Biopharm Asia 10K/A 2009 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

(Amendment No.1)

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION FROM _______ TO ________.

COMMISSION FILE NUMBER: 000-25487

BIOPHARM ASIA, INC.

(Exact Name of Small Business Issuer as Specified in its Charter)

NEVADA	88-0409159
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

New Agriculture Development Park, Daquan Village,

Tonghua County, Jilin Province, P.R. China. 134115

(Address of principal executive offices) (Zip code)

Issuer's telephone number: 011-86-435-5211803

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of June 23, 2009, the last date prior to June 30, 2009 upon which shares of the registrant’s common stock were traded, the aggregate market value of the outstanding shares of the registrant's common stock held by non-affiliates (excluding shares held by Directors, officers and others holding more than 5% of the outstanding shares of the class) was $26,406,250, based upon a closing sale price of $3.25 as reported by Bloomberg Finance.

At March 25, 2010, the Registrant had outstanding 50,000,000 shares of common stock.

Explanatory Note

As stated in the Form 8-K/A we filed on March 8, 2011, amending the Current Report on Form 8-K we originally filed on January 24, 2011 reporting that we had terminated Former Accountant, we reported that “[w]e have been advised that the licenses of Edwin Reese Davis, Jr. and his firm, the Davis Accounting Group, P.C, lapsed on September 30, 2008 and were formally revoked as of November 4, 2010 by the Utah Division of Occupational & Professional Licensing the (“DOPL”). We also understand that the successor firm, Etania Audit Group P.C. is not licensed to practice by the Utah DOPL.

We had engaged the Former Accountant, which continues to appear on the list of Registered Independent Public Accountants registered with the Public Accounting Oversight Board, to audit the financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “2009 Form 10-K”), and the Former Accountant issued a report on those financial statements which was included in the 2009 Form 10-K.”

We are have received a letter of comment from the Securities and Exchange Commission concerning the 2009 Form 10-K stating that we may not include the audit report of the Former Accountant in our 2009 because the Former Accountant was not licensed as of the date of the audit report included in the 2009 Form 10-K. Accordingly, we will file an amendment to our 2009 Form 10-K deleting the audit report of the Former Accountant included in our 2009 Form 10-K and indicating that the financial statements as at December 31, 2008 and 2009 and the years then ended have not been audited.

We are filing this amendment in response to a letter of comment we received from the Securities and Exchange Commission concerning the 2009 Form 10-K stating that we may not include the audit report of the Former Accountant in our 2009 because the Former Accountant was not licensed as of the date of the audit report included in the 2009 Form 10-K. This amendment to our 2009 Form 10-K is being filed to amend Item 7. Financial Statements, to remove the audit report of the Former Accountant and to indicate on the face of each of our financial statements included therein that the financial information presented is “Unaudited”.

As previously reported in our Current Report on Form 8-K filed on February 14, 2011, we have engaged Acquavella, Chiarelli, Shuster, Berkower & Co. LLP (the “New Accountant”) to audit our financial statements to be included in our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”), which will include our financial statements as at December 31, 2009 and 2010 and the years then ended, and the audit report of the New Accountant thereon. Following the filing of the 2010 Form 10-K and after the inclusion therein of the audit report of the New Accountant on our financial statements as at and for the year ended December 31, 2009, we will file a further amendment to our 2009 Form 10-K to include the audit report of the New Accountant on our financial statements as at and for the year ended December 31, 2009.

Item 8. Financial Statements

The Financial Statements in this Annual Report are presented commencing on page F-1 following Item 15.

BIOPHARM ASIA, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31 2009 AND 2008

Consolidated Financial Statements-

Consolidated Balance Sheets as of December 31 2009 and 2008 (Unaudited)	F-3

Consolidated Statements of Operations and Comprehensive Income
for the Years Ended December 31, 2009 and 2008(Unaudited)	F-4

Consolidated Statements of Stockholders’ Equity for the Years Ended
December 31, 2009 and 2008(Unaudited)	F-5

Consolidated Statements of Cash Flows for Years Ended December 31, 2009
and 2008(Unaudited)	F-6

Notes to Consolidated Financial Statements December 31, 2009 and 2008 (Unaudited)	F-7

F-1

BIOPHARM ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2009 AND 2008

	2009			2008
ASSETS	Unaudited			Unaudited

Current Assets:
Cash and cash equivalents	$	11,066,671		$	5,869,607
Accounts receivable-
Trade		18,716,094			15,354,103
Employees and other		1,538,783			855,271
Related parties		1,339,828			4,129,531
Less - Allowance for doubtful accounts		(514,011	)		(719,224	)
Total accounts receivable		21,080,694			19,619,681
Inventories		14,057,699			7,908,494
Advances to suppliers		196,722			108,146
Total current assets		46,401,786			33,505,928

Property and Equipment:
Buildings		4,928,544			4,923,929
Biological assets		6,247,016			3,706,031
Machinery and equipment		1,745,432			1,727,293
Vehicles		376,467			344,686
Leasehold improvements		2,682,284			-
		15,979,743			10,701,939
Less - Accumulated depreciation and amortization		(4,178,211	)		(3,293,973	)
		11,801,532			7,407,966
Construction work in progress		1,077,846			-
Net property and equipment		12,879,378			7,407,966

Other Assets:
Intangible assets, net		193,524			250,807
Deferred lease payments		1,845,289			819,360
Total other assets		2,038,813			1,070,167

Total Assets	$	61,319,977		$	41,984,061

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Short-term loans	$	4,891,479		$	5,185,840
Accounts payable and accrued liabilities		15,333,980			5,187,915
Advances from customers		143,751			315,885
Taxes payable		3,892,749			2,825,457
Other payables		4,202,238			937,434
Due to related parties		304,758			777,810
Total current liabilities		28,768,955			15,230,341
Total liabilities		28,768,955			15,230,341

