Ltd. and Xia Jin County Plasma Collection Station, dated
      as of October 20, 2006 (English Translation) (incorporated
  by reference to Exhibit 10.15 of the registration statement
      on Form SB-2/A, filed by the Company on December 3, 2007)
10.16.
Asset Purchase Agreement, between Liao Cheng An Tai
      Plasma Collection Co., Ltd. and Yang Gu County Plasma Collection Station,
      dated as of November 3, 2006 (English Translation) (incorporated by
      reference to Exhibit 10.16 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.17.
Asset Purchase Agreement, between Fang Cheng Plasma
      Collection Co., Ltd. and Fang Cheng Plasma Company, dated as of April 30,
      2007 (English Translation) (incorporated by reference to Exhibit 10.21 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.18.
Asset Purchase Agreement, between He Ze An Tai Plasma
      Collection Co., Ltd and Yun Cheng County Plasma Collection Station, dated
      as of December 15, 2006 (English Translation) (incorporated by reference
      to Exhibit 10.22 of the registration statement on Form SB-2/A, filed by
      the Company on December 3, 2007)
10.19.
Raw Plasma Supply Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Liao Cheng Tiantan Plasma Collection Co.
      Ltd., dated as of November 1, 2007 (English Translation) (incorporated by
      reference to Exhibit 10.23 of the registration statement on Form SB-2/A,
      filed by the Company on December 28, 2007)
10.20.
Asset Purchase Agreement, between Guang Xi Huan Jiang
      Missile Plasma Collection Co., Ltd. and Huan Jiang Maonan Autonomous
      County Plasma Collection Station, dated as of August 5, 2007 (English
      Translation) (incorporated by reference to Exhibit 10.13 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.21.
Equity Transfer Agreement, dated September 26, 2008,
      among Logic Express Limited, Chongqing Dalin Biologic Technologies Co.,
      Ltd. and certain shareholders of Chongqing Dalin Biologic Technologies
      Co., Ltd. (incorporated by reference to Exhibit 10.1 of the current report
      on Form 8-K, filed by the Company on October 2, 2008)
10.22.
Supplemental Agreement, dated November 3, 2008, among
      Logic Express Limited, Fan Shaowen, as representative of the shareholders
      of Chongqing Dalin Biologic Technologies Co., Ltd. and Chongqing Dalin
      Biologic Technologies Co., Ltd. (English Translation) (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on November 7, 2008)
10.23.
Second Supplemental Agreement, dated November 14, 2008,
      among Logic Express Limited, Fan Shaowen as representative of the
      shareholders of Chongqing Dalin Biologic Technologies Co., Ltd. and
      Chongqing Dalin Biologic Technologies Co., Ltd. (English Translation)
      (incorporated by reference to exhibit 10.3 of the current report of Form
      8-K, filed by the Company on November 20, 2008)
10.24.
Amended Equity Transfer Agreement, dated December 12,
      2008, among Logic Express Limited, Chongqing Dalin Biologic Technologies
      Co., Ltd., and certain shareholders of Chongqing Dalin Biologic
      Technologies Co., Ltd. (English Translation) (incorporated by reference to
      exhibit 10.4 of the current report of Form 8-K, filed by the Company on
      December 18, 2008)
10.25.
Equity Transfer Agreement, between Shandong Taibang
      Biological Products Co., Ltd. and Mr. Fan Qingchun, dated October 10, 2008
      (incorporated by reference to Exhibit 10.1 of the current report on Form
      8-K, filed by the Company on October 16, 2008)
10.26.
Joint Venture and Cooperation Agreement between Mr. Fan
      Qingchun, Shandong Taibang Biological Products Co., Ltd. and Shaanxi Power
      Construction Corporation, dated September 12, 2008 (incorporated by
      reference to Exhibit 10.2 of the current report on Form 8-K, filed by the
      Company on October 16, 2008)
10.27.
Agreement on Equity Transfer, Acquisition, Joint Venture
      and Cooperation, among Shandong Taibang Biological Products Co., Ltd.,
      Shaanxi Power Construction Corporation and Mr. Fan Qingchun, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.3 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)
10.28.
(Shareholder) Agreement among Shandong Taibang Biological
      Products Co., Ltd., Logic Express Limited and Biological Institute, dated
      September 12, 2008 (incorporated by reference to Exhibit 10.4 of the
      current report on Form 8-K, filed by the Company on October 16,
    2008)
10.29.
Trademark Licensing Agreement, dated as of February 27,
      2007 (English Translation) (incorporated by reference to Exhibit 10.17 of
      the registration statement on Form SB-2/A, filed by the Company on
      December 3, 2007)
10.30.
Loan Agreement, dated as of November 30, 2006, among
      Shandong Taibang and the Shandong Institute and Logic Express (English
      Translation) (incorporated by reference to Exhibit 10.18 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.31.
Supplementary Agreement, dated as of September 1, 2007,
      among Shandong Taibang Biological Products Co., Ltd., the Shandong
      Institute and Logic Express Limited (English Translation) (incorporated by
      reference to Exhibit 10.19 of the registration statement on Form SB-2/A,
      filed by the Company on December 3, 2007)
10.32.
Form of Bank of Communications Loan Contract, among
      Shandong Taibang and the Tai'an Branch of the Bank of Communications
      (English Translation) (incorporated by reference to Exhibit 10.20 of the
      registration statement on Form SB-2/A, filed by the Company on December 3,
      2007)
10.33.
China Bank of Communications Loan Contract, dated October
      28, 2008, between Shandong Taibang Biological Products Co. Ltd. and Bank
      of Communications, Tai'an Branch (English Translation) (incorporated by
      reference to Exhibit 10.1 of the current report on Form 8-K, filed by the
      Company on November 3, 2008)
10.34.
Loan Agreement between Shandong Taibang Biological
      Products Co., Ltd. and Bank Of China, dated January 8, 2009 (English
      Translation) (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on January 13, 2009)
10.35.
Consulting Agreement, between Stanley Wong and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.2 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.36.
Employment Agreement, between Y. Tristan Kuo and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.3 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.37.
Employment Agreement, between Chao Ming Zhao and China
      Biologic Products, Inc., dated May 9, 2008 (incorporated by reference to
      Exhibit 10.4 of the current report on Form 8-K, filed by the Company on
      May 13, 2008)
10.38.
Form of Director's Employment Agreement of China Biologic
      (incorporated by reference to Exhibit 10.8 of the registration
      statement on Form SB-2, filed by the Company on September 5,
  2007)
10.39.
Form of Independent Director Agreement of China Biologic
      Products, Inc. (incorporated by reference to Exhibit 10.1 of the current
      report on Form 8-K, filed by the Company on July 30, 2008)
10.40.
Form of Indemnity Agreement of China Biologic Products,
      Inc. (incorporated by reference to Exhibit 10.2 of the current report
      on Form 8-K, filed by the Company on July 30, 2008)
10.41
Form of Securities Purchase Agreement, dated June 5, 2009
      (incorporated by reference to Exhibit 10.1 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
10.42
Form of Guarantee and Pledge Agreement, dated June 10,
      2009 (incorporated by reference to Exhibit 10.2 of the Current Report
      on Form 8-K filed by the Company on June 5, 2009).
10.43
Form of Indemnification Agreement, dated June 10, 2009
      (incorporated by reference to Exhibit 10.3 of the Current Report on Form
      8-K filed by the Company on June 5, 2009).
14
Code of Ethics (incorporated by reference to Exhibit 14
      of the annual report on Form 10-KSB, filed by the Company on March 28,
      2008)
21
Subsidiaries of China Biologic Products, Inc.
      (Incorporated by reference to Exhibit 21 to the registrant's quarterly
      report on Form 10-Q filed on May 15, 2009)
23.1*
Consent of Moore Stephens Wurth Frazer and Torbet, LLP
23.2*
Consent of Pillsbury Winthrop Shaw Pittman LLP, included
      in Exhibit 5.
24 *
Power of Attorney (included on the signature page of this
      registration statement).
_________________________
* Filed herewith
CHINA BIOLOGIC PRODUCTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
Contents
Page(s)
Consolidated Balance Sheets as of March
    31, 2009 (unaudited) and December 31, 2008
F-2
Consolidated Statements of Income and
    Other Comprehensive Income for the three months ended March 31, 2009 and
    2008 (unaudited)
F-3
Consolidated Statements of Changes in
    Equity
F-4
Consolidated Statements of Cash Flows for
    the three months ended March 31, 2009 and 2008 (unaudited)
F-5
Notes to the Consolidated Financial
    Statements (unaudited)
F-6 –  F-32
F-1
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2009 AND DECEMBER 31, 2008
March 31,
2009
December 31,
2008
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash
$
34,005,948
$
8,814,616
Notes receivable
468,800
—
Accounts receivable, net of allowance for doubtful accounts
      of $1,275,437 and $1,268,052 as of March 31, 2009 and December 31, 2008,
      respectively
383,781
313,087
Accounts receivable - related party
631,803
—
Dividend receivable
147,055
147,256
Other receivables
845,780
356,957
Other receivables - related party
797,138
—
Inventories
26,700,002
14,949,196
Prepayments and deferred expense
1,133,535
614,704
Total current assets
65,113,842
25,195,816
PLANT
      AND EQUIPMENT, net
27,583,288
19,299,364
OTHER
      ASSETS:
Investment in unconsolidated affiliate
6,565,312
6,533,977
Refundable deposit for potential acquisition
—
14,181,800
Prepayments - non-current
4,519,925
955,874
Intangible assets, net
21,636,063
1,002,561
Goodwill
13,692,473
—
Total other assets
46,413,773
22,674,212
Total assets
$
139,110,903
$
67,169,392
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$
3,502,387
$
2,481,889
Notes payable
29,300
29,340
Short term loans - bank
7,720,550
—
Short term loan - holder of noncontrolling interest
772,223
773,277
Other payables and accrued liabilities
12,978,381
3,962,931
Other payable - land use right
29,281
1,683
Other payable - holder of noncontrolling interest
1,333,795
—
Other payable - related party
2,563,643
—
Accrued interest - related party
305,966
—
Distribution payable to holder of noncontrolling interest
4,166,692
3,252,354
Customer deposits
6,390,937
1,091,792
Taxes payable
5,211,498
4,060,010
Long term bank loan-current maturities
439,500
—
Investment payable
17,510,836
3,275,501
Total current liabilities
62,954,989
18,928,777
OTHER
      LIABILITIES:
Non-current other payable - land use right
324,546
323,707
Long term loan-bank, net of current maturities
8,790,000
5,868,000
Total other liabilities
9,114,546
6,191,707
Total liabilities
72,069,535
25,120,484
WARRANT LIABILITIES
2,061,049
—
COMMITMENTS AND CONTINGENCIES
—
—
EQUITY:
Common stock, $0.0001 par value, 100,000,000 shares
      authorized, 21,434,942 shares issued and outstanding at March 31, 2009 and
      December 31, 2008
2,143
2,143
Paid-in-capital
9,988,956
10,700,032
Statutory reserves
9,750,637
6,989,801
Retained earnings
15,960,158
15,392,253
Accumulated other comprehensive income
4,177,935
4,159,298
Total shareholders' equity
39,879,829
37,243,527
NONCONTROLLING INTEREST
25,100,490
4,805,381
Total equity
64,980,319
42,048,908
Total liabilities and equity
$
139,110,903
$
67,169,392
The accompanying notes are an integral part of these
consolidated statements.
F-2
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Unaudited)
2009
2008
REVENUES
$
21,148,598
$
7,849,007
COST OF
    SALES
6,214,930
1,948,898
GROSS
    PROFIT
14,933,668
5,900,109
OPERATING EXPENSES
:
Selling expenses
579,496
494,529
General and administrative expenses
3,822,907
1,584,128
Research and development expenses
467,727
183,782
Total operating expenses
4,870,130
2,262,439
INCOME
    FROM OPERATIONS
10,063,538
3,637,670
Equity in income of unconsolidated affiliate
(40,247
)
—
Change in fair value of warrant liabilities
393,023
—
Interest expense (income), net
370,853
22,973
Other expense (income), net
51,315
412
Total other expenses (income), net
774,944
23,385
INCOME
    BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST
9,288,594
3,614,285
PROVISION FOR INCOME TAXES
2,030,194
740,482
NET
    INCOME BEFORE NONCONTROLLING INTEREST
7,258,400
2,873,803
Less:
    Net income attributable to noncontrolling interest
3,000,082
606,003
NET
    INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
4,258,318
2,267,800
OTHER
    COMPREHENSIVE INCOME
:
Foreign currency translation adjustments
18,637
942,699
Comprehensive income attributable to noncontrolling interest
427,302
184,467
COMPREHENSIVE INCOME
$
4,704,257
$
3,394,966
BASIC
    EARNINGS PER SHARE
:
Weighted average number of shares
21,434,942
21,434,942
Earnings per share
$
0.20
$
0.11
DILUTED
    EARNINGS PER SHARE
:
Weighted average number of shares
21,434,942
21,964,168
Earnings per share
$
0.20
$
0.10
The accompanying notes are an integral part of these
consolidated statements.
F-3
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Retained earnings
Accumulated
other
Common stock
Additional
Statutory
comprehensive
Noncontrolling
Shares
Par value
paid in capital
reserves
Unrestricted
income
interest
Total
BALANCE,
    December 31, 2007
21,434,942
$
2,143
$
9,388,305
$
3,934,703
$
6,461,680
$
2,313,348
$
4,181,338
$
26,281,517
Stock based compensation
—
Net income
2,267,800
606,003
2,873,803
Dividend declared to noncontrolling interest shareholders
(385,080
)
(385,080
)
Adjustment to statutory reserve
352,954
(352,954
)
—
Foreign currency translation adjustments
942,699
184,467
1,127,166
BALANCE,
    March 31, 2008 (unaudited)
21,434,942
$
2,143
$
9,388,305
$
4,287,657
$
8,376,526
$
3,256,047
$
4,586,728
$
29,897,406
Stock based compensation
1,311,727
1,311,727
Net income
9,717,871
2,697,838
12,415,709
Dividend declared to noncontrolling interest shareholders
(2,596,965
)
(2,596,965
)
Adjustment to statutory reserve
2,702,144
(2,702,144
)
—
Foreign currency translation adjustments
903,251
117,780
1,021,031
BALANCE,
    December 31, 2008
21,434,942
$
2,143
$
10,700,032
$
6,989,801
$
15,392,253
$
4,159,298
$
4,805,381
$
42,048,908
Cumulative effect of reclassification of warrants
(738,449
)
(929,577
)
(1,668,026
)
Stock based compensation
27,373
27,373
Net income
4,258,318
3,000,082
7,258,400
Dividend declared to noncontrolling interest shareholders
(4,633,987
)
(4,633,987
)
Noncontrolling interest acquired from acquisition
21,501,712
21,501,712
Adjustment to statutory reserve
2,760,836
(2,760,836
)
—
Foreign currency translation adjustments
18,637
427,302
445,939
BALANCE,
    March 31, 2009 (unaudited)
21,434,942
$
2,143
$
9,988,956
$
9,750,637
$
15,960,158
$
4,177,935
$
25,100,490
$
64,980,319
The accompanying notes are an integral part of these
consolidated statements.
F-4
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Unaudited)
2009
2008
CASH
    FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to controlling interest
$
4,258,318
$
2,267,800
Net income attributable to non-controlling interest
3,000,082
606,003
Consolidated net income
7,258,400
2,873,803
Adjustments to reconcile net income to cash provided by
    operating activities:
Depreciation
759,072
274,361
Amortization
838,459
26,157
(Gain) Loss on disposal of equipment
(276
)
166
Allowance for bad debt
26,581
—
Stock based compensation
27,373
—
Change in fair value of warrant liabilities
393,023
—
Equity in income of unconsolidated affiliate
(40,246
)
—
Change in operating assets and liabilities:
Notes receivable
(468,832
)
—
Accounts receivable
(97,007
)
(960,482
)
Accounts receivable - related party
(212,367
)
—
Other receivables
(18,487
)
1,285
Other receivables - related party
—
1,398
Inventories
(3,513,011
)
(1,585,462
)
Prepayments and deferred expenses
(124,944
)
(96,457
)
Accounts payable
(252,850
)
(310,692
)
Other payables and accrued liabilities
307,916
101,089
Accrued interest - related party
305,966
—
Customer deposits
2,872,712
927,456
Taxes payable
(979,190
)
871,964
Contingent liability
—
(105,707
)
Net cash provided by operating activities
7,082,292
2,018,879
CASH
    FLOWS FROM INVESTING ACTIVITIES:
Cash acquired through acquisition
11,938,784
—
Purchase of plant and equipment
(986,640
)
(1,249,620
)
Additions to intangible assets
(88,845
)
(3,285
)
Advances on non-current assets
(474,736
)
—
Advances on building acquired from related party
—
(106,777
)
Net cash provided by (used in) investing activities
10,388,563
(1,359,682
)
CASH
    FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term bank loan
7,647,822
—
Payments on short term loan
—
(698,850
)
Net cash provided by (used in) financing activities
7,647,822
(698,850
)
EFFECTS
    OF EXCHANGE RATE CHANGE IN CASH
72,655
182,249
INCREASE
    IN CASH
25,191,332
142,596
CASH,
    beginning of period
8,814,616
5,010,033
CASH,
    end of period
$
34,005,948
$
5,152,629
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid
$
1,783,619
$
—
Interest paid (net of capitalized interest)
$
236,649
$
18,416
Non-cash investing and financing activities:
Dividend paid by offsetting loan due from holder of
    noncontrolling interest
$
3,735,243
$
—
Net assets acquired with prepayments made in prior periods
$
14,240,772
$
—
Net assets acquired with unpaid investment
$
14,240,772
$
—
Plant and equipment acquired with prepayments made in prior
    periods
$
87,305
$
—
The accompanying notes are an integral part of these
consolidated statements.
F-5
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Note 1 – Organization background and
principal activities
Principal Activities and Reorganization
China Biologic Products, Inc. (the "Company"
or "CBP") was originally incorporated in 1992 under the laws of the state of
Texas. The Company through its direct and indirect subsidiaries is principally
engaged in the research, development, commercialization, manufacture and sale of
human blood products to customers in the People's Republic of China (the "PRC")
and India.
Current Development
Establishment of New Collection Station in
Guangxi
In June 2008, the Company received the
approval from the Guangxi Province Bureau of Health to set up a new plasma
collection station in Pu Bei County, Guangxi Province. The new plasma collection
station will be located in the Centralized Industry Zone of Pu Bei County and
when it becomes operational, it will replace CBP's existing Fang Cheng Plasma
Collection Station ("Fang Cheng"). The Company's management decided to relocate
Fang Cheng to a more strategic location to increase collection volumes. During
the construction period, the existing Fang Cheng Plasma Station will still
continue with its normal operations. With the approval of the Centralized
Industry Zone of Pu Bei County, once Fang Cheng becomes operational, the Company
hopes to expand its coverage area to secure higher collection volumes in the
future.
Dalin Acquisition and Entrustment Agreement
On September 26, 2008, Logic Express Limited
("Logic Express"), through Logic Holdings (Hong Kong) Limited ("Logic
Holdings"), the newly established subsidiary in Hong Kong, entered into an
Equity Transfer Agreement with Chongqing Dalin Biological Technologies Co., Ltd.
("Dalin"), a PRC limited liability company, and Fan Shaowen, Chen Aimin, Chen
Aiguo and Yang Gang, the shareholders of Dalin, relating to the purchase of an
aggregate 90% equity interest in Dalin, for a total purchase price of
approximately $28,479,600 (RMB194,400,000). By April 2009, the Company made
three payments for total amount of approximately $25,638,850 (RMB 174,960,000),
which represents 90% of the purchase price in accordance with terms of the
equity transfer agreement. Logic Holdings is obligated to pay the fourth and
final installment, representing the remaining 10% of the purchase price, on or
before April 9, 2010, the one-year anniversary of the local Administration for
Industry and Commerce's approval of the equity transfer
In accordance with the terms of the equity
transfer agreement, Logic Holdings effectively became a 90% shareholder in Dalin,
including the right to receive its pro rata share of the profits on January 1,
2009.
Huitian Acquisition
On October 10, 2008, Taibang entered into an
equity transfer agreement pursuant to which Taibang agreed to acquire 35% of the
equity interest in Xi'an Huitian Blood Products Co., Ltd., or Huitian, a
biopharmaceutical company based in Xi'an, Shaanxi Province, China, from Mr. Fan Qingchun, a PRC citizen, for an aggregate purchase price of approximately
$6,446,000 (RMB 44,000,000). The Company paid approximately $3,223,000 (RMB
22,000,000) of the purchase price and, pursuant to the equity transfer
agreement, as amended, the Company is obligated to pay the balance of the
purchase price 5 business days following June 30, 2009 with interest. On March
17, 2009, the Company completed the government approval process for the
acquisition, and pursuant to the terms of the equity transfer agreement, is
entitled to all the rights and privileges of a 35% shareholder in Huitian,
including the right to receive the pro rata share of the profits generated.
Formation of Hong Kong Subsidiary
On December 12, 2008, the Company established
Logic Holding (Hong Kong) Limited (or Logic Holding), our wholly-owned Hong Kong
subsidiary of Logic Express, for the purpose of being a holding company for
majority interest in Dalin.
