UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(AMENDMENT NO. 1)

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

For the Fiscal Year Ended December 31, 2009

[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ______________

SINOCOM PHARMACEUTICAL, INC.

 (Exact name of registrant as specified in its charter)

Nevada	000-53213	26-1188540
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)
Room 3, 21/F, Far East Consortium Building 121 Des Voeux Road Central, Hong Kong
(Address of principal executive offices)
Registrant’s telephone number, including area code: + 852- 2159-7863

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:    

Common Stock, par value $0.001

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the [  ] Yes [ X ] No

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not  contained herein, and will not be contained, to the best of the 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. [ X ]

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 [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]  (Do not check if a smaller reporting company)	Smaller reporting company [ X ]

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of the last business day of the registrant’s most recently completed second fiscal quarter. $0

As of December 31, 2009, the Company had 71,416,660 shares of common stock issued and outstanding.

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Explanatory Note

Sinocom Pharmaceutical, Inc. (the “Company”) is filing this Amendment No. 1 (the “Amendment” or “Form 10-K/A”) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 31, 2010 (the “Original Filing”) to amend and restate our financial statements  for the fiscal years ended December 31, 2009 and December 31, 2008, and the related notes thereto, in light of changes in the Consolidated Statement of Stockholders’ Equity related to a change in the application of accounting for business combination from the pooling-of-interest method to the purchase method for the 2006 acquisition of Anqing Zhongxi Yao Ltd.   For a more detailed description of the Restatement, see Note 2 “Restatement” of the Notes to Consolidated Financial Statements.

In addition to amended and restated financial statements, this Form 10-K/A also includes an amendment in Item 1” Business,” of Part I of the Original Filing, to reflect a correction of the methodology of calculating the number of customers and suppliers and a correction of the number of current employees , an amendment of Item 2 “Properties” of Part I of the Original Filing to correct the disclosure regarding the lease term of the Company’s current facilities, an amendment of Item 9A “Controls and Procedures” of Part II of the Original Filing, an amendment of Item 11 “Executive Compensation” of Part III of the Original Filing to correct the disclosures regarding the amount of compensation paid to the Company’s CEO in 2008 and 2009, amendment of Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of Part III of the Original Filing to correct a clerical error in the number of shares of Series A Preferred Stock held by SEAVI Advent Equity V (A) Ltd, and amendment of Item 14 “Principal Accountant Fees and Services” of Part III of the Original Filing to substitute disclosures regarding the audit fees and other related fees paid to BDO Limited.

Pursuant to the rules of the SEC, Item 15 of Part IV of the Original Filing has been amended to contain currently-dated certifications from our principal executive officer and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of our principal executive officer and our principal financial officer are attached to this form 10-K/A as Exhibits 31.1, 31.2, 32.1 and 32.2.

Except for the foregoing amended information, this Form 10-K/A continues to describe conditions as of the date of the Original Filing, and we have not updated the disclosures contained herein to reflect events that have occurred subsequent to that date.  Other events occurring after the date of the Original Filing or other information necessary to reflect subsequent events have been disclosed in reports filed with the SEC subsequent to the Original Filing.

Because this Amendment restates all of the pertinent financial data for the affected periods, the Company does not intend to amend any previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for periods ended prior to December 31, 2009. As a result, the reader should not rely on the prior filings, but should rely upon the restated financial statements, reports of our independent registered public accounting firm and related financial information for affected periods contained in this Amendment.

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PART I

ITEM 1.  BUSINESS.

Overview

Sinocom Pharmaceutical, Inc (sometimes hereinafter referred to as “We,”  “Us,” “Our,” or the “Company”) is a Chinese pharmaceutical company engaged in the two complimentary businesses of wholesale distribution of pharmaceuticals and medical supplies, and cultivation and sale of natural herbs. The operations involving wholesale distribution of pharmaceuticals and medical supplies were commenced in 1986 as a state-owned enterprise by a predecessor of the Company. The Company commenced operations in 1997 when the state-owned predecessor company was privatized.  These operations currently involve distribution of a portfolio of over 5,446 types of western pharmaceuticals, medical supplies and processed Chinese herbs, to over 4,166 customers including hospitals, clinics, drug stores and sub-distributors covering five provinces in southeastern China.   The operations relating to cultivation of natural herbs were commenced by the Company in 2004.  These operations currently involve seven main species of herbs which are cultivated by approximately 10,000 individual farmers on a plantation base of approximately 15.1 million square meters located primarily in the Da Bie mountain region of Anhui province, PRC.    

Our business operations are based in Anqing, Anhui Province, PRC, and all operations are currently conducted through our wholly-owned subsidiary, Anqing Zhongxi Yao Ltd, a PRC corporation.  