Commitments and Contingencies

Stockholders' Equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized; 155,000 and nil shares of Series A Convertible Preferred Stock subscribed for in 2009 and 2008, respectively		310,000			-
Receivable related to preferred stock subscriptions		(310,000	)		-
Common stock, $0.001 par value, 150,000,000 shares authorized; 50,000,000 shares issued and outstanding in 2009 and 2008, respectively		50,000			50,000
Additional paid-in capital - Common stock		8,066,293			8,066,293
Statutory surplus reserves		2,678,094			2,117,010
Retained earnings		19,601,804			14,393,409
Accumulated other comprehensive income		2,154,831			2,127,008
Total Stockholders' Equity		32,551,022			26,753,720

Total Liabilities and Stockholders' Equity	$	61,319,977		$	41,984,061

The accompanying notes to consolidated financial statements are

an integral part of these consolidated statements.

F-2

BIOPHARM ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

	2009			2008
	Unaudited			Unaudited
Revenues	$	123,918,423		$	90,855,824

Cost of Goods Sold		85,490,929			63,736,807

Gross Profit		38,427,494			27,119,017

Expenses:
Sales and marketing		8,090,078			6,509,078
General and administrative		2,599,329			1,678,119
Total operating expenses		10,689,407			8,187,197

Income from Operations		27,738,087			18,931,820

Interest Expense		(455,706	)		(441,036	)

Income before Income Taxes		27,282,381			18,490,784

Provision for Income Taxes		(6,633,916	)		(4,063,027	)

Net Income	$	20,648,465		$	14,427,757

Other Comprehensive Income:
Foreign currency translation adjustment		27,823			1,251,323
Total Comprehensive Income	$	20,676,288		$	15,679,080

Earnings Per Common Share:
Earnings per common share - Basic and Diluted	$	0.41		$	0.29

Weighted Average Number of Common Shares Outstanding - Basic and Diluted		50,000,000			50,000,000

The accompanying notes to consolidated financial statements are

an integral part of these consolidated statements.

F-3

BIOPHARM ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

(Unaudited)

	Subscribed				Receivable on Preferred							Additional			Statutory					Accumulated Other
	Preferred Stock				Stock			Common Stock				Paid-in			Surplus		Retained			Comprehensive
Description	Shares		Amount		Subscribed			Shares		Amount		Capital			Reserves		Earnings			Income		Total

Balance - December 31, 2007		-	$	-	$	-			50,000,000	$	50,000	$	7,846,728		$	1,210,920	$	6,939,506		$	875,685	$	16,922,839

Reverse merger recapitalization		-		-		-			-		-		(168,168	)		-		168,168			-		-

Capital contribution		-		-		-			-		-		387,733			-		-			-		387,733

Dividends paid		-		-		-			-		-		-			-		(6,235,932	)		-		(6,235,932	)

Appropriation to statutory surplus reserves		-		-		-			-		-		-			906,090		(906,090	)		-		-

Foreign currency translation adjustment		-		-		-			-		-		-			-		-			1,251,323		1,251,323

Net income for the period		-		-		-			-		-		-			-		14,427,757			-		14,427,757

Balance - December 31, 2008		-		-		-			50,000,000		50,000		8,066,293			2,117,010		14,393,409			2,127,008		26,753,720

Issurance of preferred stock		155,000		310,000		(310,000	)		-		-		-			-		-			-		-

Dividends paid		-		-		-			-		-		-			-		(14,878,986	)		-		(14,878,986	)

Appropriation to statutory surplus reserves		-		-		-			-		-		-			561,084		(561,084	)		-		-

Foreign currency translation adjustment		-		-		-			-		-		-			-		-			27,823		27,823

Net income for the period		-		-		-			-		-		-			-		20,648,465			-		20,648,465

Balance -December 31, 2009		155,000	$	310,000	$	(310,000	)		50,000,000	$	50,000	$	8,066,293		$	2,678,094	$	19,601,804		$	2,154,831	$	32,551,022

The accompanying notes to consolidated financial statements are

an integral part of these consolidated statements.

F-4

BIOPHARM ASIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

	2009			2008
	Unaudited			Unaudited
Net Cash Provided by Operating Activities:
Net income	$	20,648,465		$	14,427,757
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		941,521			890,780
Allowance for doubtful accounts		57,287			-
Recovery of allowance for doubtful accounts		(265,296	)		-
Changes in Operating Assets and Liabilities-
Accounts receivable		(3,419,011	)		(1,613,528	)
Other receivables		(623,696	)		(49,749	)
Advances to suppliers		(88,576	)		370,346
Inventories		(6,149,205	)		(1,460,458	)
Accounts payable and accrued liabilities		10,146,065			(373,592	)
Other payables		3,264,804			(1,060,587	)
Advances from customers		(172,134	)		(171,460	)
Taxes payable		1,067,292			1,532,033
Net Cash Provided by Operating Activities		25,407,516			12,491,542

Investing Activities:
Deferred lease payments		(1,025,929	)		330,600
Disposal of property and equipment		-			45,886
Purchases of property and equipment		(6,355,650	)		(722,447	)
Net Cash (Used in) Investing Activities		(7,381,579	)		(345,961	)

Financing Activities:
Capital contribution		-			1,165,712
Dividends paid		(14,878,986	)		(6,235,932	)
Proceeds from short-term loans		3,768,196			4,515,989
Payments on short-term loans		(4,062,557	)		(3,974,652	)
Payments on long-term loans		-			(205,350	)
Proceeds from related parties		2,789,703			-
Payments to related parties		(473,052	)		(3,082,645	)
Repayment from related parties		-			(3,924,181	)
Net Cash (Used in) Financing Activities		(12,856,696	)		(11,741,059	)