F-6
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Note 2 – Summary of significant accounting
policies
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America. The Company's functional currency is
the Chinese Renminbi ("RMB"); however, the Company's reporting currency is the
United States Dollar ("USD"); therefore, the accompanying consolidated financial
statements have been translated and presented in USD. All material inter-company
transactions and balances have been eliminated in the consolidation.
While management has included all normal
recurring adjustments considered necessary to give a fair presentation of the
operating results for the periods presented, interim results are not necessarily
indicative of results for a full year. The information included in this Form
10-Q should be read in conjunction with information included in the 2008 annual
report filed on Form 10-K.
Use of Estimates
The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. For example,
management estimates the fair value of stock based compensation as well as
potential losses on outstanding receivables. Management believes that the
estimates utilized in preparing its financial statements are reasonable and
prudent. Actual results could differ from these estimates.
Foreign Currency Translation
The reporting currency of the Company is the
US dollar. The Company's functional currency is the Chinese Renminbi ("RMB"),
also the local currency of the Company's principal operating subsidiaries.
Results of operations and cash flows are translated at average exchange rates
during the period. Assets and liabilities are translated at the unified exchange
rate as quoted by the People's Bank of China at the end of the period.
Translation adjustments resulting from this process are included in accumulated
other comprehensive income in the statements of stockholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.
In accordance with FAS 95, "Statement of Cash
Flows," cash flows from the Company's operations is calculated based upon the
local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.
The consolidated balance sheet amounts, with
the exception of equity at March 31, 2009 and December 31, 2008 were translated
at RMB6.83 to $1.00 and RMB6.82 to $1.00, respectively. The equity accounts were
stated at their historical rate. The average translation rates applied to
consolidated statements of income and cash flow for the three months ended March
31, 2009 and 2008 were RMB6.83 and RMB7.15, respectively.
Revenue Recognition
The Company recognizes revenue when products
are delivered and the customer takes ownership and assumes risk of loss,
collection of the relevant receivable is probable, persuasive evidence of an
arrangement exists and the sales price is fixed or determinable, which are
generally considered to be met upon delivery and acceptance of products at the
customer site. Sales are presented net of any discounts given to customers. As a
policy, the Company does not accept any product returns and based on the
Company's records, product returns, if any, are immaterial. Sales revenue
represents the invoiced value of goods, net of a value-added tax ("VAT"). All
products produced by the Company and sold in the PRC are subject to a Chinese
VAT at a rate of 6% of the gross sales price or at a rate approved by the
Chinese local government. Products distributed by Shandong Medical and plasma
raw material inter-company sales from Puding Plasma Company to Qianfeng are
subjected to a 17% VAT.
Shipping and Handling
Shipping and handling costs related to costs
of goods sold are included in selling expenses and totaled $44,180 and $7,248
for the three months ended March 31, 2009 and 2008, respectively.
F-7
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Financial Instruments
FAS 107, "Disclosures about Fair Value of
Financial Instruments" requires disclosure of the fair value of financial
instruments held by the Company. FAS 107 defines financial instruments and
requires fair value disclosures about those instruments. FAS 157, "Fair Value
Measurements", adopted January 1. 2008, defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurement and
enhances disclosures requirements for fair value measures. Receivables,
payables, short and long term loans, and derivative liabilities qualify as
financial instruments. Management concluded the carrying values of the
receivables, payables and short term loans approximate their fair values because
of the short period of time between the origination of such instruments and
their expected realization, and if applicable, their stated rates of interest
are equivalent to interest rates currently available. The fair values of the
long term debt and derivative liabilities are measured pursuant to FAS 157. The
three levels are defined as follow:
•
Level 1: inputs to the valuation
    methodology are quoted prices (unadjusted) for identical assets or
    liabilities in active markets.
•
Level 2: inputs to the valuation
    methodology include quoted prices for similar assets and liabilities in
    active markets, and inputs that are observable for the assets or liability,
    either directly or indirectly, for substantially the full term of the
    financial instruments.
•
Level 3: inputs to the valuation
    methodology are unobservable and significant to the fair value.
The Company analyzes all financial instruments
with features of both liabilities and equity under FAS 150, "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity," FAS 133, "Accounting for Derivative Instruments and Hedging Activities"
and EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock."
As required by FAS 157, financial assets and
liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. Depending on the product and
the terms of the transaction, the fair value of the derivative liabilities were
modeled using a series of techniques, including closed-form analytic formula,
such as the Black-Scholes Option Pricing Model, which does not entail material
subjectivity because the methodology employed does not necessitate significant
judgment, and the pricing inputs are observed from actively quoted markets.
The fair value of 1,284,000 warrants was
determined using the Black-Scholes Model, defined in SFAS 157 as level 2 inputs,
and recorded the change in earnings. As a result, the derivative liability is
carried on the balance sheet at its fair value.
The carrying value of the long term bank loan
amounted to $8,790,000. The Company used Level 3 inputs for its valuation
methodology for the long term bank loan by comparing the stated loan interest
rate to the rate charged by the Bank of China to similar loans.
Fair Value Measurements at March 31,
    2009
using Fair Value Hierarchy
Carrying Value as of
March 31, 2009
Level 1
Level 2
Level 3
Warrant liabilities
$
2,061,049
$
—
$
2,061,049
$
Long term bank loan
$
8,790,000
$
—
$
—
$
8,790,000
The Company did not identify any assets or
liabilities that are required to be presented on the balance sheet at fair value
in accordance with FAS 157.
Concentration Risks
The Company's operations are carried out in
the PRC and are subject to specific considerations and significant risks not
typically associated with companies in North America and Western Europe.
Accordingly, the Company's business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the PRC, and by the general state of the PRC economy. The Company's results
may be adversely affected by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion and
remittance abroad, and rates and methods of taxation, among other things.
F-8
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Cash includes cash on hand and demand deposits
in accounts maintained with state-owned banks within the PRC, Hong Kong and the
United States. The Company maintains balances at financial institutions which,
from time to time, may exceed Federal Deposit Insurance Corporation insured
limits for the banks located in the United States or may exceed Hong Kong
Deposit Protection Board insured limits for the banks located in Hong Kong.
Balances at financial institutions or state-owned banks within the PRC are not
covered by insurance. Total cash in state-owned banks as of March 31, 2009 and
December 31, 2008 amounted to $33,786,039and $8,689,414, respectively. $78,141
and $78,140 of which are covered by insurance, respectively. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
risks on its cash in bank accounts.
The Company's major product, human albumin: -
20%/10ml, 20%/25ml and 20%/50ml, accounted for 58.2% and 58.1% of total
revenues, for the three months ended March 31, 2009 and 2008, respectively. If
the market demands for human albumin cannot be sustained in the future or if the
price of human albumin decreases, it would adversely affect the Company's
operating results.
All of the Company's customers are located in
the PRC and India. As of March 31, 2009 and 2008, the Company had no significant
concentration of credit risk, except for the amounts due from related parties.
There were no customers that individually comprised 10% or more of the revenue
during the three months ended March 31, 2009 and 2008. No individual customer
represented more than 10% of trade receivables at March 31, 2009 and December
31, 2008. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
There were no vendors that individually
comprised 10% or more of the purchase during the three months ended March 31,
2009 and 2008. No individual vendors represented more than 10% of accounts
payables at March 31, 2009 and 2008.
Accounts Receivable
During the normal course of business, the
Company extends unsecured credit to its customers. Management reviews its
accounts receivable on a regular basis to determine if the allowance for
doubtful accounts is adequate. An estimate for doubtful accounts is made when
collection of the full amount is no longer probable. An estimate for doubtful
accounts is made when collection of the full amount is no longer probable.
Account balances are written-off after management has exhausted all efforts of
collection. Trade accounts receivable consist of the following:
March 31, 2009
(unaudited)
December 31, 2008
Trade
    accounts receivable
$
1,659,218
$
1,581,139
Less:
    Allowance for doubtful accounts
(1,275,437
)
(1,268,052
)
Total
$
383,781
$
313,087
The activity in the allowance for doubtful
accounts for trade accounts receivable for the three months ended March 31, 2009
and the year ended December 31, 2008 is as follows:
March 31, 2009
(unaudited)
December 31, 2008
Beginning allowance for doubtful accounts
$
1,268,052
$
1,238,772
Bad debt expense
26,581
—
Recovery of amount previously reserved
(16,768
)
(56,462
)
Write-off charged against the allowance
—
—
Foreign currency translation adjustment
(2,428
)
85,742
Ending
    allowance for doubtful accounts
$
1,275,437
$
1,268,052
F-9
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Inventories
Inventories are stated at the lower of cost or
market using the weighted average basis and consist of the following:
March 31, 2009
(unaudited)
December 31, 2008
Raw
    materials
$
13,116,729
$
7,043,349
Work-in-process
7,233,674
4,801,768
Finished
    goods
6,349,599
3,104,079
Total
$
26,700,002
$
14,949,196
The Company reviews its inventory periodically
for possible obsolete goods and cost in excess of net realizable value to
determine if any reserves are necessary. As of March 31, 2009 and December 31,
2008, the Company has determined that no reserve is necessary.
Plant and Equipment
Plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets with 5% residual value.
Depreciation expense for the three months ended March 31, 2009 and 2008 amounted
to $759,072 (unaudited) and $274,361 (unaudited), respectively.
Estimated useful lives of the assets are as
follows:
Estimated Useful Life
Buildings and improvement
30
years
Machinery and equipment
10
years
Furniture, fixtures and office equipment
5-10
years
Construction in progress represents the costs
incurred in connection with the construction of buildings, new additions, and
capitalized interest incurred in connection with the Company's plant facilities.
In accordance with the provisions of FAS 34, "Capitalization of Interest Cost",
interest incurred on borrowings is capitalized to the extent that borrowings do
not exceed construction in progress. The credit is a reduction of interest
expense. No depreciation is provided for construction in progress until such
time as the assets are completed and placed into service.. Maintenance, repairs
and minor renewals are charged directly to expenses as incurred. Major additions
and betterment to property and equipment are capitalized.
The Company periodically evaluates the
carrying value of long-lived assets in accordance with FAS 144. "Accounting for
the Impairment or Disposal of Long-Lived Assets." When estimated cash flows
generated by those assets are less than the carrying amounts of the asset, the
Company recognizes an impairment loss. Based on its review, the Company believes
that, as of March 31, 2009 and December 31, 2008, there were no impairments of
its long-lived assets.
Plant and equipment consist of the following:
March 31, 2009
(unaudited)
December 31, 2008
Buildings and improvements
$
12,502,700
$
5,809,724
Machinery and equipment
23,002,042
12,308,174
Furniture, fixtures, office equipment and vehicle
3,237,677
1,501,946
Total depreciable assets
38,742,419
19,619,844
Accumulated depreciation
(11,985,029
)
(3,099,259
)
Plant
    and equipment, net
26,757,390
16,520,585
Construction in progress
825,898
2,778,779
Total
$
27,583,288
$
19,299,364
F-
10
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
No interest was capitalized into construction
in progress in either of the three months ended March 31, 2009 and 2008.
Investment in Unconsolidated Affiliate
Equity method investments are recorded at
original cost and adjusted to recognize the Company's proportionate share of the
investee's net income or losses and additional contributions made and
distributions received. The Company recognizes a loss if it is determined that
other than temporary decline in the value of the investment exists. Subsidiaries
in which the Company has the ability to exercise significant influence, but does
not have a controlling interest is accounted for using the equity method.
Significant influence is generally considered to exist when the Company has an
ownership interest in the voting stock between 20% and 50%, and other factors,
such as representation on the Board of Directors, voting rights and the impact
of commercial arrangements, are considered in determining whether the equity
method of accounting is appropriate. The Company accounts for investments with
ownership less than 20% using cost method.
Intangible Assets
Intangible assets are stated at cost
(estimated fair value upon contribution or acquisition), less accumulated
amortization. Amortization expense is recognized on the straight-line basis over
the estimated useful lives of the assets as follows:
Intangible assets
Estimated useful lives
Land use
    rights
50
years
Permits
    and licenses
5-10
years
Blood
    donor network
10
years
Software
3.8
years
Good
    Manufacturing Practice certificate
5-10
years
Long-term customer-relationship intangible assets
4
years
All land in the PRC is owned by the
government; however, the government grants "land use rights." The Company has
obtained rights to use various parcels of land for 50 years. The Company
amortizes the cost of the land use rights over their useful life using the
straight-line method.
Other intangible assets represent permits,
licenses and Good Manufacturing Practice Certificates contributed in return for
equity upon the establishment of Shandong Taibang in 2002. Contributed rights
include those necessary to manufacture and distribute human blood products in
the PRC market as authorized by the relevant PRC authorities. The estimated
useful life of the contributed rights is 5-10 years.
Intangible assets consisted of the following:
March 31, 2009
(unaudited)
December 31, 2008
Land use
    rights
$
2,136,255
$
848,982
Permits
    and licenses
11,258,012
389,709
Blood
    donor network
22,854
22,885
Software
87,712
40,758
GMP
    certificate
2,327,885
—
Long-term customer-relationship
6,941,170
—
Totals
22,773,888
1,302,334
Accumulated amortization
(1,137,825
)
(299,773
)
Intangible assets, net
$
21,636,063
$
1,002,561
F-
11
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Total amortization expense for the three
months ended March 31, 2009 and 2008 amounted to $838,459 (unaudited) and
$26,157 (unaudited), respectively. The amortization expenses related to
purchased and other intangible assets due to the consolidation of Dalin is
$792,629 for the three months ended March 31, 2009.
Amortization expense for intangible assets for
the next five fiscal years is as follows:
2009
2010
2011
2012
2013
Thereafter
Amortization expense
$
2,509,062
$
3,343,432
$
3,344,902
$
3,339,680
$
1,575,993
$
7,522,999
Intangible assets of the Company are reviewed
at least annually or more often if circumstances dictate, to determine whether
their carrying value has become impaired. The Company considers assets to be
impaired if the carrying value exceeds the future projected cash flows from
related operations. The Company also re-evaluates the years of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. As of March 31, 2009, the Company expects these assets to be
fully recoverable.
Revenues
The Company's revenues are primarily derived
from the manufacture and sale of human blood products. The Company's revenues by
significant types of product for the three months ended March 31, 2009 and 2008
are as follows:
2009
(Unaudited)
2008
(Unaudited)
Human
    Albumin – 20%/10ml, 20%/25ml and 20%/50ml
$
12,351,699
$
4,556,503
Human
    Hepatitis B Immunoglobulin
60,099
224,475
Human
    Immunoglobulin for Intravenous Injection
5,372,502
1,655,292
Human
    Rabies Immunoglobulin
1,629,011
1,203,267
Human
    Tetanus Immunoglobulin
1,029,686
111,552
Human
    Immunoglobulin
213,877
—
Others
491,724
97,918
Totals
$
21,148,598
$
7,849,007
The Company is engaged in sale of human blood
products to customers in China and India. The amount sold in India was less than
10% of total sales for the three months ended March 31, 2009.
Research and Development Costs
Research and development costs are expensed as
incurred.
Retirement and Other Post Retirement
Benefits
Contributions to retirement schemes (which are
defined contribution plans) are charged to the statement of operations as and
when the related employee service is provided.
Product Liability
The Company's products are covered by product
liability insurance of approximately $2,930,000 (RMB 20,000,000). As of March
31, 2009 and December 31, 2008, no claim on the insurance policy was filed.
However, there are two pre-existing potential claims against Qianfeng's
products, which are still in the court proceedings as explained in the legal
proceeding section below.
Government Grants
The Company's subsidiary, Shandong Taibang, is
entitled to receive grants from the PRC municipal government due to its
operation in the high and new technology business sector. For the three months
ended March 31, 2009 and 2008, no non-refundable grants were received from the
PRC municipal government. Grants received from the PRC municipal government can
be used for enterprise development and technology innovation purposes.
F-
12
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Income Taxes
The Company accounts for income taxes under
FAS 109, "Accounting for Income Taxes" and FIN 48, "Accounting for Uncertainty
in Income Taxes – an interpretation of FASB Statement No. 109", FAS 109 requires
the recognition of deferred income tax liabilities and assets for the expected
future tax consequences of temporary differences between income tax basis and
financial reporting basis of assets and liabilities. Provision for income taxes
consist of taxes currently due plus deferred taxes. Since the Company had no
operations within the United States there is no provision for US taxes and there
are no deferred tax amounts at March 31, 2009 and 2008. FIN 48 clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
return. FIN 48 provides guidance on the measurement, recognition, classification
and disclosure of tax positions, along with accounting for the related interest
and penalties.
The charge for taxation is based on the
results for the year as adjusted for items, which are non-assessable or
disallowed. It is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is accounted for using the
balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax basis used in the computation of
assessable tax profit. In principle, deferred tax liabilities are recognized for
all taxable temporary differences, and deferred tax assets are recognized to the
extent that it is probably that taxable profit will be available against which
deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates
that are expected to apply to the period when the asset is realized or the
liability is settled. Deferred tax is charged or credited in the income
statement, except when it is related to items credited or charged directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset
when they related to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on a net basis.
Value Added Tax
Enterprises or individuals, who sell products,
engage in repair and maintenance or import and export goods in the PRC are
subject to a VAT in accordance with Chinese laws. The VAT rate applicable to the
Company is 6% of the gross sales price. Products distributed by Shandong Medical
and plasma raw material inter-company sales from Puding Plasma Company to
Qianfeng are subjected to a 17% VAT. No credit is available for VAT paid on
purchases.
Stock-based Compensation
The Company accounts and reports stock-based
compensation pursuant to FAS 123R "Accounting for Stock-Based Compensation",
which defines a fair-value-based method of accounting for stock based employee
compensation and transactions in which an entity issues its equity instruments
to acquire goods and services from non-employees. Stock compensation for stock
granted to non-employees has been determined in accordance with FAS 123R and the
EITF 96-18, "Accounting for Equity Instruments that are issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services", as
the fair value of the consideration received or the fair value of equity
instruments issued, whichever is more reliably measured.
Noncontrolling
Interest
Effective January 1, 2009, the Company adopted
FAS 160, "Noncontrolling Interests in Consolidated Financial Statements - an
amendment of Accounting Research Bulletin No. 51" Certain provisions of this
statement are required to be adopted retrospectively for all periods presented.
Such provisions include a requirement that the carrying value of noncontrolling
interests (previously referred to as minority interests) be removed from the
mezzanine section of the balance sheet and reclassified as equity. Further, as a
result of adoption on FAS 160, net income attributable to noncontrolling
interests is now excluded from the determination of consolidated net income. In
addition, foreign currency translation adjustment is allocated between
controlling and noncontrolling interests.
F-
13
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Recently Issued Accounting Pronouncements
In January 2009, the FASB issued FSP EITF
99-20-1, "Amendments to the Impairment Guidance of EITF Issue No. 99-20, and
EITF 99-20, Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets". FSP EITF 99-20-1
changes the impairment model included within EITF 99-20 to be more consistent
with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by
amending the impairment model in EITF 99-20 to remove its exclusive reliance on
"market participant" estimates of future cash flows used in determining fair
value. Changing the cash flows used to analyze other-than-temporary impairment
from the "market participant" view to a holder's estimate of whether there has
been a "probable" adverse change in estimated cash flows allows companies to
apply reasonable judgment in assessing whether an other-than-temporary
impairment has occurred. The adoption of FSP EITF 99-20-1 did not have a
material impact on the Company's consolidated financial statements because all
of the Company's investments in debt securities are classified as trading
securities.
In April 2009, the FASB issued FSP FAS 157-4,
"Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly". FSP FAS 157-4 amends FAS 157 and provides additional guidance for
estimating fair value in accordance with SFAS 157 when the volume and level of
activity for the asset or liability have significantly decreased and also
includes guidance on identifying circumstances that indicate a transaction is
not orderly for fair value measurements. This FSP shall be applied prospectively
with retrospective application not permitted. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity early adopting this
FSP must also early adopt FSP FAS 115-2 and FAS 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments". Additionally, if an entity
elects to early adopt either FSP FAS 107-1 and APB 28-1, "Interim Disclosures
about Fair Value of Financial Instruments" or FSP FAS 115-2 and FAS 124-2, it
must also elect to early adopt this FSP. Management is currently evaluating this
new FSP but do not believe that it will have a significant impact on the
determination or reporting of the financial results.
In April 2009, the FASB issued FSP FAS 115-2
and FAS 124-2. This FSP amends FAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," FAS 124, "Accounting for Certain Investments Held
by Not-for-Profit Organizations," and EITF 99-20, "Recognition of Interest
Income and Impairment on Purchased Beneficial Interests and Beneficial Interests
That Continue to Be Held by a Transferor in Securitized Financial Assets," to
make the other-than-temporary impairments guidance more operational and to
improve the presentation of other-than-temporary impairments in the financial
statements. This FSP will replace the existing requirement that the entity's
management assert it has both the intent and ability to hold an impaired debt
security until recovery with a requirement that management assert it does not
have the intent to sell the security, and it is more likely than not it will not
have to sell the security before recovery of its cost basis. This FSP provides
increased disclosure about the credit and noncredit components of impaired debt
securities that are not expected to be sold and also requires increased and more
frequent disclosures regarding expected cash flows, credit losses, and an aging
of securities with unrealized losses. Although this FSP does not result in a
change in the carrying amount of debt securities, it does require that the
portion of an other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early adopt
this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity
elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1, the
entity also is required to early adopt this FSP. Management is currently
evaluating this new FSP but do not believe that it will have a significant
impact on the determination or reporting of the financial results.