History

The Company was incorporated in the State of Nevada on September 13, 2007, under the name Tiger Acquisitions, Inc.  It was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation.

On February 26, 2009, the Company changed its name to Sinocom Pharmaceutical, Inc.

On February 20, 2009, the Company completed a share exchange transaction with Rolling Rhine Holdings, Ltd., a British Virgin Islands corporation (“Rolling Rhine”), pursuant to which the shareholders of Rolling Rhine transferred 300,000 shares of Rolling Rhine, representing all of the issued and outstanding shares of common stock in Rolling Rhine, to the Company in exchange for the issuance of an aggregate of 67,131,660 shares of the Company’s common stock.  As a result of the share exchange transaction, Rolling Rhine Holdings, Ltd., and its subsidiaries, China Zhongxi Yao Group Limited, and Anqing Zhongxi Yao Ltd, became wholly-owned subsidiaries of the Company.

Rolling Rhine was incorporated in December, 2007, under the laws of the British Virgin Islands, and China Zhongxi was incorporated in December, 2007, under the laws of Hong Kong. China Zhongxi was formed for the purpose of owning 100% of the capital stock of Anqing Zhongxi, and Rolling Rhine was formed as a holding company for the purposes of owning 100% of the capital stock of China Zhongxi.

Prior to the completion of the share exchange transaction with Rolling Rhine, the Company was a shell company with no or nominal business operations, employees, or assets.  As a result of the share exchange transaction, the Company ceased to be a shell company and acquired the business operations of Anqing Zhongxi.  

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Corporate Structure

 

The Chart below depicts the Company’s current corporate structure.  The Company owns 100% of the capital stock of Rolling Rhine and has no other direct subsidiaries.  Rolling Rhine owns 100% of the capital stock of China Zhongxi and has no other direct subsidiaries. China Zhongxi owns 100% of the capital stock of Anqing Zhongxi and has no other subsidiaries.  

Sinocom Pharmaceutical, Inc. A Nevada Corporation

↓ 100%  

Rolling Rhine Holdings, Ltd. A British Virgin Islands Corporation

↓ 100%

China Zhongxi Yao Group Limited A Hong Kong Corporation

↓ 100%

Anqing Zhongxi Yao Ltd A PRC Corporation

Industry Overview

Pharmaceutical Distribution

In China, the business sector of distribution of pharmaceutical products is highly fragmented, with over 9,000 separate distributors in operation in 2007.  Because of this fragmentation, the three largest pharmaceutical distributors in China accounted for only approximately 20% of the market, and the ten largest distributors accounted for only approximately 35% of the market. The fragmentation of the industry has resulted in intense competition and an inefficient supply chain for distribution of most pharmaceutical products without the advanced logistics services which exist in more developed markets.

In recent years there has been a trend toward consolidation in the pharmaceutical distribution sector in China as a result of (i) intense competition from the fragmented industry, (ii) the introduction of Good Supply Practices requirements, (iii) increased PRC regulatory requirements, and (iv) continuing price controls.

Since 2005, China has opened certain segments of the market for manufacture, distribution and sale of pharmaceutical products to selected foreign investors.   These foreign distributors have entered the China market using advanced logistics and management systems, and have intensified the level of competition in the market in China.  

Cultivation and Sale of Natural Herbs

Traditional Chinese Medicine (TCM), including herbal treatments, has been used in China for more than 2,000 years.  Many Chinese people consider TCM’s to be safe and efficacious, while often causing fewer side effects than Western style medicine.  TCM’s are marketed both as prescriptions and over the counter, with a majority of TCM’s

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consisting of either a mixture of herbs, extracts from a single plant, or purified chemicals from herbs.  The latter two types are modernized TCM’s with multiple formulations.  

Approximately 60% of the herbs used in TCM are cultivated, mostly on a small scale, by individual farmers.  As a result, the market for sale of raw herbs is fragmented and competitive, and is limited to specific regions across China.  The four major markets in China for distribution of raw herbs are Anhui BoZhou, Henan YuZhou, Henan HuiXian, and Hebei AnGuo.  The largest Chinese herb market is the Anhui BoZhou market where the Company sells its herbs.  