Net Increase in Cash		5,169,241			404,522

Effect of Exchange Rate Changes on Cash and Cash Equivalents		27,823			1,251,323

Cash and Cash Equivalents - Beginning of Period		5,869,607			4,213,762

Cash and Cash Equivalents - End of Period	$	11,066,671		$	5,869,607

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	466,369		$	451,791
Income taxes	$	6,416,335		$	4,146,299

Supplemental Disclosure of significant non-cash transactions:
Reclassification of construction in progress to property	$	-		$	18,626
Adjustment to statutory surplus reserves	$	-		$	906,090
Subscriptions to purchase 155,000 shares of Series A Preferred Stock to 13 investors	$	310,000		$	-

On May 7, 2009, pursuant to the terms of an Agreement and Plan of Merger, the Company completed an exchange of 42,500,000 newly issued shares of its common stock for all of the issued and outstanding share capital of China Northern Pharmacy Holding Group Liminted, a British Virgin Islands corporation. The transaction was treated as a reverse merger and recapitalization for financial reporting purposes.

The accompanying notes to consolidated financial statements are

an integral part of these consolidated statements.

F-5

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 1-Summary of Significant Accounting Policies

Basis of Presentation and Organization

BioPharm Asia, Inc. (the "Company" or “BioPharm,” and previously Domain Registration, Corp.), is an entity that was incorporated under the laws of the State of Nevada on July 31, 2001. Through a merger with Bahamas Enterprises, Inc., the accounting predecessor to the Company organized under the laws of the State of Nevada on July 10, 1996, it became a wholly owned subsidiary of Suzy-Path, Corp. The merger resulted in the direct acquisition of the assets comprising a going business. Domain Registration, Corp. owned domain names and maintained a website for customers to register domain names through a contact with Verio, Inc. Prior to April 2009, the Company was a development stage enterprise, and had no assets. Further, it had not generated any revenues from operations. It maintained its registration as a public entity with the Securities and Exchange Commission (“SEC”).

On April 28, 2009, the Company organized and incorporated DOMR Merger Sub, Inc. (“Merger Sub”) as a wholly owned subsidiary. On April 30, 2009, BioPharm and Merger Sub entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Merger Sub, and China Northern Pharmacy Holding Group Limited ("CNPH"), a British Virgin Islands corporation, and their stockholders. On May 7, 2009, Merger Sub merged with and into CNPH, (the “Merger”) with CNPH designated as the surviving corporation.

Pursuant to the terms of the Merger Agreement, on May 7, 2009, in exchange for their shares in CNPH, the stockholders of CNPH received stock consideration consisting of 42,500,000 newly issued shares of the Company’s common stock, divided proportionally among the CNPH stockholders in accordance with their respective ownership interests in CNPH. Prior to the Merger, the Company had 7,500,000 shares of common stock issued and outstanding. As a result of the Merger, the stockholders of CNPH acquired approximately 85 percent of the outstanding stock of BioPharm, effectively obtaining operational and management control of the Company.

For financial reporting purposes, the transaction has been accounted for as a reverse merger and recapitalization, whereby CNPH is considered the acquirer for accounting purposes, and the financial statements of CNPH and BioPharm have been brought over at their historical bases, with the operations of CNPH presented under the name of the Company in subsequent filings with the Securities and Exchange Commission (“SEC”). Costs and expenses associated with the Merger have been expensed as incurred.

CNPH is a holding company, which acquired, on November 25, 2008, all of the outstanding capital stock of China Northern Pharmacy Holding Group Limited, a Hong Kong company ("CNPH HK"). CNPH HK was incorporated on October 16, 2008. CNPH HK is a holding company, which acquired, on November 21, 2008, all of the equity interests of Tonghua Huachen Herbal Planting Company Limited ("HERB"), and Tonghua S&T Medical & Pharmacy Company Limited ("PHARMACY"). Both HERB and PHARMACY are companies organized and registered in the People’s Republic of China (“PRC”).

F-6

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

HERB is an operating company incorporated on March 23, 2004, in Tonghua City, Jilin Province, PRC, and it is engaged in planting, processing, and selling herbs (such as Chinese Magnolia Vine, Ussuriensis Fritillary Bulb, Membranous Milk Vetch Root, Chinese Thorowax Root, Manchurian Wild Ginger, Ginseng, and Kudzurine Root) in the PRC. HERB owns 100 percent of the equity interests of Tonghua Huachen Pharmaceutical Company Limited ("HUACHEN"), a PRC company founded in 1989 in Tonghua City, Jilin Province, PRC, and incorporated in Tonghua City on August 31, 2000. HUACHEN is engaged in the production and sale of herbal products, such as Qiweixiaoke Capsules, Shengan Bujin Tablets, Tongqiaobiyan Tablets, Huatanpingchuan Tablets, Wujiarongxue Oral Liquid, and Methocarbamol Capsules.

PHARMACY is an operating company incorporated in Tonghua City, Jilin Province, PRC, on September 1, 2002. It is engaged in drug logistics and distribution in the PRC, and as of December 31, 2009, PHARMACY owned 360 retail drug stores. In addition, PHARMACY owns 100 percent of the equity interests of Yunnan Silin Pharmaceutical Company Limited ("SILIN"), a PRC company incorporated in Kunming City, Yunnan Province, PRC, on October 25, 2004, and which is engaged in the marketing and sale of medicinal products to hospitals and pharmacies in the PRC.

On May 4, 2009, the Board of Directors of CNPH, prior to the Merger, declared a dividend to its then current stockholders of approximately $14,879,000 (RMB 101,644,311). All of the dividends declared were distributed before December 31, 2009.