In April 2009, the FASB issued FSP FAS 107-1
and APB 28-1. This FSP amends SFAS 107 to require disclosures about fair value
of financial instruments not measured on the balance sheet at fair value in
interim financial statements as well as in annual financial statements. Prior to
this FSP, fair values for these assets and liabilities were only disclosed
annually. This FSP applies to all financial instruments within the scope of SFAS
107 and requires all entities to disclose the method(s) and significant
assumptions used to estimate the fair value of financial instruments. This FSP
shall be effective for interim periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity may early
adopt this FSP only if it also elects to early adopt FSP FAS 157-4 and FSP FAS
115-2 and FAS 124-2. This FSP does not require disclosures for earlier periods
presented for comparative purposes at initial adoption. In periods after initial
adoption, this FSP requires comparative disclosures only for periods ending
after initial adoption. Management is currently evaluating the disclosure
requirements of this new FSP.
F-
14
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Reclassifications
Certain prior period amounts have been
reclassified to conform to the current period presentation. These
reclassifications have no effect on net income or cash flows.
Note 3 – Related party transactions
The material related party transactions
undertaken by the Company with related parties as of March 31, 2009 and December
31, 2008 are presented as follows:
Amount Due from
Purpose
March 31, 2009
(unaudited)
December 31,
2008
Due from noncontrolling interest
    shareholders
(1)
Advances
204,864
—
Due from noncontrolling interest
    shareholders
(1)
Advances
592,274
—
Due from noncontrolling interest
    shareholders
(2)
Processing fees
631,803
Amount Due to
Purpose
March 31, 2009
(unaudited)
December 31,
2008
Noncontrolling interest shareholder of subsidiary
(3)
Loan
$
772,223
$
773,277
Guizhou
    Eakan Investing Corp.
(4)
Loan
2,119,878
—
Guizhou
    Jie'an
(3)
Contribution
962,481
—
Shandong
    Institute
(6)
Institute's
    share of Dalin net income
305,966
—
Noncontrolling interest shareholder of subsidiary
(7)
Partial acquisition consideration
371,314
—
Former
    Dalin shareholders
(7)
Partial
    acquisition consideration
443,765
—
(1)
On November 13, 2008, Qianfeng
advanced its shareholders Guizhou Eakan and Guizhou Jie'an approximately
$1,172,000 (RMB 8,000,000) and $1,391,750 (RMB 9,500,000), respectively, as
shareholders loans according to the shareholders resolution of November 10,
2008. The loans bear interest at the prevailing bank lending rate in PRC and
payable each calendar quarterly, which is 5.31% at March 31, 2009 and matures in
one year. The loans were partially offset with the dividends declared on March
10, 2009 with outstanding balances of $204,864 and $592,274 due from Guizhou
Eakan and Guizhou Jie'an, respectively.
(2)
Qianfeng provides processing
services for Guizhou Eakon, one of the Qianfeng's non-controlling shareholders.
As of March 31, 2009, Guizhou Eakon owes Qianfeng processing fees in the amount
of $631,803.
(3)
As of March 31, 2009 and
December 31, 2008, the Company borrowed an aggregate of $772,223 and $773,277,
respectively, from its minority shareholder, Shandong Institute, for working
capital purposes. The Company is required to repay the loan in cash due by
August 2009, with an annual interest rate of 6%.
(4)
Qianfeng has payables to
Guizhou Eakan Investing Corp. in the amount of approximately $2,119,878 (RMB
14,470,160). Guizhou Eakan Investing Corp. is one of the shareholders of Guizhou
Eakon, one of the Qianfeng's minority shareholders.
(5)
Qianfeng has payables to
Guizhou Jie'an in amount of approximately $962,481 (RMB 6,569,840). In 2007,
Qianfeng received additional contributions from Guizhou Jie'an in the amount of
$962,481 to maintain Jie'an ownership interest in the Company at 9%. However,
due to legal dispute among Shareholders over Raising Additional Capital as
stated in legal proceeding section of Note 9, commitment and contingent
liabilities, the money may be returned to Jie'an.
F-
15
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
(6)
On April 6, 2009, Logic Express
entered into an equity transfer and entrustment agreement, or Entrustment
Agreement, among Logic Express, Shandong Taibang, and the Shandong Institute of
Biological Products, or the Shandong Institute, the holder of the noncontrolling
interests in Shandong Taibang, pursuant to which, Logic Express agreed to permit
Shandong Taibang and the Shandong Institute to participate in the indirect
purchase of Qianfeng's equity interests. The amount $305,966 represents the pro
rata share of equity investment income pursuant of Entrustment Agreement for the
three month period ended March 31, 2009.
(7)
The Company has a payable due
to the four Dalin's original shareholders in the amount approximately $815,079 (RMB
5,563,680), which represents partial acquisition considerations Logic Express
paid to the former shareholders of Dalin, which will be remitted to those
shareholders at their demand. Among the total $815,079, $371,314 is due to the
current 10% noncontrolling interest shareholder of Dalin, Fan Shaowen and
$443,765 is due to the remaining three Dalin's original shareholders and
currently are the employees of our subsidiary.
Note 4 – Prepayments and deferred expense
Prepayments and deferred expense represent
partial payments for deposits on raw material purchases and prepayment for
insurance expenses and amounted to $1,133,535 and $614,704 as of March 31, 2009
and December 31, 2008, respectively.
Long term prepayments represent partial
payments or deposits on plant and equipment and intangible assets purchases and
amounted to $4,519,925 and $955,874 as of March 31, 2009 and December 31, 2008,
respectively.
Note 5 – Investment in unconsolidated
affiliate
On October 10, 2008, Shandong Taibang entered
into an Equity Transfer Agreement (the "Huitian Agreement") with Mr. Fan
Qingchun (the "Transferor"), a PRC citizen holding 35% of the equity interest in
Xi'an Huitian Blood Products Co., Ltd. ("Huitian"), a PRC limited liability
company. Pursuant to the Huitian Agreement, the Transferor agrees to sell to
Shandong Taibang, and Shandong Taibang agrees to purchase from the Transferor,
35% equity interest in Huitian for an aggregate purchase price of $6,494,036 (or
RMB 44,327,890) including interest of $48,036 (RMB 327,890). Huitian is one of
the 32 government approved plasma-based product producers in China, and it is in
compliance with Good Manufacturing Practices ("GMP") standards. It is also
approved by the PRC's State Food and Drug Administration ("SFDA") to produce
four types of plasma-based products. As of March 31, 2009, the Company has paid
a total of $3,223,000 with the unpaid balance of $3,271,036 to be due by July 7,
2009, including interest.
Logic Express also entered into an investment
entrustment agreement (the "Investment Agreement") with the minority shareholder
in Shandong Taibang, Shandong Biological Products Research Institute
("Biological Institute"), pursuant to which Logic Express agrees to provide the
investment amount for the acquisition and the Shandong Institute agree to
entrust Shandong Taibang to acquire the 35% equity interest of Huitian in its
name. In exchange Logic Express is also obligated to pay Shandong Taibang
approximately $17,580 (or RMB120,000) per year as consideration for Shandong
Taibang's performance under this agreement. Under the Investment Agreement,
after the acquisition, Logic Express will be in charge of Huitian's daily
operation and management, will bear the costs, expenses, liabilities and losses
incurred in its operation, and will enjoy its profits. Shandong Taibang will
perform relevant tasks according to Logic Express's instruction, and will not
exercise any management right over Huitian or derive any financial return from
Huitian. Logic Express agreed to indemnify Shandong Taibang for any loss in
connection with the investment and pledged its equity interest in Shandong
Taibang as collateral against such losses.
F-
16
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Summarized unaudited financial information of
Huitian is as follows:
March 31, 2009
December 31, 2008
Current
    assets
$
8,125,584
$
8,039,180
Non-current assets
9,963,109
10,145,248
Total
    assets
18,088,693
18,184,428
Current
    liabilities
2,557,902
2,747,573
Non-current liabilities
—
—
Shareholders' equity
15,530,791
15,436,855
Total
    liabilities and shareholders' equity
$
18,088,693
$
18,184,428
The portion of the difference between the cost
of an investment and the amount of underlying equity in net assets of Huitian
that is recognized as goodwill in accordance with APB Opinion No. 18, "the
Equity Method of Accounting for investment in Common Stock", shall not be
amortized. However, equity method goodwill shall not be reviewed for impairment
in accordance with FAS 142, but instead should continue to be reviewed for
impairment in accordance with paragraph 19(h) of APB18.
Summarized unaudited financial information of
Huitian is as follows:
Three months ended
March 31, 2009
Net
    sales
$
1,159,285
Gross
    profit
389,530
Income
    before taxes
135,281
Net
    income
114,989
Company's share of net income
$
40,247
The rollforward of investment in Huitian in
the balance sheet is shown below:
Huitian - 35%
Ownership
December
    31, 2007
$
—
Investment made
6,502,902
Net Income from 2008
175,231
Dividend declared
(147,256
)
Foreign currency translation gain
3,100
December
    31, 2008
6,533,977
Net Income from the three months ended March 31, 2009
40,247
Foreign currency translation loss
(8,912
)
March
    31, 2009 (unaudited)
$
6,565,312
Note 6 – Debt
Short and long term loans
Short term loans represent renewable loans due
to various banks which are normally due within one year.
F-
17
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
The Company's bank loans consisted of the
following:
Short/Long-term loan
Due by
Annual
interest rates
March 31, 2009
(Unaudited)
December 31,
2008
Long
    term bank loan, secured by buildings and land use rights
August 3, 2010
7.02
%
$
5,860,000
$
5,868,000
Short
    term bank loan, un-secured
January 7, 2010
5.31
%
5,860,000
—
Short
    term loan, un-secured
On demand
0.00
%
73,250
—
Long
    term loan, secured by building, machinery and equipment
(1)
June 25, 2010
7.76
%
3,369,500
—
Short
    term loan, guaranteed by minority shareholder of Qianfeng
July 3, 2009
8.54
%
1,347,800
—
Short
    term loan, secured by raw material
(2)
February 16, 2010
5.84
%
439,500
—
Totals
$
16,950,050
$
5,868,000
(1)
The interest rate is adjustable monthly at
    1.15 times of the prevailing rate as published by Bank of China. As of March
    31, 2009, the interest rate is fixed at 7.7625% per annum. The short term
    portion of this loan is $439,500 and due by December 25, 2009. The remaining
    balance of $1,465,000 and $1,465,000 are due on April 25, 2010 and June 25,
    2010, respectively.
(2)
The interest rate for this short term loan
    is adjustable quarterly at 1.10 times of the prevailing rate as published by
    Bank of China. As of March 31, 2009, the interest rate is fixed at 5.841%
    per annum.
Interest expense totaling $622,449 and
$494,040 was incurred during the three months ended March 31, 2009 and 2008,
respectively.
The above loans are secured by Shandong
Taibang's land use rights and buildings located in Taian, Shandong Province, PRC
and Qianfeng's buildings and machinery and equipment located in Guiyang, Guizhou
Province, PRC, with carrying net values as follows:
March 31, 2009
(unaudited)
December 31, 2008
Buildings in Taian, Shandong
$
1,236,322
$
1,417,138
Land use
    rights in Taian, Shandong
423,021
195,691
Buildings in Guiyang, Guizhou
1,269,802
—
Machinery and equipment in Guiyang, Guizhou
9,044,860
—
Totals
$
11,974,005
$
1,612,829
F-18
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Other payables and accruals
Other payables and accruals consist of the
following:
March 31, 2009
(unaudited)
December 31, 2008
Other
    payables
(1)
$
9,099,271
$
319,699
Payable
    to Sansui Finance department for pending investment on plasma stations
(2)
1,173,465
—
Accruals
    for salaries and welfare
670,634
830,388
Accruals
    for RTO expenses
245,657
245,657
Accruals
    for selling commission and promotion fee
911,166
1,508,102
Other
    Payable-Government Grant
184,312
114,148
Other
    payable - Deposit received
192,892
283,826
Other
    payable - Funds
359,303
627,157
Accruals
    for interest
—
33,954
Others
141,681
—
Total
$
12,978,381
$
3,962,931
(1)
The other payables mainly comprise of
    deposits by potential strategic investors and payable to former shareholders
    of Dalin with the amount of $5,824,840 and $2,466,930, respectively. As of
    March 31, 2009, Qianfeng has received in an aggregate amount of $5,824,840
    from potential private strategic investors in connection with subscribing
    shares from Qianfeng pursuant to Equity Purchase Agreement. The registration
    of the new investors as Qianfeng's shareholders and the related increase in
    registered capital of Qianfeng with the Administration for Industry and
    Commerce ("AIC") is in incomplete due to share holders dispute as disclosed
    in below legal proceedings section below. The amount $2,466,930 represents
    partial acquisition considerations Logic Express paid to the former
    shareholders of Dalin, which will be remitted to those shareholders at their
    demand.
(2)
In early 2007, Qianfeng submitted RMB
    8,010,000 (approximately $1,173,465) to the finance department of Sansui
    County, in China's Qiandongnan Autonomous Region, for acquiring the Sansui
    Plasma Collection Station from the local government, which action was
    legitimized and fully endorsement by relevant provincial government
    authorities. However, the finance department refused to implement the
    provincial government's authorization and has returned the funds to Qianfeng.
    As of March 31, 2009, Qianfeng has set aside the full amount as a payable to
    Sansui County, pending the outcome of provincial government's administrative
    review as disclosed in the legal proceedings note below.
Other payable - land use rights
In July 2003, Shandong Taibang obtained
certain land use rights from the PRC municipal government. Shandong Taibang is
required to make payments totaling approximately $20,369 (RMB 138,848) per year
to the local state-owned entity, for the 50-year life of the rights or until
Biological Institute completes its privatization process. The Company recorded
"land use rights" equal to "other payable – land use rights" totaling $353,827
and $325,390 as of March 31, 2009 and December 31, 2008, respectively,
determined using present value of annual payments over 50 years.
Note 7 - Earnings per share
Basic earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is calculated by dividing net
income by the weighted average number of common shares outstanding and dilutive
potential common shares outstanding during the period.
F-
19
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Earning per share is as follows for the three
months ended March 31,
2009
(unaudited)
2008
(unaudited)
Net
      income attributable to common shareholders for earnings per share
$
4,258,318
$
2,267,800
Weighted average shares used in basic computation
21,434,942
21,434,942
Diluted effect of warrants and options
—
529,226
Weighted average shares used in diluted computation
21,434,942
21,964,168
Earnings per share:
Basic
$
0.20
$
0.11
Diluted
$
0.20
$
0.10
At March 31, 2009, all outstanding warrants
and options were excluded in the calculation of diluted earnings per share
because of their anti-dilutive nature.
At March 31, 2008, all outstanding warrants
were included in the calculation of diluted earnings per share.
Note 8 – Taxes
Income taxes
The Company is governed by the Income Tax Law
of the People's Republic of China (PRC) concerning Foreign Investment
Enterprises and Foreign Enterprises and various local income tax laws (the
Income Tax Laws). Under the Income Tax Laws, foreign investment enterprises
(FIE) generally are subject to an income tax at an effective rate of 33% (30%
state income taxes plus 3% local income taxes) on income as reported in their
statutory financial statements after appropriate tax adjustments unless the
enterprise is located in specially designated regions of cities for which more
favorable effective tax rates apply. Upon approval by the PRC tax authorities,
FIEs scheduled to operate for a period of 10 years or more and engaged in
manufacturing and production may be exempt from income taxes for two years,
commencing with their first profitable year of operations, after taking into
account any losses brought forward from prior years, and thereafter with a 50%
exemption for the next three years.
In 2002, the Company became a Sino-foreign
joint venture. In 2003, the Company was granted by the state government for
benefit of income tax exemption in first 2 years from January 2003 to December
2004 and 50% exemption for the third to fifth years from January 2005 to
December 2007.
Beginning January 1, 2008, the new Enterprise
Income Tax ("EIT") law will replace the existing laws for Domestic Enterprises
("DES") and Foreign Invested Enterprises ("FIEs").
The key changes are:
a.
The new standard EIT rate of 25% will
    replace the 33% rate currently applicable to both DES and FIEs, except for
    High Tech companies who pays at a reduced rate of 15%; and
b.
Companies established before March 16,
    2007 will continue to enjoy tax holiday treatment approved by local
    government for a grace period of the next 5 years or until the tax holiday
    term is completed, whichever is sooner.
The Company's subsidiary, Shandong Taibang,
was established before March 16, 2007 and is, therefore, qualified to continue
enjoying the reduced tax rate as described above.
Starting from January 1, 2008, Shandong
Taibang became subject to 25% income tax rate according to the newly issued
Income Tax Laws of PRC. According to PRC's central government policy, certain
new technology or high technology companies will enjoy preferential tax
treatment of 15%, instead of 25%. On February 12, 2009, Shandong Taibang
received the new technology or high technology certification from Shandong
provincial government. The Certification allows the Company to receive the 15%
preferential income tax rate, for a period of three years starting from January
1, 2008.
F-
20
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Starting January 1, 2008, all dividends paid
to foreign parents are subject to a 10% income tax. As a result, Logic Express
recorded $218,238 and $0 income tax expense for the three months ended March 31,
2009 and 2008, respectively, for dividends Shandong Taibang paid to its foreign
parent, Logic Express.
The following table reconciles the U.S.
statutory rates to the Company's effective tax rate for the three months ended
March 31, 2009 and March 31, 2008:
2009
2008
U.S.
    Statutory rates
35.0
%
35.0
%
Foreign
    Income
(35.0
)
(35.0
)
China
    Tax rates
25.0
25.0
China
    income tax exemption
(10.0
)
(10.0
)
Other
    items
(1)
6.9
5.5
Effective income tax rates
21.9
%
20.5
%
(1)
The 6.9% represents the $0.2
million income tax expense for dividends Shandong Taibang paid to Logic Express,
its foreign parent and $1.3 million expenses incurred by CBP, Logic Express and
Logic Holding that are not deductible in PRC for the three months ended March
31, 2009. The 5.5% represents the $0.6 million expenses incurred by CBP, Logic
Express and Logic Holding that are not deductible in PRC for the three months
ended March 31, 2008.
The estimated tax savings due to the tax
exemption for the three months ending March 31, 2009 and 2008 amounted to
$763,331 and $318,221, respectively. The net effect on earnings per share if the
income tax had been applied would decrease both basic and diluted earnings per
share for the three months ended March 31, 2009 and 2008 by $0.04 and $0.01,
respectively.
CBP was incorporated in the United States and
has incurred net operating losses of $719,896 and $1,777,854 for income tax
purposes as of March 31, 2009 and December 31, 2008, respectively. The estimated
net operating loss carry forwards for United States income taxes amounted to
$4,381,039 which may be available to reduce future years' taxable income. These
carry forwards will expire, if not utilize, from 2026 through 2029. Management
believes that the realization of the benefits from these losses appears
uncertain due to the Company's limited operating history and continuing losses
for United States income tax purposes. Accordingly, the Company has provided a
100% valuation allowance on the deferred tax asset benefit to reduce the asset
to zero. The net change in the valuation allowance for the period ended March
31, 2009 was $244,765 and the accumulated valuation allowance as of March 31,
2009 amounted to $1,489,553. Management reviews this valuation allowance
periodically and makes adjustments as warranted. The following table represents
the rollforward of the deferred tax valuation allowance:
For the three months ended
March 31, 2009
For the year ended
December 31, 2008
(unaudited)
Balance as of beginning of period
$
1,244,789
$
640,318
Increase
244,764
604,471
Balance as of end of period
$
1,489,553
$
1,244,789
Value added tax
VAT on sales amounted to $1,578,403 and
$493,150 for the three months ended March 31, 2009 and 2008, respectively. Sales
are recorded net of VAT collected and paid as the Company acts as an agent for
the government. VAT taxes are not impacted by the income tax holiday.
Taxes payable consisted of the following:
F-
21
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
March 31, 2009
December 31, 2008
(Unaudited)
VAT tax
    payable
$
687,849
$
331,505
Income
    tax payable
4,462,645
3,630,878
Others
    miscellaneous tax payable
61,004
97,627
$
5,211,498
$
4,060,010
Note 9 – Commitments and contingent
liabilities
Capital and lease commitments
The Company's 82.76% owned subsidiary, He Ze,
entered into a lease agreement on January 13, 2005, with the Yun Cheng Lan Tian
Transportation Company in Yun Cheng County, Shandong Province, to lease land use
rights for a period of 10 years. The annual lease amount is approximately $1,760
(RMB 12,000) with no early termination penalty. The Company has the right of
first refusal to renew the lease after the ten year lease term.
The Company's 82.76% owned subsidiary, Qi He,
entered into a lease agreement on April 26, 2007, with the Zhang Bo Shi Village
in Qi He County, Shandong Province, to lease land use rights for a period of 50
years. The annual lease amount is approximately $4,569 (RMB 31,144) with no
early termination penalty.
The Company's 82.76% owned subsidiary, Zhang Qiu, leased land use right and the use of building and equipment for a period of
10 year from January 1, 2007 with annual lease payment of $43,245 (RMB300,000).
The lease was terminated in March 2008. The Company entered into a lease
agreement on April 1, 2008, with the Zhang Qiu Red Cross Blood Center, to lease
land use rights and the use building and equipment for a period of 10 years. The
annual lease payment is approximately $1,467 (RMB 10,000) with no early
termination penalty.