On July 17, 2009, the Company filed an amendment to its Articles of Incorporation changing its corporate name from Domain Registration, Corp., to BioPharm Asia, Inc., and authorized and provided for the following: (i) the authorization of 20 million shares of preferred stock, par value $0.001 per share; and, (ii) an increase in the number of authorized shares of common stock, par value $0.001, from 50 million shares to 150 million shares. The Company subsequently completed an offering and received subscriptions to purchase 155,000 shares of Series A Convertible Preferred Stock to 13 investors with a value of $310,000.

BioPharm, Merger Sub, CNPH, CNPH HK, HERB, PHARMACY, HUACHEN, and SILIN are collectively referred to as the “Company” unless specific reference is made to a specific entity of the consolidated company.

Accounting Method

The accompanying consolidated financial statements were prepared using the accrual method of accounting.

Principles of Consolidation

The accompanying consolidated financial statements of the Company and its wholly owned subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). All significant intercompany balances, transactions, and cash flows have been eliminated in consolidation.

F-7

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, BioPharm considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, all highly liquid instruments purchased with a maturity of three months or less, and money market accounts to be cash and cash equivalents. The Company maintains cash and cash equivalents with various financial institutions mainly in the PRC. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. Non-performance by these institutions could expose the Company to losses for amounts in excess of insured balances. As of December 31, 2009, and 2008, the Company's bank balances held in Chinese institutions of approximately $11 million and $5.9 million, respectively, were uninsured. The Company has not experienced, nor does it anticipate, non-performance by these institutions.

Accounts Receivable

The Company records accounts receivable on shipment of products to customers. The trade receivables are not collateralized, and interest is not accrued on past due accounts. The Company maintains an allowance for doubtful accounts for estimated losses. Periodically, management of the Company reviews the accounts receivable and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s historical payment history, its current credit-worthiness, and current economic trends. The amount of the provision, if any, is recognized in the consolidated statements of operations and comprehensive income within the general and administrative expenses. Accounts are written off after appropriate collection efforts are conducted. The activity in the allowance for doubtful accounts for the years ended December 31, 2009, and 2008, was as follows:

	2009			2008
Beginning Balance - January 1	$	719,224		$	751,540
Increase in allowance for doubtful accounts		57,287			-
Write-off of doubtful accounts		-			(168,770	)
Recovery of amounts written-off		(265,296	)		-
Foreign currency translation adjustment		2,796			136,454
Ending Balance - December 31	$	514,011		$	719,224

Inventories

Inventories are stated at the lower of cost or market utilizing the moving average method. Costs of work-in-progress and finished goods are composed of direct materials, direct labor and an attributable portion of manufacturing overhead. A reserve for obsolete or slow-moving inventory is established when management determines that the carrying value of certain inventories may not be realizable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the market value. These reserves are recorded based on estimates and reflected in cost of sales. There were no allowances for obsolete or slow-moving inventories deemed necessary by management as of December 31, 2009, and 2008.

F-8

Property, Plant and Equipment

Property, plant, and equipment is recorded at historical cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets. Expenditures for major additions or improvements, which extend the useful lives of assets, are capitalized. Minor replacements, maintenance and repairs, which do not improve or extend the lives of the assets, are charged to operations as incurred. Disposals are removed at cost less accumulated depreciation, and any resulting gain or loss is reflected in current operations. In accordance with US GAAP, the Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The estimated useful lives for significant property, plant, and equipment categories are as follows:

Buildings	20 years
Biological assets	27 years
Machinery and equipment	10 years
Vehicles	5 years
Leasehold improvements	5 years

Construction Work in Progress

Construction work in progress consists of costs incurred for construction projects that have not yet been completed. Such projects predominantly relate to the Company's expansion of its retail stores. Once the projects are completed, the costs will be transferred to the appropriate property, plant, and equipment category.

Biological Assets

Biological assets, which are included in property, plant, and equipment, consist primarily of Schisandra berry trees, which provide the extract used to manufacture several traditional Chinese medicines. The costs to purchase and cultivate these trees and the expenditures related to labor and materials to prepare the land, to construct staking and wiring on the field, and labor costs for grafting and pruning during the early stages of the trees’ development are capitalized until the trees become commercially pthird roductive, at which time annual depreciation is recognized using the straight-line method over the economic useful life of the trees, which is estimated to be 27 years. Depreciation expense pertaining to the biological assets amounted to $142,673 and $105,764 for the years ended December 31, 2009, and 2008, respectively, and are included in costs of inventories, and ultimately become a component of cost of goods sold.

F-9

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Lease Obligations

All noncancellable leases with an initial term greater than one year are categorized as either capital leases or operating leases. Assets recorded under capital leases are amortized according to the methods employed for property and equipment or over the term of the related lease, if shorter.

Impairment of Long-lived Assets

The management of the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the assets estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the years ended December 31, 2009, and 2008.

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted ASC 820-Fair Value Measurements and Disclosure or ASC 820 for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities

	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data

	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Cash and cash equivalents include money market securities and commercial paper that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

In addition, the Company did not elect the fair value options for any of its qualifying financial instruments.

F-10

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Foreign Currency Translation

The Company accounts for foreign currency translation pursuant to FASB ASC 830 Foreign Currency Matters. BioPharm’s functional currency is the Chinese Yuan Renminbi (“RMB”). Under ASC 830, all assets and liabilities are translated into United States Dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. Translation adjustments are included in other comprehensive income (loss) for the period. Certain transactions of BioPharm are denominated in United States Dollars. Translation gains or losses related to such transactions are recognized for each reporting period in the related consolidated statements of operations and comprehensive income (loss).

Revenue Recognition

Product sales are generally recognized when title to the product has transferred to customers in accordance with the terms of the sale. The Company recognizes revenue when goods are shipped, when a formal arrangement exists, the price is fixed or determinable, the product delivery has occurred, no other significant obligations of BioPharm exist, and collectability is reasonably assured. The Company is required to collect a three percent value-added tax (“VAT”) on sales. Revenues do not include this VAT, which is remitted to the government quarterly.

Shipping and Handling Expenses

Shipping and handling expenses (freight- out and delivery) amounted to $2,177,159 and $1,341,261 for the years ended December 31, 2009, and 2008 respectively, and are included in sales and marketing expenses in the accompanying consolidated statements of operations and comprehensive income.

Income Taxes

The Company is subject to the Income Tax Law of the People’s Republic of China. Income taxes are accounted for under FASB ASC-740 Income Taxes or ASC 740. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and tax loss carry forwards. Any deferred tax assets and liabilities would be measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consists principally of cash and trade accounts receivable. Substantially all of the Company's cash is maintained with state-owned banks within the PRC, and these deposits are not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon their financial condition, as well as the industry economics prevailing in these areas. The Company performs ongoing credit evaluations of its customers to help further reduce credit risk.

F-11

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Other Comprehensive Income

The Company presents comprehensive income (loss) under FASB ASC 220 Comprehensive Income. ASC 220 states that all items that are required to be recognized under accounting standards as components of comprehensive income (loss) be reported in the financial statements. Accumulated other comprehensive income consisted of unrealized gains or losses resulting from the translation of financial statements from RMB to United States Dollars. For the years ended December 31, 2009, and 2008, the only components of comprehensive income were the net income for the periods and the foreign currency translation adjustments, which were gains of $27,823 and $1,251,323, respectively.

Earnings per Common Share

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

Use of Estimates

The Company's consolidated financial statements have been prepared in accordance with US GAAP and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. Significant estimates include the allowance for doubtful accounts, the allowance for obsolete inventory, the useful lives of property and equipment, intangible assets, deferred lease expense, the allowance for deferred tax assets, and accruals for taxes due.

Reclassification

Certain amounts presented in the consolidated financial statements as of and for the period ended December 31, 2008, have been reclassified to conform to the 2009 presentation.

F-12

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Recent Accounting Pronouncements

In March 2008, the FASB issued ASC 815 “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement 133 .” ASC 815 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities”; and (c) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Specifically, ASC 815 requires:

disclosure of the objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation;

disclosure of the fair values of derivative instruments and their gains and losses in a tabular format;

disclosure of information about credit-risk-related contingent features;

and cross-reference from the derivative footnote to other footnotes in which derivative-related information is disclosed.

ASC 815 was effective for fiscal years and interim periods beginning after November 15, 2008. Earlier application is encouraged. The adoption of this pronouncement did not have a material impact on the Company’s financial statements.

On May 9, 2008, the FASB issued ASC 105 “The Hierarchy of Generally Accepted Accounting Principles.” ASC 105 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. generally accepted accounting principles (“US GAAP”) for nongovernmental entities.

Prior to the issuance of ASC 105, the US GAAP hierarchy was defined in the American Institute of Certified Public Accountants (“AICPA”) Statement on Auditing Standards (“SAS”) No. 69, “ The Meaning of Present Fairly in Conformity with Generally Accept Accounting Principles .” SAS No. 69 has been criticized because it is directed to the auditor rather than the entity. ASC 105 addresses these issues by establishing that the US GAAP hierarchy should be directed to entities because it is the entity (not the auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with US GAAP.

The sources of accounting principles that are generally accepted are categorized in descending order as follows:

FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB.

FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position.

AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics).

Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.

F-13

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

ASC 105 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendment to its authoritative literature. It is only effective for nongovernmental entities; therefore, the US GAAP hierarchy will remain in SAS 69 for state and local governmental entities and federal governmental entities. The management of Company does not expect the adoption of this pronouncement to have a material impact on its financial statements.

On May 26, 2008, the FASB issued ASC 944 “Accounting for Financial Guarantee Insurance Contracts.” ASC 944 clarifies how FASB Statement No. 60, “ Accounting and Reporting by Insurance Enterprises ” (“SFAS No. 60”), applies to financial guarantee insurance contracts issued by insurance enterprises, including the recognition and measurement of premium revenue and claim liabilities. It also requires expanded disclosures about financial guarantee insurance contracts.

The accounting and disclosure requirements of ASC 944 are intended to improve the comparability and quality of information provided to users of financial statements by creating consistency. Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under SFAS No. 60, “ Accounting and Reporting by Insurance Enterprises .” That diversity results in inconsistencies in the recognition and measurement of claim liabilities because of differing views about when a loss has been incurred under FASB Statement No. 5, “ Accounting for Contingencies ” (“SFAS No. 5”). ASC 944 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also requires disclosure about (a) the risk-management activities used by an insurance enterprise to evaluate credit deterioration in its insured financial obligations and (b) the insurance enterprise’s surveillance or watch list.

ASC 944 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for disclosures about the insurance enterprise’s risk-management activities. Disclosures about the insurance enterprise’s risk-management activities are effective the first period beginning after issuance of ASC 944. Except for those disclosures, earlier application is not permitted. The adoption of this pronouncement did not have a material impact on the Company’s financial statements.

On May 22, 2009, the FASB ASC 958 “Not-for-Profit Entities: Mergers and Acquisitions”. SFAS No. 164 (FASB ASC 958) is intended to improve the relevance, representational faithfulness, and comparability of the information that a not-for-profit entity provides in its financial reports about a combination with one or more other not-for-profit entities, businesses, or nonprofit activities. To accomplish that, this Statement establishes principles and requirements for how a not-for-profit entity:

Determines whether a combination is a merger or an acquisition.

Applies the carryover method in accounting for a merger.

Applies the acquisition method in accounting for an acquisition, including determining which of the combining entities is the acquirer.

Determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of a merger or an acquisition.

F-14

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

This Statement also improves the information a not-for-profit entity provides about goodwill and other intangible assets after an acquisition by amending FASB Statement No. 142, Goodwill and Other Intangible Assets , to make it fully applicable to not-for-profit entities.