The Company's 48.6% indirectly owned
subsidiary, Qianfeng, entered into a lease agreement on June 1, 2006 with a
group of individuals in an area located next to its production facility, to
lease and use the space for processing industrial wastes for 10 years. The
annual lease amount is approximately $1,529 (RMB 10,438).
The Company's indirectly owned subsidiary,
Huang Ping, entered into a lease with Huang Ping County Finance Department on
April 28, 2007, Guizhou Province, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$10,269 (RMB 70,000).
The Company's indirectly owned subsidiary, Pu
Ding, entered into a lease with Pu Ping County Health Department, Guizhou
Province on March 31, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$22,005 (RMB 150,000).
The Company's indirectly owned subsidiary, Na
Yong, entered into a lease with Na Yong County Health Department, Guizhou
Province on March 31, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$22,005 (RMB 150,000).
The Company's indirectly owned subsidiary, Wei Ning, entered into a lease with Wei Ning County Health Department, Guizhou
Province on April 9, 2007, to lease land use rights and use building and
equipment for a period of 3 years. The annual lease payment is approximately
$11,720 (RMB 80,000).
The Company recognizes lease expense on a
straight line basis over the term of the lease in accordance to FAS 13,
"Accounting for Leases." Total capital and lease commitments outstanding as of
March 31, 2008 were as follows:
Fiscal year
2009
2010
2011
2012
2013
Thereafter
Property
    and equipment
$
77,383
$
—
$
—
$
—
$
—
$
—
Lease
73,293
26,586
9,315
9,315
9,315
204,892
Total
$
150,676
$
26,586
$
9,315
$
9,315
$
9,315
$
204,892
F-
22
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
For the three months ended March 31, 2009 and
2008, total rent expense amounted to $33,134 and $16,226, respectively.
Guarantees
As of March 31, 2009, Qianfeng guaranteed
approximately $1,465,000 (RMB10,000,000) of a short term bank loans for Eakan, a
noncontrolling shareholder of Qianfeng. In return, Eakan cross guaranteed
Qianfeng's bank loan of $1,347,800. The Company is obligated to perform under
the guarantee if Eakan fails to pay principal and interest payments when due.
The maximum potential amount of future undiscounted payments under the guarantee
is $1.5 million including accrued interest. As of March 31, 2009, the Company
did not record a liability for the guarantee because management believes Eakan
is current in its payment obligations, and the likelihood of the Company having
to make good on the guarantee is remote.
Contingencies
In the normal course of business, the Company
is exposed to claims related to the manufacture and use of the Company's
products, but currently the Company is not aware of any such claim.
Legal proceedings
Misuse of Company Seal
In July 2006, one of the Company's sales
employees misappropriated goods and resold them to other parties using a
counterfeit Company seal. The amount involved was approximately $0.15 million
(RMB1.16 million). The incident was revealed during a routine reconciliation of
accounts receivable. The Company reported the misappropriation to the police and
the employee was arrested and criminal charges were brought against him. To
date, the Company recovered approximately $0.05 million (cash of RMB350,000 and
goods valued at approximately RMB30,000). Pursuant to a financial guarantee and
repayment agreement between the Company and the employee, witnessed by officials
at the Taian City Police Station, the Company will continue to pursue recovery.
Transfer of Equity Interests
Mr. Zu Ying Du was one of the original equity
holders in our operating subsidiary, Shandong Taibang. Pursuant to a joint
venture agreement, among the original equity holders, Mr. Du was obligated to
make a capital contribution of approximately $2.6 million or (RMB20 million) for
a 25% interest in Shandong Taibang. Mr. Du made this contribution using funds
borrowed from the Beijing Chen Da Technology Investment Company, or Beijing Chen
Da. Mr. Du failed to repay Beijing Chen Da for his loan of the capital
contribution amount. Mr. Du disputes that the money was due and owing. A Beijing
court found that Beijing Chen Da had given money to Mr. Du but found that the
loan agreement failed to comply with Chinese law. A notice was issued on July 5,
2004 by the Shenzhen Public Security Bureau Economic Crime Investigation Unit
requesting a stay of the Beijing action pending their investigation into money
laundering relating to the $2.6 million loan to Zu Ying Du.
On September 26, 2004, Beijing Chen Da entered
into an equity transfer agreement with Mr. Du, pursuant to which Mr. Du's 25%
equity interest in Shandong Taibang was transferred to Beijing Chen Da as
repayment of the $2.6 million debts. This agreement was signed by Mr. Du's
brother who held a power of attorney from Mr. Du. This transfer was approved by
the Shandong Provincial Department of Foreign of Trade and Economic Cooperation,
or the Shandong COFTEC on March 17, 2005. Mr. Du disputes the legitimacy of this
transfer and has argued that his brother, Du Hai Shan, exceeded the scope of the
power of attorney. Mr. Du sued his brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the power of
attorney was valid, but that the transfer agreements signed by Mr. Du's brother,
Du Hai Shan were invalid because their execution and delivery were beyond the
scope of Du Hai Shan's authority under the power of attorney. Subsequently the
Intermediate Court of Jingzhou City, Hubei province, ruled on December 10, 2008
to suspend the judgment based on the grounds that the original court lacked
jurisdiction to hear the case. The case is stated to be reviewed again by the
Hubei Jingzhou Intermediate Court.
Missile Engineering, another original equity
holder wholly controlled by Mr. Du, was obligated to contribute approximately
$4.2 million (RMB32.8 million) for a 41% interest in Shandong Taibang by means
of cash, equipment and patent technology. It was obligated to obtain a new drug
certificate and production license of its patent technology from the government
within a stipulated period in order to be recognized as a valid capital
contribution, or in the alternative, make a cash payment. The patent technology
was valued as approximately $3.4 million (RMB26.4 million). However, Missile
Engineering failed to obtain the new drug certificate and production license
within the stipulated period. Mr. Du also disputes whether the period for
obtaining the certificate and license had expired. Pursuant to a stockholders
resolution on September 26, 2004, Missile Engineering agreed to sell its 41%
interest in Shandong Taibang to Up-Wing and Up-Wing agreed to take up the
obligation of Missile Engineering to pay the $3.4 million in cash. This transfer
was approved by Shandong COFTEC on March 17, 2005. Missile Engineering disputes
this transaction and sued Mr. Du's brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the act had
exceeded the scope of the power of attorney. Subsequently the Intermediate Court
of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court.
F-
23
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
In June 10, 2005, Beijing Chen Da also sold
its equity interest in Shandong Taibang to Up-Wing Investments Limited, or
Up-Wing, pursuant to a share transfer agreement, which became effective on
September 2, 2005, upon approval by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. In March 2006,
Up-Wing sold its equity interests in Shandong Taibang to Logic Express, our
subsidiary.
In 2006, Missile Engineering applied for
arbitration before the China International Economic and Trade Arbitration
Commission, or CIETAC, to challenge the effectiveness of the transfer to Up-Wing
Investments Limited, of the equity interests in Shandong Taibang, formerly owned
by Missile Engineering. The equity transfer had been approved by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation, or the Shandong
COFTEC. Missile Engineering later voluntarily withdrew this application and
instead applied for administrative reconsideration of the equity transfer, but
this application was rejected by the Ministry of Commerce in 2007. Missile
Engineering applied with the District Court of Lixia District, Jinan City,
Shandong province requesting revocation of Shandong COFTEC's approval of the
equity transfer to Up-wing by Missile Engineering. Missile Engineering later
voluntarily withdraw the action. In April 2007, Logic Express initiated an
arbitration proceeding before the Shandong Taian Arbitration Committee, to
establish that Logic Express is the lawful shareholder of Shandong Taibang. The
parties to that proceeding were Logic Express Ltd. and Shandong Taibang
Biological Products Co., Ltd. The Arbitration Committee's decision on September
6, 2007 confirmed that Logic Express had legitimate ownership as a result of the
transfers of Shandong Taibang. Up-Wing started an action in the Intermediate
Court of Taian City, Shandong province requesting the court to establish that
Up-wing is the lawful shareholder of Shandong Taibang. The intermediate court
rejected the application by Up-Wing on the basis that the same matter had been
tried by the arbitration panel.
On February 16, 2009, Mr. Du and Missile
Engineering filed actions in the Intermediate Court of Wuhan City, Hubei
province, against the following defendants, Du Hai Shan the brother of Mr. Du,
Beijing Chen Da and Logic Express. Mr. Du and Missile Engineering have requested
that the Wuhan Intermediate Court to restore the equity interests originally
held by the plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by
Missile Engineering. On February 17, 2009, the Wuhan Intermediate Court issued
preliminary orders attaching 66% of the equity of Shandong Taibang pending the
outcome of the case.
Bobai County Collection Station
In January 2007, the Company's PRC subsidiary,
Shandong Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20%
minority shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. ("Bobai") in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. ("Hua Lan") filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Taian City. A hearing was held on June 25, 2007 and judgment was
entered against the defendants along with a $226,780 (RMB1,700,000) joint
financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the
judgment against the three defendants and increased the amount of the joint
financial judgment to approximately $405,954 (RMB3,000,000).
F-
24
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
In January 2008, Hua Lan enforced the judgment
granted by the High Court to freeze the Company's bank accounts. Shandong Taibang has filed a separate action against Hua Lan before the Taian City
District Court to seek recovery of any losses in connection with Hua Lan's claim
and to request that the Taian City District Court preserve Hua Lan's property or
freeze up to approximately $411,300 (RMB 3 million) of Hua Lan's assets to
secure the return of such funds to the Company. The intermediate court in Taian
City accepted the application on February 14, 2008 but the matter is still
pending. Pending the outcome of the proceedings, Shandong Taibang increased its
loss contingency reserve during its fourth quarter of 2007 from approximately
$75,593 (RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the
enforcement of this judgment. During the fourth quarter of 2008, full amount of
the judgment, including Feng Lin and Keliang Huang's portions of the judgment
and the related fees, approximately $456,222 (RMB 3,109,900) has been withdrawn
from Shandong Taibang's account. The Company recorded Feng Lin and Keliang
Huang's portion of the judgment, approximately $304,143 (RMB2,073,234), as
receivable as a result of the withdraw. As of December 31, 2008, the Company
determined that it is unlikely that the Company will be able to recover such
receivable from those two individuals and wrote off the receivable as bad debt
expense.
In light of the foregoing, it is unlikely that
the Company's planned acquisition of the assets of Bobai will go forward.
Dispute among Shareholders over Raising
Additional Capital
On May 28, 2007, a 91% majority of Qianfeng's
shareholders approved a plan to raise additional capital from private strategic
investors through the issuance of an additional 20,000,000 shares of Qianfeng
equity interests at RMB 2.80 per share. The plan required all existing Qianfeng
shareholders to waive their rights of first refusal to subscribe for the
additional shares. The remaining 9% minority holder of Qianfeng's shares, the
Guizhou Jie'an Company, or Jie'an, did not support the plan and did not agree to
waive its right of first refusal. On May 29, 2007, the majority shareholders
caused Qianfeng to sign an Equity Purchase Agreement with certain investors,
pursuant to which the investors agreed to invest an aggregate of approximately
$7,475,832 (RMB 50,960,000) in exchange for 18,200,000 shares, or 21.4%, of
Qianfeng's equity interests. At the same time, Jie'an also subscribed for
1,800,000 shares, representing its 9% pro rata share of the 20,000,000 shares
being offered. The proceeds from all parties were received by Qianfeng in
accordance with the agreement.
In June 2007, Jie'an brought suit in the High Court of
Guizhou province, China, against Qianfeng and the three other original Qianfeng
shareholders, alleging the illegality of the Equity Purchase Agreement. In its
complaint, Jie'an alleged that it had a right to acquire the shares waived by
the original Qianfeng shareholders and offered to the investors in connection
with the Equity Purchase Agreement. On September 12, 2008, the Guizhou High
Court ruled against Jie'an and sustained the Equity Purchase Agreement, but on
November 2008, Jie'an appealed the Guizhou High Court judgment to the People's
Supreme Court in Beijing. On May 13, 2009, the People's Supreme Court sustained
the ruling of the High Court of Guizhou and denied Jie'an's right of first
refusal claim over shares with respect to which the original Qianfeng
shareholders waived their right of first refusal. The registration of the new
investors as Qianfeng's shareholders and the related increase in registered
capital of Qianfeng with the Administration for Industry and Commerce is still
pending. Qianfeng is evaluating whether it has the right to rescind the Equity
Purchase Agreement and the transactions contemplated by that agreement, or the
2007 Financing. If Qianfeng does not have such rescission right, Dalin's
interests in Qianfeng would be reduced to approximately 41.3%. However, we will
be able to retain control over Qianfeng due to our right to appoint a majority
of Qianfeng's directors. Meanwhile, Qianfeng has set aside amounts received from the
investors and Jie'an in the 2007 Financing as well as amounts of dividends to
which the investors and Jie'an will be entitled if Qianfeng does not have the
right to rescind the 2007 Financing.
Dispute over Qianfeng Technical Consulting
Agreement
In 1997, Qianfeng entered into a Technical
Cooperation Agreement with Sin Kyung Ye, or Sin, a Korean individual, to provide
certain fractionation equipment and transfer processing know-how to Qianfeng. In
August 2004, Sin filed a law suit against Qianfeng with the Intermediate Court
in Guiyang City, China, alleging non-payment of approximately, $14,670 (RMB
100,000) for his fractionation equipment and approximately, $733,500 (RMB
5,000,000) for the transfer of his technological know-how. The Intermediate
Court ruled in favor of Sin and found that Qianfeng owed Sin approximately, $
1,522,183 (RMB 10,376,160), but Qianfeng appealed the Intermediate Court ruling
to the Guizhou High Court. The Guizhou High Court agreed in part with Qianfeng's
grounds for appeal and reduced the amount of know-how transfer fee to
approximately, $289,060 (RMB 1,970,413). In May 2007, Sin appealed the Guizhou
High Court's decision to the People's Supreme Court in Beijing. The People's
Supreme Court heard in April 2008, but had not issued its decision as of the
date of this report.
F-
25
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Qianfeng Product Liability Claims
In January 2008, Qianfeng, along with two
local hospitals and a local blood center, was sued in the Zhuhui District Court
in Hengyang, Hunan province, China, by a resident of Hunan province, for
approximately, $256,631 (RMB 1,749,358) in damages, in connection with his
alleged HIV contamination via blood transfusion during the plaintiff's treatment
following an April 2006 traffic accident. The Zhuhui District Court awarded the
plaintiff approximately, $29,340 (RMB 200,000), but found that the defendants
were not responsible for his HIV contamination. All parties appealed to the
Zhuhui Middle Court. On December 4, 2008, the Zhuhui Middle Court remanded the
case to the lower court for retrial, on grounds that the HIV contamination could
not be directly linked to the plaintiff's treatment by the hospitals or to Qianfeng's products. There have been no further developments on this case as of
the date of this report.
On November 10, 2006, Qianfeng and eight other
defendants were sued in the Sigu District Court of Hengyang County, Hunan
province, China, by a resident of Hunan province, for approximately, $106,446 (RMB
725,606) in damages, in connection with his alleged Hepatitis C contamination
via blood transfusion and injection of plasma-based products, during the
plaintiff's August 2004 treatment for hemophilia. On December 8, 2008, the Sigu
District Court ruled in favor of the plaintiff and held Qianfeng liable for 10%
of the total approximately, $2,680 (RMB 18,293) judgment against three of the
defendants. All three defendants, including Qianfeng appealed the district court
ruling to the Intermediate Court of the Hengyang County. On May 4, 2009, the
Intermediate Court ruled against the defendants and sustained the original
district court ruling. As of result, Qianfeng is liable and obligated to pay the
plaintiff approximately, $2,680 (RMB 18,293) in damages and related court fees.
Administration Interference
Qianfeng is party to an administrative
proceeding against the government of the Qiandongnan Autonomous Region, or the
Qiandongnan Authorities, in Guizhou Province, China, in connection with the
ownership of three of Qianfeng's eight plasma stations in Guizhou Province.
Qianfeng was authorized to acquire a total of eight plasma stations in Guizhou
Province based on several national and provincial administrative authorizations
issued by the PRC State Council and the Guizhou Ministry of Health between 2006
and 2007
,
but to date, the governmental authorizations have not been
fully implemented by the Qiandongnan Authorities. In early 2007, Qianfeng
submitted approximately $1,173,465 (RMB 8,010,000) to the local finance
department of Sansui County, Qiandongnan, for acquiring the Sansui Plasma
Collection Station ("Sansui"), but the local finance department refused to honor
the purchase and returned the full consideration to Qianfeng. Furthermore,
subsequent local rulings published by the Qiandongnan Authorities February 28,
2008 appear to authorize another private company to acquire the Sansui and two
other stations, the Zhengyuan Plasma Collection Station and the Shibing Plasma
Collection Station. In December 2008 Qianfeng filed an administrative review
application with the People's Government of Guizhou Province, or the Guizhou
Provincial Government, but the Guizhou Provincial Government has delayed making
a final decision pending further review of regulations regarding administrative
authorizations. Qianfeng has received verbal notification from staff in the
Guizhou Provincial Government that the Qiandongnan Authorities have withdrawn
the local rulings authorizing acquisition of the three plasma stations, but
management has not received any written confirmation of such withdrawal. As a
result, Qianfeng has maintained its application with the Guizhou Provincial
Government for a formal administrative ruling on its right to acquire all eight
plasma stations in Guizhou Province. In addition, Qianfeng has set aside the
purchase price payable for Sansui pending the outcome of the administrative
review.
F-
26
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Note 10 – Warrants and options
Warrants
On July 18, 2006, the Company entered into a
securities purchase agreement with certain accredited investors and completed
the sale of 2,200,000 shares of common stock on July 18, 2006. Concurrent with
the private placement, the Company issued 1,070,000 warrants with an exercise
price of $2.8425 per share ("Investor Warrant") to investors. The warrants have
a 5-year term and shall be callable by the Company if the shares trade at 160%
of the exercise price for 15 consecutive trading days after the registration
statement has been effective for 45 days. On July 28, 2006, the Company also
issued 214,000 warrants with exercise price at $2.8425 ("Placement Agent
Warrant") to Lane Capital Markets, LLC, the placement agent. These warrants have
a 5-year term and were non-callable and vested upon grant.
Effective January 1, 2009, the Company adopted
the provisions of EITF 07-5, "Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity's Own Stock", which is effective for financial
statements for fiscal years beginning after December 15, 2008 and which replaced
the previous guidance on this topic in EITF 01-6. Paragraph 11(a) of FAS 133
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to the Company's own stock and (b) classified
in stockholders' equity in the statement of financial position would not be
considered a derivative financial instrument. EITF 07-5 provides a new two-step
model to be applied in determining whether a financial instrument or an embedded
feature is indexed to an issuer's own stock and thus able to qualify for the FAS
133 paragraph 11(a) scope exception. Because of strike prices of the 1,284,000
previously issued warrants are denominated in USD which is different than the
Company's function currency, RMB, these warrants previously treated as equity
pursuant to the derivative treatment exemption were no longer afforded equity
treatment.
As such, effective January 1, 2009, the
Company reclassified the original fair value of these warrants $738,449 from
equity to liability status as if these warrants were treated as a derivative
liability since their date of issue in July 2006. On January 1, 2009, the
Company reclassified from additional paid-in capital, as a cumulative effect
adjustment, $929,577 from beginning retained earnings and $1,668,026 to a
long-term derivative liability to recognize the fair value of such warrants on
such date. The fair value of these common stock purchase warrants increased to
$2,061,049 as of March 31, 2009. As such the Company recognized a $393,023 loss
from the change in fair value of these warrants for three months ended March 31,
2009.
These common stock purchase warrants were not
issued with the intent of effectively hedging any future cash flow, fair value
of any asset, liability or any net investment in a foreign operation. The
warrants do not qualify for hedge accounting, and as such, all future changes in
the fair value of these warrants will be recognized currently in earnings until
such time as the warrants are exercised or expire. These common stock purchase
warrants do not trade in an active securities market, and as such, the Company
estimated the fair value of these warrants using the Black-Scholes option
pricing model using the following assumptions:
Granted on
March 31, 2009
January 1, 2009
Expected dividend yield
0
%
0
%
Risk-free interest rate
0.98
%
1.01
%
Expected life (in years)
2.30
2.55
Weighted average expected volatility
130
%
130
%
Expected volatility is based on historical
volatility. Historical volatility was computed using daily pricing observations
for recent periods that correspond to the term of the warrants. The Company
believes this method produces an estimate that is representative of our
expectations of future volatility over the expected term of these warrants. The
Company has no reason to believe future volatility over the expected remaining
life of these warrants likely to differ materially from historical volatility.
The expected life is based on the remaining term of the warrants. The risk-free
interest rate is based on U.S. Treasury securities according to the remaining
term of the warrants.