ASC 958 is effective for mergers occurring on or after December 15, 2009, and acquisitions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2009. Early application is prohibited. The management of Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

On May 28, 2009, the FASB issued ASC 855 “Subsequent Events.” SFAS No. 165 (FASB ASC 855) establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, ASC 855 provides:

The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements.

The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

In accordance with this Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The adoption of this pronouncement did not have a material impact on the consolidated financial statements of the Company.

In June 2009, the FASB issued ASC 860 “Accounting for Transfers of Financial Assets- an amendment of FASB Statement No, 140 .” ASC 860 is a revision to SFAS No. 140 “ Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities ” and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures.

F-15

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

This statement is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009. The management of Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

In June 2009, the FASB issued ASC 810 "Amendments to FASB Interpretation No. 46(R).” ASC 810 amends certain requirements of FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.

This statement is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The management of Company does not expect the adoption of this pronouncement to have material impact on its financial statements.

In June 2009, the FASB issued ASC 105 "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162 .” ASC 105 establishes the FASB Accounting Standards Codification (the "Codification") to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (“US GAAP”). The Codification did not change US GAAP but reorganizes the literature.

ASC 105 is effective for interim and annual periods ending after September 15, 2009. The adoption of this pronouncement did not have a material impact on the consolidated financial statements of the Company.

F-16

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 2-Accounts Receivable

As of December 31, 2009, and 2008, accounts receivable consisted of the following:

	2009			2008
Trade accounts	$	18,716,094		$	15,354,103
Employees and other		1,538,783			855,271
Related parties		1,339,828			4,129,531
		21,594,705			20,338,905
Less - Allowance for doubtful accounts		(514,011	)		(719,224	)
Total accounts receivable	$	21,080,694		$	19,619,681

The Company records accounts receivable on shipment of products to customers. The trade receivables are not collateralized, and interest is not accrued on past due accounts.

As of December 31, 2009, and 2008, employees and other receivables consisted of the following:

	2009		2008
Advances to employees	$	1,538,783	$	493,927
Security deposits		-		361,344
Total	$	1,538,783	$	855,271

Advances to employees are primarily advances made to employees and salesmen for travel expenses to be incurred by these individuals in service to the Company.

Note 3-Advances to Suppliers

Advances to suppliers as of December 31, 2009, and 2008 amounted to $196,722 and $108,146 respectively, and consisted primarily of prepayments to suppliers for merchandise that had not yet been shipped to the Company, as well as services that had not yet been provided to the Company. The Company recognizes advances as costs of inventories or operating expenses as suppliers make delivery of goods or provide services.

F-17

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 4-Inventories

As of December 31, 2009, and 2008, inventories consisted of the following:

	2009		2008
Raw materials	$	967,608	$	357,392
Work in progress		1,531,613		1,246,482
Finished goods		11,558,478		6,304,620
Total	$	14,057,699	$	7,908,494

As of December 31, 2009, and 2008, no provision for obsolete or slow-moving inventories was deemed necessary by the Company.

Note 5-Intangible Assets

As of December 31, 2009, and 2008, intangible assets consisted of the following:

	2009			2008
Manufacturing right (China Pharmaceutical Manufacturing Permit)	$	410,064		$	409,680
License fees (Medicine Patent)		162,924			162,772
Software (Accounting System)		4,394			4,389
Total		577,382			576,841
Less - Accumulated amortization		(383,858	)		(326,034	)
Intangible assets, net	$	193,524		$	250,807

Amortization expense amounted to $57,492 and $56,191 for the years ended December 31, 2009, and 2008, respectively.

The projected amortization expense attributable to future periods is as follows:

Year ending December 31,

2010	$	57,519
2011		50,510
2012		41,006
2013		41,006
2014		3,483
	$	193,524

F-18

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 6-Deferred Lease Payments

BioPharm leases from the local government in the PRC two farms that are used to plant and cultivate Schisandra trees. Schisandra is harvested once a year with the highest production yield beginning three years after initial planting. Schisandra berries can be used to produce Chinese medicines for a variety of diseases.

The first land parcel (Lease #1) is approximately 330 acres, and was leased for a 30-year term, which began on January 1, 2003. A total of four lease payments amounting to $12,295,262 (RMB 84,000,000) are to be paid on the dates, June 30, 2003 (paid by the Company), June 30, 2011, June 30, 2019, and June 30, 2027. The annual lease expense for Lease #1 has been calculated using the straight-line method over the life of the lease, and is approximately $410,000 (RMB 2,800,000) per year. As of December 31, 2009, and 2008, the Company had deferred lease payments prepaid on this parcel of land of $409,842 and $819,360, respectively.

The Company leased a second land parcel (Lease #2) of approximately 165 acres pursuant to a 25-year lease commencing January 1, 2008. A total of four lease payments amounting to $5,123,026 (RMB 35,000,000) are to be paid over the 25-year term of Lease #2 on June 30, 2008 (paid by the Company), June 30, 2009 (paid by the Company), June 30, 2017 (approximately $1,639,800), and June 30, 2025 (approximately $1,639,800). The annual lease expense for Lease #2 has been calculated using the straight-line method over the life of the lease, and is approximately $205,000 (RMB 1,400,000) per year. As of December 31, 2009, the Company had deferred lease payments prepaid on this parcel of land of $1,435,447.

The following table reflects the scheduled future lease payment dates and amounts for Leases #1 and #2:

June 30, 2011	$	3,278,737
June 30, 2017		1,639,800
June 30, 2019		3,278,737
June 30, 2025		1,639,800
June 30, 2027		2,459,051
Total	$	12,296,125

Total deferred lease payments amounted to $1,845,289 and $819,360 as of December 31, 2009, and 2008, respectively.

F-19

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 7-Short-term Loans

As of December 31, 2009, and 2008, short-term loans, consisted of the following:

	2009		2008
Loan payable to City Credit Union (Construction Road) due on November 10, 2009, with annual interest rate of 11.02% and secured by buildings and equipment.	$	-	$	292,630
Loan payable to City Credit Union (Construction Road) due on June 21, 2009, with annual interest rate of 10.5% and secured by buildings and equipment.		-		2,959,939
Loan payable to City Credit Union (Construction Road) due on December 20, 2009, with annual interest rate of 10.5% and secured by buildings and equipment.		-		804,728
Loan Payable to City Credit Union (Construction Road) due on December 19, 2010, with annual interest rate of 10.5% and secured by buildings and equipment.		758,619		757,909
Loan payable to City Credit Union (Construction Road) due on July 21, 2010, with annual interest rate of 10.5% and secured by building and equipment		144,987		151,162
Loan payable to Agriculture Finance Bureau of TongHua government, due on December 6, 2010, non-interest bearing and secured by buildings.		219,677		219,472
Loan payable to City Credit Union (Construction Road) due on April 20, 2010, with annual interest rate of 5.94% and secured by buildings and equipment.		805,483		-
Loan payable to City Credit Union (Construction Road) due on June 20, 2010, with annual interest rate of 5.94%, secured by buildings and equipment.		2,962,713		-
Total short-term loans	$	4,891,479	$	5,185,840

F-20

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 8-Accounts Payable and Accrued Liabilities

As of December 31, 2009, and 2008, accounts payable and accrued liabilities were $15,333,980 and $5,187,915, respectively. Accounts payable is composed primarily of amounts due to suppliers and vendors. Items included in accounts payable and accrued liabilities are as follows:

	2009		2008
Accounts payable - Trade	$	12,722,407	$	4,966,343
Accrued liabilities		2,466,568		7,603
Payroll and welfare payables		145,005		213,969
Total	$	15,333,980	$	5,187,915

Note 9-Advances from Customers

Advances from customers represent prepayments to the Company for merchandise that had not yet been shipped to customers or services that had not yet been rendered to customers. The Company will recognize these advances as revenue as customers take delivery of the goods or when the services have been rendered, in compliance with the Company’s revenue recognition policy. Advances from customers totaled $143,751 and $315,885 at December 31, 2009, and 2008, respectively.

Note 10-Taxes Payable

As of December 31, 2009, and 2008, taxes payable consisted of the following:

	2009		2008
Income taxes payable	$	1,536,184	$	1,318,603
Value added tax payable		2,164,731		1,211,905
Other taxes payable		191,834		294,949
Total	$	3,892,749	$	2,825,457

The Company accounts for income taxes under a standard that requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. US GAAP additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain. The Company is subject to the Income Tax Laws of the PRC, Hong Kong, and the United States.

F-21

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration any permanent differences between financial statement and tax return income applicable to the Company in the jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in enacted tax laws or rates or tax status, and unusual or infrequently occurring events, would be recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes. The effective tax rates of 24.3% and 22% for the years ended December 31, 2009 and December 31, 2008, respectively are lower than the statutory rate of 25% due to the benefit resulting from the Company’s agricultural operations being exempt from income taxes.

Since January 1, 2008, under the Income Tax Laws of PRC, Chinese companies are generally subject to an income tax at an effective rate of 25% on income reported in the their statutory financial statements after appropriate tax adjustments. The Company's PRC subsidiaries are subject to these statutory rates. HERB, one of the Company's Chinese operating subsidiaries, has engaged in the agriculture and wholesale business. HERB’s business profits from these agriculture operations are exempt from the income taxes in accordance with the PRC Income Tax Laws. HERB’s non-agricultural operations are subject to the effective PRC income tax rate of 25%.

CNPH HK was incorporated in Hong Kong and is subject to Hong Kong profit tax of 17.5% on its activities conducted in Hong Kong and any income arising in or derived from Hong Kong. No provision for profits tax has been made for CNPH HK as the Company had no assessable income from Hong Kong for the year ended December 31, 2009.

The Company has had no assessable income within the United States.

Note 11-Other Payables

As of December 31, 2009, and 2008, other payables consisted of the following:

	2009		2008
Security deposits from salesmen	$	426,066	$	458,339
Union fees payable		19,013		2,302
Employee benefits payable		41,510		33,895
Payables to employees		3,715,649		442,898
Total	$	4,202,238	$	937,434

Note 12-Capital Stock

Preferred Stock-

On August 21, 2009, the Company filed a Notice of Designation with the Nevada Secretary of State and established 155,000 shares of its authorized preferred stock as Series A Convertible Preferred Stock (the “Series A Preferred Stock”).

Subsequently, on September 3, 2009, the Company closed an offering of its Series A Preferred Stock, and agreed to issue a total of 155,000 shares to 13 investors at $2.00 per share for a total purchase price of $310,000 to be paid subsequently to the closing date. When received, the proceeds from the issuance of the Series A Preferred Stock were to be used for working capital purposes. As of December 31, 2009, the Company had not received payment of the $310,000 from the investors related to the issuance of Series A Preferred Stock.

Under the terms of the offering of the Series A Preferred Stock, the Company agreed to repurchase the Series A Preferred Stock from the 13 investors, at the election of each investor, on or before September 3, 2010, at a price of $2.60 per share (for a total repurchase price of $403,000). In the event that the investors do not make the election to have the Company repurchase the Series A Preferred Stock on or before September 3, 2010, then, on September 6, 2010, the Series A Preferred Stock will automatically convert into shares of the Company’s common stock at a conversion price of $2.00 per share, subject to adjustment for organic changes resulting from stock splits, stock dividends, and business combinations, but not for issuances at less than fair market value or the conversion price. See Note 16 for additional information.