F-
27
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
The summary of warrant activity is as follows:
Warrants
Outstanding
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Life
December
    31, 2007
1,284,000
$
2.84
3.55
Granted
Forfeited
Exercised
March
    31, 2008(unaudited)
1,284,000
$
2.84
3.30
Granted
Forfeited
Exercised
December
    31, 2008
1,284,000
$
2.84
2.55
Granted
Forfeited
Exercised
March
    31, 2009(unaudited)
1,284,000
$
2.84
2.30
Options
On May 9, 2008, the Company adopted the 2008
Equity Incentive Plan, which provides up to 5,000,000 shares of Company's Common
Stock to be made available to employees and directors at various prices as
established by the Board of Directors of the Company. On May 9, 2008, the
Company granted options to purchase an aggregate of 937,500 shares of the
Company's common stock under the 2008 Plan to certain directors and employees,
pursuant to stock option agreements between the Company and each of these
directors or employees. The options have an exercise price of $4.00 per share,
will vest immediately vest and will expire on June 1, 2018. On July 24, 2008,
the Company granted options to purchase an aggregate of 60,000 shares of the
Company's common stock under the 2008 plan to its three independent directors.
These options have an exercise price of $4.00 per share and 30,000 shares will
be vested on January 24, 2009 and the remaining 30,000 shares will be vested on
July 24, 2009, with the expiration date of July 24, 2018. As of December 31,
2008, there were 4,002,500 shares available under the plan.
The fair value of each option granted on May
9, 2008 and July 24, 2008 are estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions:
Granted on
May 9, 2008
July 24, 2008
Expected dividend yield
0
%
0
%
Risk-free interest rate
3.56
%
3.56
%
Expected life (in years)
5
5
Weighted average expected volatility
59.4
%
81.2
%
The volatility of the Company's common stock
was estimated by management based on the historical volatility of the Company's
common stock, the risk free interest rate was based on Treasury Constant
Maturity Rates published by the U.S. Federal Reserve for periods applicable to
the estimated life of the options, and the expected dividend yield was based on
the Company's current and expected dividend policy. The value of the options was
based on the Company's common stock price on the date the options were granted.
Because the Company does not have a history of employee stock options, the
Company utilized the simplified method to estimate the life of the options which
is the same as assuming that the options are exercised at the mid-point between
the vesting date and expiration date. For the three months ended March 31, 2009,
the Company expensed $27,373 in compensation expense. As of March 31, 2009,
approximately $34,908 of estimated expense with respect to non-vested
stock-based awards has yet to be recognized and will be recognized as an expense
over the employee's remaining weighted average service period of approximately
0.42 years. The options are accounted for as equity under SFAS 133 and EITF
00-19.The options activity is as follows:
F-28
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Options
Outstanding
Options
Exercisable
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
December
    31, 2007
—
—
$
—
—
$
—
Granted
—
—
—
—
—
Forfeited
—
—
—
—
—
Exercised
—
—
—
—
—
March
    31, 2008
—
—
$
—
—
$
—
Granted
997,500
937,500
4.00
10.00
—
Forfeited
—
—
—
—
—
Exercised
—
—
—
—
—
December
    31, 2008
997,500
937,500
$
4.00
9.43
$
—
Granted
—
30,000
4.00
9.31
—
Forfeited
—
—
—
—
—
Exercised
—
—
—
—
—
March
    31, 2009
997,500
967,500
$
4.00
9.18
$
—
Note 11 – Statutory reserves
In accordance with the "Law of the PRC on
Joint Ventures Using Chinese and Foreign Investment" and the Company's Articles
of Association, appropriations from net profit should be made to the Reserve
Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from
prior years, and before profit distributions to the investors. The percentages
to be appropriated to the Reserve Fund and the Enterprise Expansion Fund are
determined by the Board of Directors of the Company.
Reserve fund
For the three months ended March 31, 2009 and
2008, the Company transferred $2,508,741 (unaudited) and $235,303 (unaudited),
respectively, to the surplus reserve fund. Amounts represent 10% of the net
income determined in accordance with PRC accounting rules and regulations, and
are transferred to a statutory surplus reserve fund until such reserve balance
reaches 50% of the Company's registered capital. As of March 31, 2009,
approximately $8 million still needs to be transferred to statutory reserve. The
transfer to this reserve must be made before distribution of any dividend to
shareholders. The surplus reserve fund is non-distributable other than during
liquidation and can be used to fund previous years' losses, if any, and may be
utilized for business expansion or converted into share capital by issuing new
shares to existing stockholders in proportion to their shareholding or by
increasing the par value of the shares currently held by them, provided that the
remaining reserve balance after such issue is not less than 25% of the
registered capital.
Enterprise expansion fund
The enterprise fund may be used to acquire
plant and equipment or to increase the working capital to expend on production
and operation of the business. For the three months ended March 31, 2009 and
2008, the Company transferred $252,095 (unaudited) and $117,651 (unaudited),
respectively, to the fund. Amounts represent 5% of the net income determined in
accordance with the Company's policy.
Note 12 – Retirement benefit plans
Regulations in the PRC require the Company to
contribute to a defined contribution retirement plan for the benefit of all
permanent employees. All permanent employees are entitled to an annual pension
equal to their basic salaries at retirement. The PRC government is responsible
for the benefit liability to these retired employees. The Company is required to
make contributions to the state retirement plan at 20% of the monthly base
salaries of the current employees. For the three months ended March 31, 2009 and
2008, the Company made pension contributions in the amount of $220,493
(unaudited) and $54,591 (unaudited), respectively.
F-29
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Note 13- Noncontrolling interest and
distribution
The roll forward of noncontrolling interest in
the balance sheet is shown below:
Fang Cheng
Plasma Co.
Minority
Owner
(20%)
Shandong
Taibang
Minority
Owner
(17.24%)
Guizhou
Renyuan
Minority
Owners
(75%)
Guiyang
Qianfeng
Minority
Owners
(46%)
Chongqing
Dalin
Minority
Owner
(10%)
Total
Noncontrolling
interest
December
    31, 2007
$
82,994
$
4,098,344
$
—
$
—
$
—
$
4,181,338
Net income(loss)
(83,938
)
3,387,779
—
—
—
3,303,841
Foreign currency translation gain/(loss)
944
301,303
—
—
—
302,247
Dividend declared
—
(2,982,045
)
—
—
—
(2,982,045
)
December
    31, 2008
$
—
$
4,805,381
$
—
$
—
$
—
$
4,805,381
Dalin acquisition
—
—
2,521,470
17,249,290
1,730,952
21,501,712
Net income(loss)
(2,449
)
850,158
15,694
1,914,995
221,684
3,000,082
Foreign currency translation gain/(loss)
—
(4,260
)
36,543
352,923
42,096
427,302
Dividend declared
—
(454,308
)
—
(4,179,679
)
—
(4,633,987
)
March
    31, 2009
$
(2,449
)
$
5,196,971
$
2,573,707
$
15,337,529
$
1,994,732
$
25,100,490
Dividends declared are split pro rata between
the shareholders according to their ownership interest. The payment of the
dividends may occur at different times to the shareholders resulting in
distributions which do not appear to be reflective of the minority ownership
percentages. As of March 31, 2009, minority shareholders owned 17.24% of the
Shandong Taibang, 10% of Dalin and 46% of Qianfeng. The table below shows the
minority shareholder and dividends outstanding.
Shandong Taibang
Noncontrolling
shareholder
Guiyang Qianfeng
Noncontrolling
shareholder
Total
Noncontrolling
shareholder
Distribution payable, December 31, 2006
$
476,597
$
—
$
476,597
Dividend
    declared
2,207,541
—
2,207,541
Dividend
    paid
(488,878
)
—
(488,878
)
Dividend
    used to increase registered capital
(1,710,880
)
—
(1,710,880
)
Foreign
    currency translation adjustments
22,246
—
22,246
Distribution payable, December 31, 2007
$
506,626
$
—
$
506,626
Dividend
    declared
2,982,045
—
2,982,045
Dividend
    paid
(288,300
)
—
(288,300
)
Foreign
    currency translation adjustments
51,983
—
51,983
Distribution payable, December 31, 2008
$
3,252,354
$
—
$
3,252,354
Dividend
    declared
454,308
4,179,679
4,633,987
Dividend
    paid
—
(3,735,243
)
(3,735,243
)
Foreign
    currency translation adjustments
12,796
2,798
15,594
Distribution payable, March 31, 2009
$
3,719,458
$
447,234
$
4,166,692
Note 14 – Business Combinations
On September 26, 2008, Logic Express entered
into an equity transfer agreement with Dalin, a PRC limited liability company,
and Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang, the shareholders of Dalin,
relating to the purchase of an aggregate 90% equity interest in Dalin, for a
total purchase price of RMB194,400,000 (approximately $28,479,600), due in four
installments. On April 14, 2009, the Company paid the third installment towards
the acquisition which represented the payment of 90% of the purchase price in
the aggregate, and in accordance with terms of the equity transfer agreement,
Logic Holdings, the Hong Kong subsidiary, is now entitled to all the rights and
privileges of a 90% shareholder in Dalin, including the right to receive its pro
rata share of the profits generated by Dalin's 54% majority-owned operating
subsidiary, Qianfeng Biological Products Co., Ltd., or Qianfeng, as of January
1, 2009, subject to a possible dilution to as low as 41.3%, if a dissenting
Qianfeng shareholder prevails in a pre-existing suit to obtain additional equity
interests in Qianfeng. The Company are obligated to pay the fourth and final
installment, representing the remaining 10% of the Dalin purchase price, on or
before April 9, 2010, the one-year anniversary of the local Administration for
Industry and Commerce's approval of the equity transfer. On January 16, 2009, Qianfeng's shareholders, including Dalin, elected four members to its seven
member Board of Directors that were nominated by Dalin, and on January 17, 2009,
the Qianfeng's Board of Directors elected a new management team consisting of
all Logic Express' and Dalin's appointees, including a new CEO, Executive Senior
Vice President, CFO and Director of Sales. The operational control of Qianfeng
passed to the Company effective January 1, 2009. The results of Dalin's and its
subsidiaries' operations from January 1, 2009 through March 31, 2009 are
included in the Company's Consolidated Statements of Income and Comprehensive
Income.
F-
30
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
Effective January 1, 2009, the Company adopted
FAS 141R, "Business Combinations" to replace FAS 141, "Business Combinations".
FAS 141R retains the fundamental requirements in FAS 141 that the acquisition
method of accounting (which FAS 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. FAS 141R requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. This replaces FAS 141's cost-allocation process, which required the
cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. FAS 141R also requires
the acquirer in a business combination achieved in stages (sometimes referred to
as a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with FAS 141R).
The Company's acquisition of Dalin was
accounted for in accordance with FAS 141R and we have allocated the purchase
price of Dalin based upon the fair value of the net assets acquired and
liabilities assumed and the fair value of the noncontrolling interest measured
at the acquisition date. The Company estimated the fair values of the assets
acquired and liabilities assumed at the acquisition date in accordance with FAS
141R and, expect for cash and cash equivalents, fair value was estimated using
level 3 inputs under SFAS No. 157. Level 3 inputs for the nonfinancial assets
included a valuation report (prepared by a third party appraisal firm) that
primarily utilized a combination of Income approach, cost approach and Market
approach valuation techniques. Level 3 inputs for other assets and liabilities
included present value techniques applied to after-tax income, expected
after-tax cash flows and estimated selling prices (less costs of disposal and
profit allowance) for inventories. In accordance with SFAS No. 142, "Goodwill
and Other Intangibles Assets", indefinite lived intangibles and goodwill are not
being amortized.
The following table summarizes the net book
value and the fair value of the assets acquired and liabilities assumed at the
date of acquisition, which represents the purchase price allocation at the date
of the acquisition of Dalin based on valuation report which was prepared by a
third party appraisal firm:
Net Book Value
Fair Value
Current
    assets
$
26,883,246
$
26,883,246
Property, plant and equipment, net
6,060,024
8,098,959
Intangibles
1,729,112
21,471,408
Other
    non-current assets
3,449,162
3,449,162
Goodwill
—
13,692,473
Total
    assets
38,121,544
73,595,248
Total
    liabilities
23,178,257
23,178,257
Net
    assets
$
14,943,287
$
50,416,991
The Company determined the $50.4 million fair
value of the acquired assets of Dalin based on an evaluation by an independent
appraisal and the final asset evaluation by the management. Pursuant to FAS
141R, the excess of the cost of an acquired entity over the net of the amounts
assigned to assets acquired and liabilities assumed shall be recognized as
goodwill. As a result, the $13.7 million of goodwill was due to the acquisition
purchase price over the fair value of the assets acquired. During the three
months ended March 31, 2009, the Company did not record any impairment charge
from write-downs of purchased intangible assets since the Company do not
identify any trends caused a reduction in expected future cash flows.
F-
31
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
The following table presents the details of
the fair value purchased intangible assets acquired through business
combinations as of January 1, 2009:
Useful life
(in years)
Fair Value
Plasma
    collection permits
10
$
10,891,092
Land use
    rights
40
1,285,968
Long-term customer-relationship intangible assets
4
6,955,384
GMP
    certificate
5.8
2,332,652
Software
3.8
6,312
Total
$
21,471,408
In addition, the Company determined the $21.5
million fair value of the noncontrolling interest of Dalin based on an
evaluation by an independent third party appraisal firm. Level 3 inputs for
noncontrolling interest included considering average control premium in relevant
Merger and Acquisition premium.
Pro Forma
The following unaudited pro forma condensed
income statement for the three months ended March 31, 2009 and 2008 were
prepared under generally accepted accounting principles as if the acquisition of
Dalin has occurred on January 1, 2008. The pro forma information may not be
indicative of the results that actually would have occurred if the acquisition
had been in effect from and on the date indicated.
For the three months ended March 31,
2009
2008
Sales
$
21,148,598
$
16,221,336
Cost of
    Goods Sold
6,214,930
4,844,829
Gross
    Profit
14,933,688
11,376,507
Operating Expenses
4,870,130
3,358,037
Other
    expense, net
774,944
85,803
Income
    Tax
2,030,194
1,428,232
Net
    Income before noncontrolling interest
7,258,400
6,504,435
Less:
    Net income attributable to noncontrolling interest
3,000,082
2,136,434
Net
    Income attributable to controlling interest
$
4,258,318
$
4,368,001
Basic -
    earning per share
Weighted average number of shares
21,434,942
21,434,942
Earnings per share
$
0.20
$
0.20
Diluted
    - earning per share
Weighted average number of shares
21,434,942
21,964,168
Earnings per share
$
0.20
$
0.20
F-
32
CHINA BIOLOGIC PRODUCTS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008 AND 2007
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
Index to Financial Statements
Page
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2008 AND 2007
Report of Independent Registered Public
    Accounting Firm
F-34
Consolidated Balance Sheets as of December 31, 2008 and
    2007
F-35
Consolidated Statements of Income and
    Other Comprehensive Income for the Years Ended December 31, 2008 and 2007
F-36
Consolidated Statements of Shareholders' Equity for the
    Years Ended December 31, 2008 and 2007
F-37
Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2008 and 2007
F-38
Notes to Consolidated Financial Statements
F-39
F-33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
China Biologic Products, Inc.
We have audited the accompanying consolidated balance sheets
of China Biologic Products, Inc. and subsidiaries as of December, 2008 and 2007,
and the related consolidated statements of income and other comprehensive
income, shareholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 2008. China Biologic Products, Inc's
management is responsible for these consolidated financial statements. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of China Biologic Products, Inc. and subsidiaries as of December 31,
2008 and 2007, and the results of its operations and cash flows for each of the
years in the two-year period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of America.
/s/ Moore Stephens Wurth Frazer and Torbet, LLP
Walnut, California
March 30, 2009
F-34
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
A S S E T S
2008
2007
CURRENT ASSETS:
Cash
$
8,814,616
$
5,010,033
Note receivable
-
41,130
Accounts receivable, net of allowance for doubtful
    accounts of $1,268,052
and $1,238,772 as of December 31, 2008 and
    2007, respectively
313,087
316,869
Dividend receivable
147,256
-
Other receivables
356,957
301,773
Other receivables- related party
-
413,697
Inventories
14,949,196
9,505,074
Prepayments and deferred expense
614,704
138,756
Total current assets
25,195,816
15,727,332
PLANT AND EQUIPMENT, net
19,299,364
15,434,124
OTHER ASSETS:
Investment in unconsolidated
    affiliate
6,533,977
-
Refundable deposit for potential acquisition
14,181,800
-
Prepayments-non-current
955,874
711,459
Long term prepayment – related party
-
516,456
Intangible assets, net
1,002,561
915,874
Total other assets
22,674,212
2,143,789
Total assets
$
67,169,392
$
33,305,245
L I A B I L I T I E S   A N D   S H A R E
    H O L D E R S'
E Q U I T Y
CURRENT LIABILITIES:
Accounts payable
$
2,481,889
$
2,677,587
Notes payable
29,340
-
Short term loans - bank
-
685,500
Short term loan – minority
    shareholder
773,277
722,674
Other payables and accrued liabilities
3,962,931
1,200,068
Other payable - land use right
1,683
1,485
Distribution payable to minority shareholder
3,252,354
506,626
Customer deposits
1,091,792
398,794
Taxes payable
4,060,010
384,788
Investment payable
3,275,501
-
Total current liabilities
18,928,777
6,577,522
OTHER LIABILITIES:
Non-current other payable – land use right
323,707
304,086
Long term loan-bank
5,868,000
-
Total other liabilities
6,191,707
304,086
Total liabilities
25,120,484
6,881,608
COMMITMENTS AND CONTINGENCIES
-
142,120
MINORITY INTEREST
4,211,794
3,885,892
SHAREHOLDERS' EQUITY:
Common stock, $0.0001 par value,
    100,000,000 shares authorized, 21,434,942
shares issued and outstanding
    at December 31, 2008 and 2007
2,143
2,143
Paid-in-capital
10,700,032
9,388,305
Statutory reserves
6,989,801
3,934,703
Retained earnings
15,392,253
6,461,680
Accumulated other comprehensive
    income
4,752,885
2,608,794
Total shareholders' equity
37,837,114
22,395,625
Total liabilities
    and shareholders' equity
$
67,169,392
$
33,305,245
See report of independent registered public accounting firm.
The accompanying notes are an integral part of these statements.
F-35
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2008
2007
REVENUES
$
46,751,160
$
32,398,669
COST OF SALES
14,040,602
9,945,921
GROSS PROFIT
32,710,558
22,452,748
OPERATING EXPENSES:
Selling expenses
2,212,073
4,434,721
General and administrative expenses
7,684,493
4,651,434
Research and development expenses
1,166,494
609,178
Stock-based compensation expenses (general and
    administrative)
1,311,727
-
TOTAL OPERATING EXPENSES
12,374,787
9,695,333
INCOME FROM OPERATIONS
20,335,771
12,757,415
OTHER EXPENSES (INCOME):
Equity in income of unconsolidated affiliate
(175,231
)
-
Interest expense (income), net
373,497
88,686
Other expense (income), net
251,390
422,891
TOTAL OTHER EXPENSES (INCOME), NET
449,656
511,577
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST
19,886,115
12,245,838
PROVISION FOR INCOME TAXES
4,596,603
2,074,560
NET INCOME BEFORE MINORITY INTEREST
15,289,512
10,171,278
LESS MINORITY INTEREST
3,303,841
1,991,902
NET INCOME
11,985,671
8,179,376
OTHER COMPREHENSIVE INCOME:
Foreign currency translation gain
2,144,091
1,490,409
COMPREHENSIVE INCOME
$
14,129,762
$
9,669,785
BASIC EARNINGS PER SHARE:
Weighted average number of shares
21,434,942
21,434,942
Earnings per share
$
0.56
$
0.38
DILUTED EARNINGS PER SHARE:
Weighted average number of shares
21,556,342
21,861,014
Earnings per share
$
0.56
$
0.37
See report of independent registered public accounting firm.
The accompanying notes are an integral part of these statements.
F-36
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Common stock
Retained earnings
Accumulated
Additional
other
Par
Paid-in
Statutory
comprehensive
Shares
value
capital
reserves
Unrestricted
income
Totals
BALANCE, December 31, 2006
21,434,942
$
2,143
$
9,388,305
$
2,199,580
$
17,427
$
1,118,385
$
12,725,840
Net income
8,179,376
8,179,376
Adjustment to statutory reserve
1,735,123
(1,735,123
)
-
Foreign currency
    translation adjustments
1,490,409
1,490,409
BALANCE, December 31, 2007
21,434,942
$
2,143
$
9,388,305
$
3,934,703
$
6,461,680
$
2,608,794
$
22,395,625
Stock based
    compensation
1,311,727
1,311,727
Net income
11,985,671
11,985,671
Adjustment to
    statutory reserve
3,055,098
(3,055,098
)
-
Foreign currency translation adjustments
2,144,091
2,144,091
BALANCE, December
    31, 2008
21,434,942
$
2,143
$
10,700,032
$
6,989,801
$
15,392,253
$
4,752,885
$
37,837,114
See report of independent registered public accounting firm.
The accompanying notes are an integral part of these statements.
F-37
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
2008
2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
11,985,671
$
8,179,376
Adjustments to reconcile net income
    to cash
provided by operating
    activities:
Minority Interest
3,303,841
1,991,902
Depreciation
1,088,155
777,007
Amortization
61,095
91,965
Loss on disposal
    of equipment
214,663
245,042
Allowance for bad debt – accounts
    receivable
(56,462
)
221,813
Allowance for bad
    debt – other receivables and prepayments
560,668
-
Impairment of assets
415,873
-
Stock based
    compensation
1,311,727
-
Equity in income of unconsolidated
    affiliate
(175,231
)
-
Change in operating assets
    and liabilities:
Notes receivable
43,245
44,109
Accounts
    receivable
81,980
3,351,444
Other receivables
(33,462
)
310,943
Other receivables
    – related party
1,442
(2,302
)
Inventories
(4,695,495
)
(2,845,676
)
Prepayments and
    deferred expenses
(459,019
)
599,238
Accounts payable
(376,527
)
93,800
Other payables and
    accrued liabilities
2,695,860
(773,185
)
Other payables –land use right
(37,308
)
(1,346
)
Customer deposits
653,514
2,679
Taxes payable
3,585,237
227,604
Contingent
    liability
(149,428
)
136,491
Net cash provided by
    operating activities
20,020,039
12,650,904
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments to related party
-
(395,010
)
Additions to plant and equipment
(4,033,667
)
(7,715,142
)
Additions to intangible assets
(83,259
)
(234,120
)
Payments for unconsolidated affiliate
(3,171,300
)
-
Prepayments for potential
    acquisition
(14,181,800
)
-
Advances on non-current assets
(270,119
)
(381,996
)
Advances on building purchase to
    related party
-
(496,001
)
Proceeds from sales of equipment
73,641
11,455
Net cash
    used in investing activities
(21,666,504
)
(9,210,814
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable
28,830
-
Proceeds from short term loan
-
1,316,700
Payments on short term loan
(720,750
)
(3,291,750
)
Proceeds from long term loan
5,766,000
-
Payments on long term debt
-
(658,350
)
Dividends paid to minority
    shareholders
(288,300
)
(488,878
)
Net cash provided by (used
    in) financing activities
4,785,780
(3,122,278
)
EFFECTS OF EXCHANGE RATE CHANGE IN CASH
665,268
424,001
INCREASE IN CASH
3,804,583
741,813
CASH, beginning of year
5,010,033
4,268,220
CASH, end of year
$
8,814,616
$
5,010,033
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid
$
1,523,867
$
1,803,510
Interest paid (net of capitalized interest)
$
108,170
$
107,077
Non-cash transactions
Accounts receivable in exchange for accrued
    liabilities
$
-
$
1,126,404
Unpaid investment in
    unconsolidated affiliate
$
3,218,565
$
-
Plant and
    equipment acquired with prepayments made in prior periods
$
78,905
$
498,147
See report of independent registered public accounting firm.
The accompanying notes are an integral part of these statements.
F-38
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note 1 – Organization background and principal activities
Principal Activities and Reorganization
China Biologic Products, Inc. (the "Company" or "CBP") was
originally incorporated in 1992 under the laws of the state of Texas as Shepherd
Food Equipment, Inc. On July 18, 2006, the Company entered into a Share Exchange
Agreement with Logic Express Ltd ("Logic Express") and its stockholders. Upon
the closing of the Share Exchange Agreement on July 19, 2006, Logic Express
became a wholly-owned subsidiary of the Company.
Logic Express was incorporated on January 6, 2006, in the
British Virgin Islands. Logic Express was established for the purpose of
acquiring an 82.76% majority equity interest in Shandong Missile Biological
Products Co., Ltd., which it acquired on April 17, 2006 and on February 27, 2007
changed its name to Shandong Taibang Biological Products Co., Ltd. ("Shandong
Taibang"). As a result of the acquisition, Shandong Taibang became the Company's
indirect subsidiary.
The Company through its direct and indirect subsidiaries is
principally engaged in the research, development, commercialization, manufacture
and sale of human blood products to customers in the People's Republic of China
(the "PRC") and India.
Acquisition of assets from plasma stations
In the third quarter of 2006, Shandong Taibang, through its
wholly owned plasma companies, entered into an asset transfer agreement with the
Shandong Provincial government to acquire certain assets of five plasma stations
in Shandong Province, for total consideration of approximately $2,607,356 (RMB
19.3 million). The operating licenses of the plasma companies were effective as
of January 1, 2007.
In January 2007, Shandong Taibang, through its 100% and 80%
owned plasma companies, entered into letters of intent to acquire certain assets
of two plasma stations in Guangxi Province for total consideration of
approximately $761,781 (approximately RMB 5.6 million).
Establishment of distribution company
In September 2006, Shandong Taibang applied to establish a
wholly owned subsidiary "Shandong Missile Medical Co., Ltd." ("Shandong
Medical"). The registration of Shandong Medical was approved by the Shandong
Provincial Department of Foreign Trade and Economic Cooperation on July 19,
2007. Shandong Medical's scope of business is the wholesale of biological
products with a business license period of 25 years from the date of
registration, with a registered capital of $384,600.
Establishment of new collection station in Guangxi
In June 2008, the Company received the approval from the
Guangxi Province Bureau of Health to set up a new plasma collection station in
Pu Bei County, Guangxi Province. The new plasma collection station will be
located in the Centralized Industry Zone of Pu Bei County and when it becomes
operational, it will replace CBP's existing Fang Cheng Plasma Collection Station
("Fang Cheng"). The Company's management decided to relocate Fang Cheng to a
more strategic location to increase collection volumes. During the construction
period, the existing Fang Cheng Plasma Station will still continue with its
normal operations. With the approval of the Centralized Industry Zone of Pu Bei
County, once Fang Cheng becomes operational, the Company hopes to expand its
coverage area to secure higher collection volumes in the future.
See report of independent registered public accounting firm.
F-39
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note 2 – Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"). All material inter-company transactions
and balances have been eliminated in the consolidation.
Use of estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. For example, management estimates the fair value of stock based
compensation as well as potential losses on outstanding receivables. Management
believes that the estimates utilized in preparing its financial statements are
reasonable and prudent. Actual results could differ from these estimates.
Foreign currency translation
The reporting currency of the Company is the US dollar. The
Company's principal operating subsidiaries established in the PRC use their
local currency, Renminbi ("RMB"), as their functional currency. Results of
operations and cash flows are translated at average exchange rates during the
period. Assets and liabilities are translated at the unified exchange rate as
quoted by the People's Bank of China at the end of the period. Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in the statements of stockholders' equity. Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the
results of operations as incurred.
In accordance with FAS 95, "Statement of Cash Flows," cash
flows from the Company's operations is calculated based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.
The consolidated balance sheet amounts, with the exception of
equity at December 31, 2008 and 2007 were translated at RMB6.82 to $1.00 and
RMB7.29 to $1.00, respectively. The equity accounts were stated at their
historical rate. The average translation rates applied to consolidated
statements of income and cash flow for the years ended December 31, 2008 and
2007 were RMB6.94 and RMB7.59, respectively.
Revenue recognition
The Company recognizes revenue when products are delivered
and the customer takes ownership and assumes risk of loss, collection of the
relevant receivable is probable, persuasive evidence of an arrangement exists
and the sales price is fixed or determinable, which are generally considered to
be met upon delivery and acceptance of products at the customer site. Sales are
presented net of any discounts given to customers. As a policy, the Company does
not accept any product returns and based on our records, product returns, if
any, are immaterial. Sales revenue represents the invoiced value of goods, net
of a value-added tax ("VAT"). All products produced by the Company and sold in
the PRC are subject to a Chinese VAT at a rate of 6% of the gross sales price or
at a rate approved by the Chinese local government. Products distributed by
Shandong Medical are subjected to a 17% VAT.
Shipping and handling
Shipping and handling costs related to costs of goods sold
are included in selling, general and administrative costs and totaled $60,164
and $93,107 for the years ended December 31, 2008 and 2007, respectively.
Financial instruments
Statement of Financial Accounting Standards ("SFAS") 107,
"Disclosures about Fair Value of Financial Instruments" requires disclosure of
the fair value of financial instruments held by the Company. SFAS 107 defines
the fair value of financial instruments. The Company considers the carrying
amount of cash, receivables, payables including accrued liabilities and short
term loans to approximate their fair values because of the short period of time
between the origination of such instruments and their expected realization and
if applicable, their stated rates of interest are equivalent to interest rates
currently available.
See report of independent registered public accounting firm.
F-40
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
On January 1, 2008, the Company adopted SFAS 157, "Fair Value
Measurements", which defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosures
requirements for fair value measures. The three levels are defined as follow:
Level 1: inputs to the
  valuation methodology are quoted prices (unadjusted) for identical assets or
  liabilities in active markets.
Level 2: inputs to the
  valuation methodology include quoted prices for similar assets and liabilities
  in active markets, and inputs that are observable for the assets or liability,
  either directly or indirectly, for substantially the full term of the
  financial instruments.
Level 3: inputs to the
  valuation methodology are unobservable and significant to the fair value.
The Company's investment in unconsolidated affiliate amounted
to $6,533,977 as of December 31, 2008. Since there is no quoted or observable
market price for the fair value of similar investment, the Company then used the
level 3 inputs for its valuation methodology. The determination of the fair
value was based on the capital investment that the Company contributed income or
losses from investment and additional contributions made and distributions
received. The carrying value of the investment in unconsolidated affiliate
approximated the fair value as of December 31, 2008.
The carrying value of the long term bank loan amounted to
$5,868,000. The Company used Level 2 inputs for its valuation methodology for
the long term bank loan by comparing the stated loan interest rate to the rate
charged by the Bank of China to similar loans.
Carrying Value as of
Fair Value Measurements at December 31, 2008
December 31, 2008
using Fair Value Hierarchy
Level 1
Level 2
Level 3
Investment
$
6,533,977
$
-
$
-
$
6,533,977
Long term bank loan
$
5,868,000
$
-
$
5,380,114
$
-
The Company did not identify any assets or liabilities that
are required to be presented on the balance sheet at fair value in accordance
with SFAS 157.
Concentration of risk
The Company's operations are carried out in the PRC and are
subject to specific considerations and significant risks not typically
associated with companies in North America and Western Europe. Accordingly, the
Company's business, financial condition and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC economy. The Company's results may be adversely
affected by changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.
Cash includes cash on hand and demand deposits in accounts
maintained with state-owned banks within the PRC, Hong Kong and the United
States. Certain financial instruments, which subject the Company to
concentration of credit risk, consist of cash. The Company maintains balances at
financial institutions which, from time to time, may exceed Federal Deposit
Insurance Corporation insured limits for the banks located in the United States
or may exceed Hong Kong Deposit Protection Board insured limits for the banks
located in Hong Kong. Balances at financial institutions or state-owned banks
within the PRC are not covered by insurance. Total cash in state-owned banks at
December 31, 2008 and 2007 amounted to $8,689,414 and $4,814,991, respectively,
$47,865 and $240,797 of which are covered by insurance, respectively. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any risks on its cash in bank accounts.
The Company's major product, human albumin: - 20%/10ml,
20%/25ml and 20%/50ml, accounted for 57.8% and 63.5% of total revenues, for the
years ended December 31, 2008 and 2007, respectively. If the market demands for
human albumin cannot be sustained in the future or if the price of human albumin
decreases, it would adversely affect the Company's operating results.
See report of independent registered public accounting firm.
F-41
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
All of the Company's customers are located in the PRC. As of
December 31, 2008 and 2007, the Company had no significant concentration of
credit risk, except for the amounts due from related parties. There were no
customers that individually comprised 10% or more of the revenue during the
fiscal year ended December 31, 2008 and 2007, respectively. No individual
customer represented more than 10% of trade receivables at December 31, 2008 and
2007. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company's top three vendors comprised 36.3% and 24.0%,
respectively, of the Company's purchases for the years ended December 31, 2008
and 2007. Accounts payable to these vendors amounted $448,016 and $318,843 as of
December 31, 2008 and 2007, respectively.
Accounts receivable
During the normal course of business, the Company extends
unsecured credit to its customers. Management reviews its accounts receivable on
a regular basis to determine if the allowance for doubtful accounts is adequate.
An estimate for doubtful accounts is made when collection of the full amount is
no longer probable. Account balances are written-off after management has
exhausted all efforts of collection. Trade accounts receivable consist of the
following:
December 31,
    2008
December 31,
    2007
Trade accounts receivable
$
1,581,139
$
1,555,641
Less: Allowance for doubtful accounts
(1,268,052
)
(1,238,772
)
Total
$
313,087
$
316,869
The activity in the allowance for doubtful accounts for trade
accounts receivable for the years ended December 31, 2008 and 2007 is as
follows:
December 31,
    2008
December 31,
    2007
Beginning allowance for doubtful accounts
$
1,238,772
$
1,131,209
Bad debt expense
-
221,813
Recovery of amount previously
    reserved
(56,462
)
-
Write-off charged
    against the allowance
-
(188,891
)
Foreign currency translation adjustment
85,742
74,641
Ending allowance for doubtful
    accounts
$
1,268,052
$
1,238,772
Inventories
Inventories are stated at the lower of cost or market using
the weighted average basis and consist of the following:
December 31, 2008
December 31, 2007
Raw materials
$
7,043,349
$
3,841,595
Work-in-process
4,801,768
4,068,389
Finished goods
3,104,079
1,595,090
Total
$
14,949,196
$
9,505,074
The Company reviews its inventory periodically for possible
obsolete goods or to determine if any reserves are necessary for potential
obsolescence. As of December 31, 2008 and 2007, the Company has determined that
no reserve is necessary.
Plant and equipment
Plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets with 5% residual value. Depreciation
expense for the year ended December 31, 2008 and 2007 amounted to $1,088,155 and
$777,007, respectively.
See report of independent registered public accounting firm.
F-42
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Estimated useful lives of the assets are as follows:
Estimated Useful Life
Buildings and improvement
30
years
Machinery and equipment
10
years
Furniture, fixtures and office equipment
5-10
years
Construction in progress represents the costs incurred in
connection with the construction of buildings, new additions, or capitalized
interest incurred in connection with the Company's plant facilities. In
accordance with the provisions of SFAS No. 34, "Capitalize of Interest Cost",
interest incurred on borrowings is capitalized to the extent that borrowings do
not exceed construction in progress. The credit is a reduction of interest
expense. No depreciation is provided for construction in progress until such
time as the assets are completed and placed into service. Maintenance, repairs
and minor renewals are charged directly to expenses as incurred. Major additions
and betterment to property and equipment are capitalized.
The Company periodically evaluates the carrying value of
long-lived assets in accordance with SFAS 144. When estimated cash flows
generated by those assets are less than the carrying amounts of the asset, the
Company recognizes an impairment loss. Based on its review, the Company believes
that, as of December 31, 2008, there were no impairments of its long-lived
assets.
Plant and equipment
    consist of the following:
December 31, 2008
December 31, 2007
Buildings and improvements
$
5,809,724
$
4,525,589
Machinery and
    equipment
12,308,174
8,201,720
Furniture, fixtures, and office equipment
1,501,946
768,197
Total
    depreciable assets
19,619,844
13,495,506
Accumulated depreciation
(3,099,259
)
(1,840,197
)
16,520,585
11,655,309
Construction in progress
2,778,779
3,778,815
Total
$
19,299,364
$
15,434,124
Interest expense of $0 and $52,701 was capitalized into
construction in progress for the years ended December 31, 2008 and 2007,
respectively.
Investment in unconsolidated affiliate
Equity method investments are recorded at original cost and
adjusted to recognize the Company's proportionate share of the investee's net
income or losses and additional contributions made and distributions received.
The Company recognizes a loss if it is determined that other than temporary
decline in the value of the investment exists.
Intangible assets
Intangible assets are stated at cost (estimated fair value
upon contribution or acquisition), less accumulated amortization. Amortization
expense is recognized on the straight-line basis over the estimated useful lives
of the assets as follows:
Intangible assets
Estimated useful lives
Land use
      rights
50 years
Permits and licenses
5-10 years
Blood donor network
10 years
All land in the PRC is owned by the government; however, the
government grants "land use rights." The Company has obtained rights to use
various parcels of land for 50 years. The Company amortizes the cost of the land
use rights over their useful life using the straight-line method.
Other intangible assets represent permits, licenses and Good
Manufacturing Practice Certificates contributed in return for equity upon the
establishment of Shandong Taibang in 2002. Contributed rights include those
necessary to manufacture and distribute human blood products in the PRC market
as authorized by the relevant PRC authorities. The estimated useful life of the
contributed rights is 5-10 years.
See report of independent registered public accounting firm.
F-43
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Intangible assets consisted of the following:
December 31,
    2008
December 31,
    2007
Land use rights
$
848,982
$
819,937
Permits and licenses
389,709
326,983
Blood donor network
2,347
5,621
Software
61,296
28,892
Totals
1,302,334
1,181,433
Accumulated amortization
(299,773
)
(265,559
)
Intangible assets, net
$
1,002,561
$
915,874
Total amortization expense for the years ended December 31,
2008 and 2007 amounted to $61,095 and $91,965, respectively.
Amortization expense for intangible assets for the next five
fiscal years is as follows:
2009
2010
2011
2012
2013
Thereafter
Amortization expense
$
64,328
$
62,635
$
62,635
$
56,560
$
31,777
$
749,029
Intangible assets of the Company are reviewed at least
annually or more often if circumstances dictate, to determine whether their
carrying value has become impaired. The Company considers assets to be impaired
if the carrying value exceeds the future projected cash flows from related
operations. The Company also re-evaluates the years of amortization to determine
whether subsequent events and circumstances warrant revised estimates of useful
lives. For the years ended December 31, 2008 and 2007, the Company recorded an
impairment loss of $415,873 and $0, respectively. As of December 31, 2008, the
Company expects these assets to be fully recoverable.
Revenues
The Company's revenues are primarily derived from the
manufacture and sale of human blood products. The Company's revenues by
significant types of product for the years ended December 31, 2008 and 2007 are
as follows:
2008
2007
Human Albumin – 20%/10ml, 20%/25ml and
    20%/50ml
$
27,021,733
$
20,544,330
Human Hepatitis B Immunoglobulin
3,203,901
1,532,661
Human Immunoglobulin for Intravenous
    Injection
10,307,294
3,335,607
Human Rabies Immunoglobulin
3,619,622
5,753,124
Human Tetanus Immunoglobulin
1,492,421
1,105,630
Others
1,106,189
127,317
Totals
$
46,751,160
$
32,398,669
The Company is engaged in sale of human blood products to
customers in India. The amount was immaterial and less than 10% of total sales
for the year ended December 31, 2008.
Research and development costs
Research and development costs are expensed as incurred.
See report of independent registered public accounting firm.
F-44
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Retirement and other post retirement benefits
Contributions to retirement schemes (which are defined
contribution plans) are charged to the statement of operations as and when the
related employee service is provided.
Product liability
The Company's products are covered by product liability
insurance of approximately $2,934,000 (RMB 20,000,000). For the years ended
December 31, 2008 and 2007, no claim on the insurance policy was filed.
Government grants
The Company's subsidiary, Shandong Taibang, is entitled to
receive grants from the PRC municipal government due to its operation in the
high- and new technology business sector. For the years ended December 31, 2008
and 2007, Shandong Taibang received non-refundable grants of $139,365 and
$257,415, respectively, from the PRC municipal government. Grants received from
the PRC municipal government can be used for enterprise development and
technology innovation purposes. The government grants received during the 2008
and 2007 periods were recognized in the accompanying statement of operations as
an offset to Research and Development expenses as they were earmarked or as a
reduction of cost of the assets acquired.
Income taxes
The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes", which requires the recognition of deferred income
tax liabilities and assets for the expected future tax consequences of temporary
differences between income tax basis and financial reporting basis of assets and
liabilities. Provision for income taxes consist of taxes currently due plus
deferred taxes. Since the Company had no operations within the United States
there is no provision for US taxes and there are no deferred tax amounts at
December 31, 2008 and 2007. In July, 2006, the Financial Accounting Standard
Board ("FASB") issued FASB Interpretations No. 48,
Accounting for Uncertainty
in Income Taxes – an interpretation of FASB Statement No. 109
("FIN 48"),
which clarifies the accounting for uncertainty in tax positions taken or
expected to be taken in a return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. FIN 48 became effective at
the beginning of 2007 and had no impact on the Company's consolidated financial
statements.
The charge for taxation is based on the results for the year
as adjusted for items, which are non-assessable or disallowed. It is calculated
using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of assessable
tax profit. In principle, deferred tax liabilities are recognized for all
taxable temporary differences, and deferred tax assets are recognized to the
extent that it is probably that taxable profit will be available against which
deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates that are expected
to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it is
related to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they
related to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
Value added tax
Enterprises or individuals, who sell products, engage in
repair and maintenance or import and export goods in the PRC are subject to a
VAT in accordance with Chinese laws. The VAT rate applicable to the Company is
6% of the gross sales price. Products distributed by Shandong Medical are
subjected to a 17% VAT. No credit is available for VAT paid on purchases.
Stock-based compensation
See report of independent registered public accounting firm.
F-45
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
The Company accounts and reports stock-based compensation
pursuant to SFAS 123R "Accounting for Stock-Based Compensation", which defines a
fair-value-based method of accounting for stock based employee compensation and
transactions in which an entity issues its equity instruments to acquire goods
and services from non-employees. Stock compensation for stock granted to
non-employees has been determined in accordance with SFAS 123R and the EITF
96-18, "Accounting for Equity Instruments that are issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services", as
the fair value of the consideration received or the fair value of equity
instruments issued, whichever is more reliably measured.
Recently issued accounting pronouncements
In February 2007, the FASB issued SFAS 159, "The Fair Value
Option for Financial Assets and Financial Liabilities—including an amendment of
FASB Statement No. 115" which permits companies to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The objective of SFAS 159 is to
provide opportunities to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
hedge accounting provisions. SFAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The Company adopted SFAS 159 on January 1, 2008, and chose not to
elect the option to measure the fair value of eligible financial assets and
liabilities.