F-22

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Common Stock-

On April 30, 2009, BioPharm and Merger Sub entered into a Merger Agreement by and among the Company, Merger Sub, and CNPH, a British Virgin Islands corporation, and their stockholders. On May 7, 2009, Merger Sub merged with and into CNPH, with CNPH designated as the surviving corporation.

For financial reporting purposes, the transaction has been accounted for as a reverse merger and recapitalization, whereby CNPH is considered the acquirer for accounting purposes, and the financial statements of CNPH and BioPharm have been brought over at their historical bases, with the operations of CNPH presented under the name of the Company in subsequent filings with the SEC. Costs and expenses associated with the Merger have been expensed as incurred.

Note 13-Segment Reporting

US GAAP requires the use of the management approach model for segment reporting. The management approach model is based on how a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Based on this model, the Company has determined that it has four segments. The Company’s principal businesses are the planting, manufacturing, distribution, and retail sale of a broad line of health care products. Based on the various operating activities, the Company’s reportable segments are as follows:

Herbal planting – planting, processing, and selling herbs in China.

Drug manufacturing – the production and sale of herbal and pharmaceutical products.

Distribution – the sale of healthcare products to hospitals and pharmacy shops.

Retailing – the sale of healthcare products to consumers.

F-23

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

For the year ended December 31, 2009

	Herbal Planting		Drug Manufacturing		Distribution		Retailing		Corporate			Total
Revenues	$	21,373,619	$	33,252,296	$	47,212,958	$	22,079,550	$	-		$	123,918,423

Depreciation and Amortization	$	603,633	$	316,500	$	21,388	$	-	$	-		$	941,521

Segment Profit (Loss)	$	4,859,495	$	5,710,449	$	8,740,773	$	1,966,710	$	(628,962	)	$	20,648,465

Segment Assets	$	18,191,696	$	15,959,773	$	16,521,210	$	10,647,298	$	-		$	61,319,977

Expenditures for Segment Assets	$	3,252,914	$	-	$	1,758,361	$	1,344,375	$	-		$	6,355,650

For the year ended December 31, 2008

	Herbal Planting		Drug Manufacturing		Distribution		Retailing		Corporate		Total
Revenues	$	20,215,933	$	28,330,394	$	42,309,497	$	-	$	-	$	90,855,824

Depreciation and Amortization	$	609,923	$	269,905	$	10,952	$	-	$	-	$	890,780

Segment Profit	$	3,977,998	$	4,520,842	$	5,928,917	$	-	$	-	$	14,427,757

Segment Assets	$	14,826,069	$	15,763,664	$	11,394,328	$	-	$	-	$	41,984,061

Expenditures for Segment Assets	$	622,138	$	61,678	$	38,631	$	-	$	-	$	722,447

In 2008, all corporate cost was booked in the general and administrative expenses, the Company has been re-organized, and these expenses are now separately reported.

Note 14-Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

F-24

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Related parties with whom the Company has had transactions are:

Related Parties		Relationship
Yanhua Han		Stockholder, Chairman of Board of Directors
Hong Lin		Stockholder
Xiandong Meng		Senior Manager
Xueye Jing		Senior Manager
Baoyou Han		Senior Manager
Giant Fortune Ltd.		Stockholder

Due to/from Related Parties

Prior to the Merger (see Note 1), from time to time, the Company advanced funds to or received funds from certain officers and stockholders. These advances were non-interest bearing, unsecured and payable/receivable on demand. The related parties make monthly payments on the advances due to the Company. Since May 7, 2009, the date of the Merger, the Company has not made any advances to officers or stockholders.

Due to related parties – December 31, 2009, and 2008:

Related Party	2009		2008
Hong Lin	$	52,368	$	334,912
YanHua Han		9,885		-
Xueye Jing		-		442,898
Kean Yuan		155,132		-
Stockholders		87,373		-
Total due to related parties	$	304,758	$	777,810

Due from related parties – December 31, 2009, and 2008:

Related Party	2009		2008
Yanhua Han	$	890,074	$	544,830
Hong Lin		449,754		-
Xiandong Meng		-		3,584,701
Total due from related parties	$	1,339,828	$	4,129,531

F-25

BIOPHARM ASIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Note 15-Statutory Surplus Reserves

In accordance with PRC regulations, the Company is required to make appropriations to reserve funds, based on after-tax net income, from its PRC incorporated subsidiaries. Collectively these are the statutory surplus reserves and are contained in the Company’s stockholders’ equity. Annual appropriations to the statutory surplus reserves should be at least 10 percent of the after tax net income determined in accordance with PRC regulations until the statutory surplus reserve is equal to 50 percent of the entity’s registered capital or members’ equity.

HERB and HUACHEN transfer 10 percent of their after tax profit as reported in their PRC statutory financial statements to these statutory reserve funds. The reserves can be used to offset losses incurred or to increase the registered capital. Except for the reduction of losses incurred, any other application should not result in this reserve balance falling below 25 percent of the registered capital. The statutory reserve fund amounts as of December 31, 2009, for both PHARMACY and SILIN reached 50 percent of their respective amounts of registered capital, and thus, such entities do not need to make any further allocations from retained earnings.

As of December 31, 2009, and 2008, the Company had total statutory surplus reserve balances of $2,678,094 and $2,117,010, respectively.

Note 16-Subsequent Event

As of May 10, 2010, the Company had not received the subscription amounts due for the 155,000 shares of its Series A Preferred Stock issuable to 13 investors for an aggregate of $310,000. As a result of nonpayment by the investors, management of the Company cancelled the 155,000 shares of Series A Preferred Stock.

F-26

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to the report to be signed on its behalf by the undersigned thereunto duly authorized.

	BIOPHARM ASIA, INC.

Dated: March 29, 2011	By:	/s/ Xia Yang Hu
		Xia Yang Hu Chief Executive Officer (principal executive officer)

Biopharm Asia (BFAR) Inactive 10-K/A2009 FY Annual report (amended)