In June 2007, the FASB issued FASB Staff Position No. EITF
07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services
Received for use in Future Research and Development Activities" ("FSP EITF
07-3"), which addresses whether nonrefundable advance payments for goods or
services that used or rendered for research and development activities should be
expensed when the advance payment is made or when the research and development
activity has been performed. The adoption of FSP EITF 07-3 did not impact the
Company's consolidated financial statements
In December 2007, the FASB issued SFAS 160, "Noncontrolling
Interests in Consolidated Financial Statements - an amendment of Accounting
Research Bulletin No. 51", which establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent's ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling owners. SFAS
160 is effective for fiscal years beginning after December 15, 2008. The Company
believes adopting SFAS 160 will significantly impact its financial statements
for purchases of minority ownership completed after December 31, 2008.
In December 2007, the FASB issued SFAS 141(R), "Business
Combinations" to replace SFAS 141, "Business Combinations"
.
SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions.
This replaces SFAS 141's cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141R also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS 141R).
SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. The Company believes adopting SFAS 141R will significantly
impact its financial statements for all business combinations completed after
December 31, 2008.
In March 2008, the FASB issued SFAS 161, "Disclosures about
Derivative Instruments and Hedging Activities –An Amendment of SFAS No. 133".
Effective on January 1, 2009, SFAS 161 seeks to improve financial reporting for
derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, SFAS 161 requires (1) the
disclosure of the fair value of derivative instruments and gains and losses in a
tabular format; (2) the disclosure of derivative features that are credit
risk-related; and (3) cross-referencing within the footnotes. The Company is in
the process of evaluating the new disclosure requirements under SFAS 161.
See report of independent registered public accounting firm.
F-46
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
In May 2008, the FASB issued SFAS 162, "The Hierarchy of
Generally Accepted Accounting Principles". SFAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. GAAP for nongovernmental entities.
SFAS 162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles." SFAS 162
has no impact on the Company's financial condition, operations or cash flows.
In June 2008, the FASB issued EITF 07-5 "Determining whether
an Instrument (or Embedded Feature) is indexed to an Entity's Own Stock". This
Issue is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 "Accounting for
Derivatives and Hedging Activities" specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to the
Company's own stock and (b) classified in stockholders' equity in the statement
of financial position would not be considered a derivative financial instrument. EITF 07-5 provides a new two-step model to be applied in determining whether a
financial instrument or an embedded feature is indexed to an issuer's own stock
and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. This
standard triggers liability accounting on all options and warrants exercisable
at strike prices denominated in any currency other than the functional currency
of the operating entity in China (Renminbi). EITF 07-5 is effective for fiscal
years beginning after December 15, 2008, and is expected to materially affect
the Company's financial statements to carry all warrants and options as
liabilities at fair value and to reflect the change in fair value as a gain
(loss).
In June 2008, FASB issued EITF 08-4, "Transition Guidance for
Conforming Changes to Issue No. 98-5." The objective of EITF 08-4 is to provide
transition guidance for conforming changes made to EITF 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios", that result from EITF 00-27 "Application of Issue
No. 98-5 to Certain Convertible Instruments", and SFAS 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". This Issue is effective for financial statements issued for fiscal
years ending after December 15, 2008. Early application is permitted. EITF 08-4
had no impact on the Company.
On October 10, 2008, the FASB issued FSP 157-3, "Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active," which clarifies the application of SFAS 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. FSP 157-3 became effective on October 10, 2008, and its adoption did
not have a material impact on our financial position or results for the years
ended December 31, 2008.
In January 2009, the FASB issued FSP EITF 99-20-1,
"Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF 99-20,
Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets". FSP EITF 99-20-1 changes
the impairment model included within EITF 99-20 to be more consistent with the
impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the
impairment model in EITF 99-20 to remove its exclusive reliance on "market
participant" estimates of future cash flows used in determining fair value.
Changing the cash flows used to analyze other-than-temporary impairment from the
"market participant" view to a holder's estimate of whether there has been a
"probable" adverse change in estimated cash flows allows companies to apply
reasonable judgment in assessing whether an other-than-temporary impairment has
occurred. The adoption of FSP EITF 99-20-1 did not have a material impact on our
consolidated financial statements because all of our investments in debt
securities are classified as trading securities
Reclassifications
Certain prior period amounts have been reclassified to
conform to the current period presentation. These reclassifications have no
effect on net income or cash flows.
See report of independent registered public accounting firm.
F-47
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note 3 – Related party transactions
The material related party transactions undertaken by the
Company with related parties during the years ended December 31, 2008 and 2007
are presented as follows:
Amount Due from
Purpose
December 31,
    2008
December 31,
    2007
Minority
    shareholder of subsidiary
(1)
Advances
$
-
$
413,697
Minority shareholder of subsidiary
(2)
Prepayment for assets
-
516,456
Amount Due to
Purpose
December 31,
    2008
December 31,
    2007
Minority
    shareholder of subsidiary
(3)
Loan
$
773,277
$
722,674
(1) During 2007, the Company advanced in total $413,697 (RMB
3,007,481) in cash to a 20% minority shareholder of one of the Company's plasma
companies for the purchases of plasma collection license and certain equipments
for its Fang Cheng Plasma Company. However, the title transfer of those
equipments, with the estimated value of approximately $16,871 (RMB 122,481), has
not been realized. The Company determined that the likelihood of the minority
shareholder's ability to deliver the title of those equipments is minimal and
made a provision for the amount of $16,871 as of December 31, 2008. The Company
also determined that the future cash flows expected to be generated from the
Fang Cheng plasma collection license had impaired as the plasma collected in
2008 did not warrant any carrying amount for the license. As a result, the
Company recorded an impairment write-down of intangible assets for approximately
$415,873 (RMB 2,885,000).
(2) The Company prepaid approximately $516,456 (RMB
3,767,000) to a minority shareholder of one of the plasma companies as of
December 31, 2008. The prepayment is for the purpose of acquiring certain
assets. Assets are expected to be received by January 2009. The Company
determined that the likelihood of recovering this prepayment is minimal, due to
the minority shareholder's ability to secure the title of the assets and the
personal financial difficulty as a result of the economic downturn, and made a
provision for the amount as allowance for bad debt as of December 31, 2008. The
Company is currently negotiating with the shareholder in attempt to recover the
fund.
(3) As of December 31, 2008 and 2007, the Company borrowed an
aggregate of $773,277 and $722,674, respectively, from its minority shareholder,
Shandong Institute, for working capital purposes. The Company is required to
repay the loan in cash due by August 2009, with an annual interest rate of 6%.
Note 4 – Prepayments and deferred expense
Prepayments and deferred expense represent partial payments
for deposits on raw material purchases and prepayment for insurance expenses and
amounted to $614,704 and $138,756 as of December 31, 2008 and 2007,
respectively.
Long term prepayments represent partial payments or deposits
on plant and equipment and intangible assets purchases and amounted to $955,874
and $711,459 as of December 31, 2008 and 2007, respectively.
Note 5 – Investment in unconsolidated affiliate
On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement (the "Equity Transfer Agreement") with Mr. Fan Qingchun (the
"Transferor"), a PRC citizen holding 35% of the equity interest in Xi'an Huitian
Blood Products Co., Ltd. ("Huitian"), a PRC limited liability company. Pursuant
to the Equity Transfer Agreement, the Transferor agrees to sell to Shandong
Taibang, and Shandong Taibang agrees to purchase from the Transferor, 35% equity
interest in Huitian for an aggregate purchase price of $6,502,902 (or RMB
44,327,890) including interest of $48,102 (RMB 327,890). Huitian is one of the
32 government approved plasma-based product producers in China, and it is in
compliance with Good Manufacturing Practices ("GMP") standards. It is also
approved by the PRC's State Food and Drug Administration ("SFDA") to produce
four types of plasma-based products. As December 31, 2008, the Company has paid
a total of $3,171,300 with the unpaid balance of $3,275,501 to be due by March
31, 2009, including interest.
While the
Company is able and willing to make the final payment, the local tax authority
where Huitian is located prohibited the Company from making the final payment
due to the dispute over the Mr. Fan's personal income tax rate and the
withholding tax receiving jurisdiction. The Company is awaiting the final
decision from the local tax authority and expects the payment can be made during
April, 2009.
Logic Express has also entered into an investment entrustment
agreement (the "Investment Agreement") with the minority shareholder in Shandong
Taibang, Shandong Biological Products Research Institute ("Biological
Institute"), pursuant to which Logic Express agrees to provide the investment
amount for the acquisition and the Shandong Institute agree to entrust Shandong
Taibang to acquire the 35% equity interest of Huitian in its name. In exchange
Logic Express is also obligated to pay Shandong Taibang approximately $18,000
(or RMB120,000) per year as consideration for Shandong Taibang's performance
under this agreement. Under the Investment Agreement, after the acquisition,
Logic Express will be in charge of Huitian's daily operation and management,
will bear the costs, expenses, liabilities and losses incurred in its operation,
and will enjoy its profits. Shandong Taibang will perform relevant tasks
according to Logic Express's instruction, and will not exercise any management
right over Huitian or derive any financial return from Huitian. Logic Express
agreed to indemnify Shandong Taibang for any loss in connection with the
investment and pledged its equity interest in Shandong Taibang as collateral
against such losses.
See report of independent registered public accounting firm.
F-48
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Summarized unaudited financial information of Huitian is as
follows:
December 31, 2008
Current assets
$
8,039,180
Non-current assets
10,145,248
Total assets
18,184,428
Current liabilities
2,747,573
Non-current liabilities
-
Shareholders' equity
15,436,855
Total liabilities and shareholders'
    equity
$
18,184,428
The portion of the difference between the cost of an
investment and the amount of underlying equity in net assets of Huitian that is
recognized as goodwill in accordance with APB Opinion No. 18, "the Equity Method
of Accounting for investment in Common Stock", shall not be amortized. However,
equity method goodwill shall not be reviewed for impairment in accordance with
SFAS No.142, but instead should continue to be reviewed for impairment in
accordance with paragraph 19(h) of APB18.
Summarized unaudited financial information of Huitian from
October 10, 2008, date of acquisition, to December 31, 2008 is as follows:
From October 10, 2008
to
December 31,
    2008
Net sales
$
1,777,321
Gross profit
$
1,022,416
Income before taxes
$
560,443
Net income
$
500,661
Company's share of net income
$
175,231
The roll forward of investment in Huitian in
    the balance sheet is shown below:
Huitian Minority
35%
    Ownership
December 31, 2007
$
-
Investment made
6,502,902
Net Income
175,231
Dividend declared
(147,256
)
Foreign currency translation gain
3,100
December 31, 2008
$
6,533,977
See report of independent registered public accounting
    firm.
F-49
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note 6 – Debt
Short term and long term loans
Short term loans represent renewable loans due to various
banks which are normally due within one year.
The Company's bank loans consisted of the following:
December 31,
    2008
December 31,
    2007
Short term bank loan, secured by
    buildings and land use rights, due on February 25, 2008, annual interest
    rate at 6.12%
$
-
$
685,500
Long term bank loan, secured by buildings and land use
    rights, due on August 3, 2010, annual interest rate at 7.02%
5,868,000
-
Totals
$
5,868,000
$
685,500
The above loans are secured by Shandong Taibang's land use
rights and a building located in Taian, Shandong Province, PRC, with carrying
value as follows:
December 31,
    2008
December 31,
    2007
Buildings
$
1,417,138
$
1,369,831
Land use rights
195,691
387,989
Totals
$
1,612,829
$
1,757,820
Other payables and accruals
Other payables and accruals consist of the following:
December 31,
    2008
December 31,
    2007
Other payables
$
1,344,830
$
664,195
Accruals for salaries and welfare
830,388
184,942
Accruals for RTO expenses
245,657
245,658
Accruals for selling commission
1,508,102
104,753
Accruals for interest
33,954
-
Others
-
520
Total
$
3,962,931
$
1,200,068
Other payable - land use rights
In July 2003, Shandong Taibang obtained certain land use
rights from the PRC municipal government. Shandong Taibang is required to make
payments totaling approximately $20,369 (RMB 138,848) per year to the local
state-owned entity, for the 50-year life of the rights or until Biological
Institute completes its privatization process. The Company recorded "land use
rights" equal to "other payable – land use rights" totaling $325,390 and
$305,571 as of December 31, 2008 and December 31, 2007, respectively, determined
using present value of annual payments over 50 years.
Note 7 - Earnings per share
Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is calculated by dividing net income by the weighted
average number of common shares outstanding and dilutive potential common shares
outstanding during the period.
See report of independent registered public accounting firm.
F-50
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Earning per share is as follows for the years ended December
31,
2008
2007
Net income for earnings per share
$
11,985,671
$
8,179,376
Weighted average shares used in basic computation
21,434,942
21,434,942
Diluted effect of warrants and options
121,400
426,072
Weighted average shares used in diluted computation
21,556,342
21,861,014
Earnings per share:
Basic
$
0.56
$
0.38
Diluted
$
0.56
$
0.37
At December 31, 2008, 1,284,000 warrants were included in the
calculation of diluted earnings per share and 937,500 options were excluded from
the calculation because of their antidilutive nature.
At December 31, 2007, all outstanding warrants were included
in the calculation of diluted earnings per share.
Note 8 – Taxes
Income taxes
The Company is governed by the Income Tax Law of the People's
Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign
Enterprises and various local income tax laws (the Income Tax Laws). Under the
Income Tax Laws, foreign investment enterprises (FIE) generally are subject to
an income tax at an effective rate of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments unless the enterprise is located in specially
designated regions of cities for which more favorable effective tax rates apply.
Upon approval by the PRC tax authorities, FIEs scheduled to operate for a period
of 10 years or more and engaged in manufacturing and production may be exempt
from income taxes for two years, commencing with their first profitable year of
operations, after taking into account any losses brought forward from prior
years, and thereafter with a 50% exemption for the next three years.
In 2002, the Company became a Sino-foreign joint venture. In
2003, the Company was granted by the state government for benefit of income tax
exemption in first 2 years from January 2003 to December 2004 and 50% exemption
for the third to fifth years from January 2005 to December 2007.
Beginning January 1, 2008, the new Enterprise Income Tax ("EIT")
law will replace the existing laws for Domestic Enterprises ("DES") and Foreign
Invested Enterprises ("FIEs").
The key changes are:
a.
The new standard EIT rate of 25% will replace the 33%
    rate currently applicable to both DES and FIEs, except for High Tech
    companies who pays at a reduced rate of 15%; and
b.
Companies established before March 16, 2007 will continue
    to enjoy tax holiday treatment approved by local government for a grace
    period of the next 5 years or until the tax holiday term is completed,
    whichever is sooner.
The Company's subsidiary, Shandong Taibang, was established
before March 16, 2007 and therefore is qualified to continue enjoying the
reduced tax rate as described above.
Starting from January 1, 2008, Shandong Taibang became
subject to 25% income tax rate according to the newly issued Income Tax Laws of
PRC. According to PRC's central government policy, certain new technology or
high technology companies will enjoy preferential tax treatment of 15%, instead
of 25%. On February 12, 2009, Shandong Taibang received the new technology or
high technology certification from Shandong provincial government. The
Certification allows the Company to receive the 15% preferential income tax
rate, for a period of three years starting from January 1, 2008.
See report of independent registered public accounting firm.
F-51
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
The local government granted the Company tax exemption for
purchases of locally manufactured equipment for the fiscal year ended December
31, 2003 through 2007. Starting January 1, 2008 the government no longer
provides this tax exemption for purchases of locally manufactured equipment.
During the third quarter of 2008, the Company received a tax rebate for the
amount of $319,095 (RMB 2,181,102) for the Company's reinvestment of its
dividends back into Shandong Taibang at the end of our fiscal year 2007.
Starting January 1, 2008, all dividends paid to foreign parents are subject to a
10% income tax. As a result, the company recorded a $1,228,775 income tax
expense for dividends Shandong Taibang paid to its foreign parent, Logic
Express.
The following table reconciles the U.S. statutory rates to
the Company's effective tax rate for the years ended December 31, 2008 and 2007:
2008
2007
U.S. Statutory rates
35.0
%
35.0
%
Foreign Income
(35.0
)
(35.0
)
China Tax rates
25.0
33.0
China income tax exemption
(10.0
)
(18.0
)
Other items (1)
8.1
1.9
Effective income tax rates
23.1
%
16.9
%
(1) The 8.1% represents the $1,228,775 income tax expense for
dividends Shandong Taibang paid to its foreign parent in 2008 and expenses
incurred by CBP and Logic Express that are not deductible in PRC for the year
ended December 31, 2008 offset by tax rebate of $319,095 received during the
third quarter of 2008. The 1.9% represents expenses incurred by CBP and Logic
Express that are not deductible in PRC for the year ended December 31, 2007.
The estimated tax savings due to the tax exemption for the
fiscal year ending December 31, 2008 and 2007 amounted to $2,443,657 and
$2,498,472, respectively. The net effect on earnings per share if the income tax
had been applied would decrease basic earnings per share for the years ended
December 31, 2008 and 2007 by $0.11 and $0.12, respectively, would decrease the
diluted earnings per share for the years ended December 31, 2008 and 2007 by
$0.11 and $0.11, respectively.
CBP was incorporated in the United States and has incurred
net operating losses of $1,777,854 (estimated) and $614,982 for income tax
purposes for the years ended December 31, 2008 and 2007, respectively. The
estimated net operating loss carry forwards for United States income taxes
amounted to $3,661,143 which may be available to reduce future years' taxable
income. These carry forwards will expire, if not utilize, from 2026 through
2028. Management believes that the realization of the benefits from these losses
appears uncertain due to the Company's limited operating history and continuing
losses for United States income tax purposes. Accordingly, the Company has
provided a 100% valuation allowance on the deferred tax asset benefit to reduce
the asset to zero. Management reviews this valuation allowance periodically and
makes adjustments as warranted. The following table represents the rollforward
of the deferred tax valuation allowance
For the year ended December 31,
2008
2007
Balance of January 1,
$
640,318
$
431,224
Increase
604,471
209,094
Balance as of December 31,
$
1,244,789
$
640,318
Value added tax
VAT on sales amounted to $3,098,977 and $2,203,070 for the
years ended December 31, 2008 and 2007, respectively. Sales are recorded net of
VAT collected and paid as the Company acts as an agent for the government. VAT
taxes are not impacted by the income tax holiday.
See report of independent registered public accounting firm.
F-52
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Taxes payable consisted of the following:
December 31,
    2008
December 31,
    2007
VAT tax payable
$
331,505
$
168,369
Income tax payable
3,630,878
187,924
Others miscellaneous tax payable
97,627
28,495
$
4,060,010
$
384,788
Note 9 – Commitments and contingent liabilities
Capital and lease commitments
The Company's 82.76% owned subsidiary, He Ze, entered into a
lease agreement on January 13, 2005, with the Yun Cheng Lan Tian Transportation
Company in Yun Cheng County, Shandong Province, to lease land use rights for a
period of 10 years. The annual lease amount is approximately $1,760 (RMB 12,000)
with no early termination penalty. The Company has the right of first refusal to
renew the lease after the ten year lease term.
The Company's 82.76% owned subsidiary, Qi He, entered into a
lease agreement on April 26, 2007, with the Zhang Bo Shi Village in Qi He
County, Shandong Province, to lease land use rights for a period of 50 years.
The annual lease amount is approximately $4,569 (RMB 31,144) with no early
termination penalty.
The Company's 82.76% owned subsidiary, Zhang Qiu, leased land
use right and the use of building and equipment for a period of 10 year from
January 1, 2007 with annual lease payment of $43,245 (RMB300,000). The lease was
terminated in March 2008. The Company entered into a lease agreement on April 1,
2008, with the Zhang Qiu Red Cross Blood Center, to lease land use rights and
the use of building and equipment for a period of 10 years. The annual lease
payment is approximately $1,467 (RMB 10,000) with no early termination penalty.
The Company recognizes lease expense on a straight line basis
over the term of the lease in accordance to SFAS 13, "Accounting for leases."
Total capital and lease commitments outstanding as of December 31, 2008 were as
follows:
Fiscal year
2009
2010
2011
2012
2013
Thereafter
Property and equipment
$
82,068
$
-
$
-
$
-
$
-
$
-
Lease
7,796
7,796
7,796
7,796
7,796
205,977
Purchase of 54% Dalin
    Equity
11,407,392
2,851,848
-
-
-
-
Total
$
11,497,256
$
2,859,644
$
7,796
$
7,796
$
7,796
$
205,977
For the years ended December 31, 2008 and 2007, total rent
expense amounted to $21,717 and $0, respectively.
Contingencies
In the normal course of business, the Company is exposed to
claims related to the manufacture and use of the Company's products, but
currently the Company is not aware of any such claim.
Legal proceedings
Misuse of Company Seal
In July 2006, one of the Company's sales employees
misappropriated goods and resold them to other parties using a counterfeit
Company seal. The amount involved was approximately $0.15 million (RMB1.16
million). The incident was revealed during a routine reconciliation of accounts
receivable. The Company reported the misappropriation to the police and the
employee was arrested and criminal charges were brought against him. To date,
the Company recovered approximately $0.05 million (cash of RMB350,000 and goods
valued at approximately RMB30,000). Pursuant to a financial guarantee and
repayment agreement between the Company and the employee, witnessed by officials
at the Taian City Police Station, the Company will continue to pursue recovery.
See report of independent registered public accounting firm.
F-53
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Transfer of Equity Interests
Mr. Zu Ying Du was one of the original equity holders in our
operating subsidiary, Shandong Taibang. Pursuant to a joint venture agreement,
among the original equity holders, Mr. Du was obligated to make a capital
contribution of RMB20 million (or approximately $2.6 million) for a 25% interest
in Shandong Taibang. Mr. Du made this contribution using funds borrowed from the
Beijing Chen Da Technology Investment Company, or Beijing Chen Da. Mr. Du failed
to repay Beijing Chen Da for his loan of the capital contribution amount.
Mr. Du disputes that the money was due and owing. A Beijing court found
that Beijing Chen Da had given money to Mr. Du but found that the loan agreement
failed to comply with Chinese law. A notice was issued on July 5, 2004 by the
Shenzhen Public Security Bureau Economic Crime Investigation Unit requesting a
stay of the Beijing action pending their investigation into money laundering
relating to the 20 million RMB loan to Zu Ying Du.
On September 26, 2004, Beijing Chen Da entered into an equity
transfer agreement with Mr. Du, pursuant to which Mr. Du's 25% equity interest
in Shandong Taibang was transferred to Beijing Chen Da as repayment of the RMB20
million debts. This agreement was signed by Mr. Du's brother who held a power of
attorney from Mr. Du. This transfer was approved by the Shandong Provincial
Department of Foreign of Trade and Economic Cooperation, or the Shandong COFTEC
on March 17, 2005. Mr. Du disputes the legitimacy of this transfer and has
argued that his brother, Du Hai Shan, exceeded the scope of the power of
attorney. Mr. Du sued his brother in the court of Jianli County, Hubei province,
relating to the propriety of the brother's actions under the power of attorney.
Initially the county court found in its judgment that the power of attorney was
valid, but that the transfer agreements signed by Mr. Du's brother, Du Hai Shan
were invalid because their execution and delivery were beyond the scope of Du
Hai Shan's authority under the power of attorney. Subsequently the Intermediate
Court of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend
the judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court.
Missile Engineering, another original equity holder wholly
controlled by Mr. Du, was obligated to contribute RMB32.8 million (or $4.2
million) for a 41% interest in Shandong Taibang by means of cash, equipment and
patent technology. It was obligated to obtain a new drug certificate and
production license of its patent technology from the government within a
stipulated period in order to be recognized as a valid capital contribution, or
in the alternative, make a cash payment. The patent technology was valued as
RMB26.4 million (or approximately $3.4 million). However, Missile Engineering
failed to obtain the new drug certificate and production license within the
stipulated period. Mr. Du also disputes whether the period for obtaining the
certificate and license had expired. Pursuant to a stockholders resolution on
September 26, 2004, Missile Engineering agreed to sell its 41% interest in
Shandong Taibang to Up-Wing and Up-Wing agreed to take up the obligation of
Missile Engineering to pay the RMB26.4 million in cash. This transfer was
approved by Shandong COFTEC on March 17, 2005. Missile Engineering disputes this
transaction and sued Mr. Du's brother in the court of Jianli County, Hubei
province, relating to the propriety of the brother's actions under the power of
attorney. Initially the county court found in its judgment that the act had
exceeded the scope of the power of attorney. Subsequently the Intermediate Court
of Jingzhou City, Hubei province, ruled on December 10, 2008 to suspend the
judgment based on the grounds that the original court lacked jurisdiction to
hear the case. The case is stated to be reviewed again by the Hubei Jingzhou
Intermediate Court.
In June 10, 2005, Beijing Chen Da also sold its equity
interest in Shandong Taibang to Up-Wing Investments Limited, or Up-Wing,
pursuant to a share transfer agreement, which became effective on September 2,
2005, upon approval by the Shandong Provincial Department of Foreign Trade and
Economic Cooperation, or the Shandong COFTEC. In March 2006, Up-Wing sold its
equity interests in Shandong Taibang to Logic Express, our subsidiary.
In 2006, Missile Engineering applied for arbitration before
the China International Economic and Trade Arbitration Commission, or CIETAC, to
challenge the effectiveness of the transfer to Up-Wing Investments Limited, of
the equity interests in Shandong Taibang, formerly owned by Missile Engineering.
The equity transfer had been approved by the Shandong Provincial Department of
Foreign Trade and Economic Cooperation, or the Shandong COFTEC. Missile
Engineering later voluntarily withdrew this application and instead applied for
administrative reconsideration of the equity transfer, but this application was
rejected by the Ministry of Commerce in 2007. Missile Engineering applied with
the District Court of Lixia District, Jinan City, Shandong province requesting
revocation of Shandong COFTEC's approval of the equity transfer to Up-wing by
Missile Engineering. Missile Engineering later voluntarily withdraw the action.
In April 2007, Logic Express initiated an arbitration proceeding before the
Shandong Taian Arbitration Committee, to establish that Logic Express is the
lawful shareholder of Shandong Taibang. The parties to that proceeding were
Logic Express Ltd. and Shandong Taibang Biological Products Co., Ltd. The
Arbitration Committee's decision on September 6, 2007 confirmed that Logic
Express had legitimate ownership as a result of the transfers of Shandong Taibang. Up-Wing started an action in the Intermediate Court of Taian City,
Shandong province requesting the court to establish that Up-wing is the lawful
shareholder of Shandong Taibang. The intermediate court rejected the application
by Up-Wing on the basis that the same matter had been tried by the arbitration
panel.
See report of independent registered public accounting firm.
F-54
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
On February 16, 2009, Mr. Du and Missile Engineering have
filed actions in the Intermediate Court of Wuhan City, Hubei province, against
the following defendants, Du Hai Shan the brother of Mr. Du, Beijing Chen Da and
Logic Express. Mr. Du and Missile Engineering have requested that the Wuhan
Intermediate Court to restore the equity interests originally held by the
plaintiffs, 25% equity interest by Mr. Du and 41% equity interest by Missile
Engineering. On February 17, the Wuhan Intermediate Court has issued preliminary
orders attaching 66% of the equity of Shandong Taibang pending the outcome of
the case.
Bobai County Collection Station
In January 2007, the Company's PRC subsidiary, Shandong
Taibang, advanced $413,697 (RMB3.0 million) to Feng Lin, the 20% minority
shareholder in Fang Cheng Plasma Company, the Company's majority owned
subsidiary, for the purpose of establishing or acquiring a plasma collection
station. Mr. Lin and Shandong Taibang intended to establish the Bobai Kangan
Plasma Collection Co., Ltd. ("Bobai") in Bobai County, Guangxi and on January
18, 2007, Shandong Taibang signed a letter of intent to acquire the assets of
the Bobai Plasma Collection Station, which was co-owned by Mr. Lin and Mr.
Keliang Huang. However, in January 2007, Hua Lan Biological Engineering Co.,
Ltd. ("Hua Lan") filed suit in the District Court of Hong Qi District, Xin Xiang
City, Henan Province, alleging that Feng Lin, Keliang Huang and Shandong Taibang
established and/or sought to operate the Bobai Plasma Collection Station using a
permit for collecting and supplying human plasma in Bobai County, that was
originally granted to Hua Lan by the government of the Guangxi region, without
Hua Lan's permission. The establishment and registration of Bobai was never
realized as a result of this law suit. On January 29, 2007, on Hua Lan's motion,
the District Court entered an order to freeze funds in the amount of
approximately $386,100 (RMB3,000,000) held by the defendants in the case,
including approximately $65,750 (RMB500,000) in funds held in Shandong Taibang's
bank account in Taian City. A hearing was held on June 25, 2007 and judgment was
entered against the defendants along with a $226,780 (RMB1,700,000) joint
financial judgment. The Company appealed the District Court judgment to the
Henan Province High Court. In November 2007, the High Court affirmed the
judgment against the three defendants and increased the amount of the joint
financial judgment to approximately $405,954 (RMB3,000,000).
In January 2008, Hua Lan enforced the judgment granted by the
High Court to freeze the Company's bank accounts. Shandong Taibang has filed a
separate action against Hua Lan before the Taian City District Court to seek
recovery of any losses in connection with Hua Lan's claim and to request that
the Taian City District Court preserve Hua Lan's property or freeze up to
approximately $411,300 (RMB 3 million) of Hua Lan's assets to secure the return
of such funds to the Company. The intermediate court in Taian City accepted the
application on February 14, 2008 but the matter is still pending. Pending the
outcome of the proceedings, Shandong Taibang increased its loss contingency
reserve during its fourth quarter of 2007 from approximately $75,593
(RMB566,667) to $133,400 (RMB1,000,000) to cover its share of the enforcement of
this judgment. During the fourth quarter of 2008, full amount of the judgment,
including Feng Lin and Keliang Huang's portions of the judgment and the related
fees, approximately $456,222 (RMB 3,109,900) has been withdrawn from Shandong
Taibang's account. The Company recorded Feng Lin and Keliang Huang's portion of
the judgment, approximately $304,143 (RMB2,073,234), as receivable as a result
of the withdraw. As of December 31, 2008, the Company determined that it is
unlikely that the Company will be able to recover such receivable from those two
individuals and wrote off the receivable as bad debt expense.
In light of the foregoing, it is unlikely that the Company's
planned acquisition of the assets of Bobai will go forward.
See report of independent registered public accounting firm.
F-55
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Note 10 – Warrants and options
Warrants
The Company's warrants are accounted for as equity under SFAS
133 and EITF 00-19. The warrant activity is as follows:
Weighted
Average
Average
Remaining
Warrants
Warrants
Exercise
Contractual
Outstanding
Exercisable
Price
Life
December 31, 2006
1,284,000
1,284,000
$
2.84
4.55
Granted
Forfeited
Exercised
December 31, 2007
1,284,000
1,284,000
$
2.84
3.55
Granted
Forfeited
Exercised
December 31, 2008
1,284,000
1,284,000
$
2.84
2.55
Options
On May 9, 2008, the Company adopted the 2008 Equity Incentive
Plan, which provides up to 5,000,000 shares of Company's Common Stock to be made
available to employees and directors at various prices as established by the
Board of Directors of the Company. On May 9, 2008, the Company granted options
to purchase an aggregate of 937,500 shares of the Company's common stock under
the 2008 Plan to certain directors and employees, pursuant to stock option
agreements between the Company and each of these directors or employees. The
options have an exercise price of $4.00 per share, will vest immediately vest
and will expire on June 1, 2018. On July 24, 2008, the Company granted options
to purchase an aggregate of 60,000 shares of the Company's common stock under
the 2008 plan to its three independent directors. These options have an exercise
price of $4.00 per share and 30,000 shares will be vested on January 24, 2009
and the remaining 30,000 shares will be vested on July 24, 2009, with the
expiration date of July 24, 2018. As of December 31, 2008, there were 4,002,500
shares available under the plan.
The fair value of each option granted on May 9, 2008 and July
24, 2008 are estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions:
Granted on
May 9, 2008
July 24,
    2008
Expected dividend yield
0%
0%
Risk-free interest rate
3.56%
3.56%
Expected life (in years)
5
5
Weighted average expected volatility
59.4%
81.2%
The volatility of the Company's common stock was estimated by
management based on the historical volatility of the Company's common stock, the
risk free interest rate was based on Treasury Constant Maturity Rates published
by the U.S. Federal Reserve for periods applicable to the estimated life of the
options, and the expected dividend yield was based on our current and expected
dividend policy. The value of the options was based on the Company's common
stock price on the date the options were granted. Because the Company does not
have a history of employee stock options, the Company utilized the simplified
method to estimate the life of the options which is the same as assuming that
the options are exercised at the mid-point between the vesting date and
expiration date. For the year ended December 31, 2008, the Company expensed
$1,311,727 in compensation expense. As of December 31, 2008, approximately
$62,281 of estimated expense with respect to non-vested stock-based awards has
yet to be recognized and will be recognized as an expense over the employee's
remaining weighted average service period of approximately 0.67 years. The
options are accounted for as equity under SFAS 133 and EITF 00-19.The options
activity is as follows:
See report of independent registered public accounting firm.
F-56
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Weighted
Average
Average
Remaining
Aggregate
Options
Options
Exercise
Contractual
Intrinsic
Outstanding
Exercisable
Price
Life
Value
December 31, 2006
-
-
$
-
-
$
-
Granted
Forfeited
Exercised
December 31, 2007
-
-
$
-
-
$
-
Granted
997,500
937,500
4.00
10.00
-
Forfeited
Exercised
December 31, 2008
997,500
937,500
$
4.00
9.43
$
-
Note 11 – Statutory reserves
In accordance with the "Law of the PRC on Joint Ventures
Using Chinese and Foreign Investment" and the Company's Articles of Association,
appropriations from net profit should be made to the Reserve Fund and the
Enterprise Expansion Fund, after offsetting accumulated losses from prior years,
and before profit distributions to the investors. The percentages to be
appropriated to the Reserve Fund and the Enterprise Expansion Fund are
determined by the Board of Directors of the Company.
Reserve fund
For the years ended December 31, 2008 and 2007, the Company
transferred $2,036,732 and $1,156,748, respectively, to the surplus reserve
fund. Amounts represent 10% of the net income determined in accordance with PRC
accounting rules and regulations, and are transferred to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company's registered
capital. As of December 31, 2008, amount of $3,806,825 still needs to be
transferred to statutory reserve. The transfer to this reserve must be made
before distribution of any dividend to shareholders. The surplus reserve fund is
non-distributable other than during liquidation and can be used to fund previous
years' losses, if any, and may be utilized for business expansion or converted
into share capital by issuing new shares to existing stockholders in proportion
to their shareholding or by increasing the par value of the shares currently
held by them, provided that the remaining reserve balance after such issue is
not less than 25% of the registered capital.
Enterprise expansion fund
The enterprise fund may be used to acquire fixed assets or to
increase the working capital to expend on production and operation of the
business. For the years ended December 31, 2008 and 2007, the Company
transferred $1,018,366 and $578,375, respectively, to the fund. Amounts
represent 5% of the net income determined in accordance with PRC accounting
rules and regulations.
Note 12 – Retirement benefit plans
Regulations in the PRC require the Company to contribute to a
defined contribution retirement plan for the benefit of all permanent employees.
All permanent employees are entitled to an annual pension equal to their basic
salaries at retirement. The PRC government is responsible for the benefit
liability to these retired employees. The Company is required to make
contributions to the state retirement plan at 20% of the monthly base salaries
of the current employees. For the years ended December 31, 2008 and 2007, the
Company made pension contributions in the amount of $220,493 and $171,802,
respectively.
Note 13- Minority interest and distribution
The roll forward of minority interest in the balance sheet is
shown below:
See report of independent registered public accounting firm.
F-57
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
Fang Cheng
Minority
Owners
(20%)
Shandong Taibang
Minority Owners
(17.24%)
Total
Minority
Interest
December 31, 2006
$
-
$
2,308,487
$
2,308,487
Net income(loss)
(2,332
)
1,994,234
1,991,902
Foreign currency
    translation gain/(loss)
(96
)
-
(96
)
Investment made
82,260
-
82,260
Dividend declared
-
(2,207,541
)
(2,207,541
)
Dividend reinvested
-
1,710,880
1,710,880
December 31, 2007
$
79,832
$
3,806,060
$
3,885,892
Net income(loss)
(83,938
)
3,387,779
3,303,841
Foreign currency
    translation gain/(loss)
4,106
-
4,106
Dividend declared
-
(2,982,045
)
(2,982,045
)
December 31, 2008
$
-
$
4,211,794
$
4,211,794
Dividends declared are split pro rata between the
shareholders according to their ownership interest. The payment of the dividends
may occur at different times to the shareholders resulting in distributions
which do not appear to be reflective of the minority ownership percentages. In
2008 and 2007, minority shareholders owned 17.24% of the Company's subsidiaries.
The table below shows the minority shareholder and dividends outstanding.
Minority shareholder
Distribution payable, December 31, 2006
$
476,597
Dividend declared
2,207,541
Dividend paid
(488,878
)
Dividend used to increase registered capital
(1,710,880
)
Foreign currency translation adjustments
22,246
Distribution payable, December 31, 2007
$
506,626
Dividend declared
2,982,045
Dividend paid
(288,300
)
Foreign currency translation adjustments
51,983
Distribution payable, December 31, 2008
$
3,252,354
Note 14 – Subsequent event
On September 26, 2008, Logic Express Limited ("Logic
Express"), a wholly-owned BVI subsidiary of the Company, entered into an Equity
Transfer Agreement with Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang for
the purchase of a total of a 90% equity interest in Chongqing Dalin Biologic
Technologies Co., Ltd., ("Chongqing Dalin"), a PRC limited liabilities company,
for a price of $28,518,480 (RMB 194,400,000). The Company made prepayments of
approximately $2,023,165 (RMB 13,810,000) and approximately $12,208,296
(RMB83,390,000) on this potential acquisition in October and December 2008,
respectively. An English translation of the Equity Transfer Agreement is
incorporated by reference to exhibit 10.1 of the Company's Form 8-K filed with
SEC on October 2, 2008. As of December 31, 2008, the Company has completed the
financial and legal due diligence investigations on Dalin and Qianfeng and
expects to close the transaction within a few months, subject to the formal
transfer of title to the Company. In January 2009, Logic Express appointed three
out of the four Board of Directors members to the Chongqing Dalin to take
control of Dalin. On January 16, 2009, the shareholders of Qianfeng Biological
Products ("Qianfeng"), which Chongqing Dalin owns 54% equity interest, elected
four Board of Directors appointed by Chongqing Dalin as part of its seven board
members. On January 17, 2009, the Board of Directors of Qianfeng elected a new
management team consists of all Logic Express and Chongqing Dalin's appointees,
including CEO, Executive Senior Vice President, CFO and Directors of sales. As a
result, the Company took over the control of Qianfeng starting January 16, 2009.
As part of its due diligence investigation into Dalin and
Qianfeng, the Company discovered that the indirect interest in Qianfeng that
would be acquired under Equity Transfer Agreement will be diluted. The local AIC
records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued
equity to certain investors pursuant to a capital increase agreement, dated May
2007. Qianfeng received the consideration for the equity, but the increase in
registered capital and issuance of the equity interest has not yet been
registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that
such shareholder's right of first refusal with respect to the new equity
issuance was violated. When the capital increase is registered with AIC, Dalin
will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng
shareholder was decided against such shareholder, who subsequently appealed.
Therefore, Dalin's interests in Qianfeng could be diluted to as low as 41.3% as
the result of the issuance of additional equity to the shareholder, if his
appeal prevails. Even if the indirect equity interest that the Company acquires
through the proposed acquisition is diluted down to 41.3%, the Company would be
able to retain control over Qianfeng as a result of the four board membership to
the Qianfeng's board. The Company does not expect this dispute to impact its
ability to complete the acquisition.
See report of independent registered public accounting firm.
F-58
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
On October 10, 2008, Shandong Taibang entered into an Equity
Transfer Agreement with Mr. Fan Qingchun, a PRC citizen holding 35% of the
equity interest in Xi'an Huitian Blood Products Co., Ltd., a PRC limited
liabilities company ("Huitian"), for a price of approximately $6,454,800 (RMB
44,000,000).The Company has made a prepayment of $1,467,000 (RMB 10,000,000) and
$1,760,400(RMB 12,000,000) on this potential acquisition in September and in
November 2008, respectively. An English translation of the Equity Transfer
Agreement is incorporated by reference to exhibit 10.1 of the Company's Form 8-K
filed with SEC on October 16, 2008. Since November 14, 2008, the date of second installment payment, the Company has been exercise its rights in Huitian as a
shareholder, pursuant to cooperation agreements among Taibang and the other
Huitian shareholders, including the right to re-elect directors to Huitian's
board of directors and board of supervisors and engagement of new executive
officers. On March 17, 2009, the Shandong Taibang successfully completed the
registration process with Administration of Industry and Commerce in the City of
Xi'An, Shannxi Province to transfer the 35% equity title from Mr. Fan Qingchun
to Shandong Taibang according to the Equity Transfer Agreement. In January 2009,
Shandong Taibang received approximately $147,256 (RMB 1,003,789) from Huitian
for its share of 2008 dividends declared by Huitian according to the Equity
Transfer Agreement.
On January 8, 2009, Shandong Taibang entered into a loan
agreement with Taishan Sub-Branch of the Bank of China, to borrow $5,868,000 (RMB
40,000,000) for purchase of raw material. The loan bears a fixed interest rate
of 5.31% per annum and payable in full on January 7, 2010 and early prepayment
will be subject to a penalty equal to 0.0005 of the principal. During the term
of the loan agreement, the Company had agreed that it will not engage in any
sub-contracting, leasing, equity restructuring, pooling, consolidating, merging,
splitting, joint investment, capital transferring, filing for restructuring,
fling for dissolution, filing for bankruptcy, and other actions which may affect
realization of the bank's right under the loan agreement.
On February 16, 2009, Shandong Taibang's board of directors
declared a cash dividend in the amount of approximately $2,640,600 (RMB
18,000,000). According to the PRC tax law, Shandong Taibang had withheld at
source 10% of the dividend amount of its BVI parent, Logic Express.
See report of independent registered public accounting firm.
F-59