In 2006, approximately 1,000,000 hectares of arable land in China was used for herb plantation

Current Operations

We currently receive approximately 85% of our annual revenues from sales of pharmaceutical products and medical supplies, and approximately 15% of our annual revenues from the sale of natural herbs. The following table represents revenues realized from each of our two complimentary business segments for the periods indicated:  

	Year Ended December 31, 2009	Year Ended December 31, 2008	Year Ended December 31, 2007
Pharmaceutical Products and Medical Supplies	$69,930,857	$56,363,998	$ 63,292,383
Herbs	$16,189,214	$8,408,824	$ 10,899,815
TOTAL SALES	$86,120,071	$64,772,822	$ 74,192,198

Pharmaceutical Products

We currently act as a distributor of over 5,446 Western medicine and TCM pharmaceutical products and medical supplies, and are the exclusive distributor of over 332 pharmaceutical products in the region of southeastern China where we operate. The pharmaceutical products include both over-the-counter and prescription pharmaceuticals, as well as certain medical supplies such as syringes and hospital trays.  We do not manufacture or produce any of the products we distribute. The manufacturer of each of the pharmaceutical products we distribute must follow procedures established by China’s State Food and Drug Administration (“SFDA”) in order to obtain approval for manufacture or distribution of its products in the PRC.   

Historically, TCM consisted primarily of mixtures of dried herbs and, in some cases, animal parts and minerals. These mixtures would be boiled and simmered at home to create a medicinal tea or soup. These liquid concoctions were inconvenient to prepare and take, and their dosage and quality were inconsistent due to varied methods of preparation and differences in the quality of ingredients. Despite these characteristics, we believe that consumers in China perceive TCM products to have a superior safety profile compared to western pharmaceuticals and to be more effective in treating chronic and frequently occurring illnesses. In recent decades, Chinese pharmaceutical manufacturers have applied modern production technologies to produce TCM formulated products with consistent quality and in a variety of forms such as tablets, capsules and powders, which we refer to as modernized TCM.

The following table summarizes the principal pharmaceutical products which we currently market and the medical uses of those products:   

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NAME	USES
Lingzhi	Beneficial for rejuvenating the immune system, protecting liver, heart & blood vessels, reducing cholesterol & blood sugar & improving blood circulation. Anti-tumor effect & beneficial in preventing cerebral hemorrhage & cardiopathy
Ampillin	Antibiotic
Fulin	Treats insomnia & palpitations. Improves spleen function. Used as a diuretic & quality ingredient in food, healthcare & beauty products.
Erythromycin　Enteric-coated　Tablets	Antibiotic
Compound Sulfamethoxazole	Urinary tract infection and tympanitis. Pneumocystis carinii pneumonia.
Erythromycin　Enteric-coated　Tablets	Antibiotic
Chuanbei Pipa Tangjiang	Expel wind and relieve cough, Eliminate sputum and disperse lumps.

Herbs

We are a distributor of unprocessed natural herbs which we sell in bulk to our customers. A portion of these herbs are purchased from third parties and a portion are grown on our own plantations located in the central plains of Yuexi County, Anqing City, Anhui Province, PRC, where the climatic and soil conditions are well suited for growing natural herbs.

Our plantations encompass approximately 15.1 million sq m of arable land. The land where our plantations are located is owned collectively by all farmers living in the surrounding area. The local Villagers’ Committees and local governments enter into leasing agreements with us on behalf of the farmers who own the land collectively and the leasing term for the land ranges from 10 years to 50 years.

The local Villagers' Committee assigns farmers to work on our plantations and we do not directly employ those farmers. We specify the types of natural herbs to be cultivated and the farmers purchase seeds and provide the labor to carry on all cultivating activities, including seeding, sowing, fertilizing, watering and harvesting.  The farmers use only organic fertilizers on our plantations.  No pesticides or chemical fertilizers are used.

  

The majority of work on the plantations is performed by hand, although machines have been introduced to modernize the plantation process in certain areas.  We provide the farmers with technical assistance and training including cultivation know-how and picking techniques and we also supervise the plantations to ensure the quality of its output. We purchase the natural herbs from the local farmers after they are harvested at a price which reflects their labor and raw material costs.

The herbs are harvested each year in the fall, which is 4^th quarter of the year.  Prior to harvest, our sales team informs customers regarding the schedule for harvesting and the forecast yield and accepts orders in advance. After harvest, the herbs are checked for quality and cleanliness and are then initially stored in our warehouse in the form in which they are

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harvested.   The herbs are sold to customers in bulk in the form in which they are harvested, and any processing work is subsequently done by the customers.  

We manage our inventory of herbs on a first-in-first-out basis.  Accordingly, in our warehouse, the herbs are separated based upon the batch in which they were purchased, and are sold to customers on the same basis.  We maintain a fleet of trucks for delivery of pharmaceutical products, and after the herbs are harvested and stored in our warehouse, we use the same trucks to complete delivery of the herbs to our customers.  In most cases, this allows us to complete delivery of the herbs to our customers within 24 hours after they leave our warehouse.  

The following table summarizes the natural herbs which we currently grow and the uses of those herbs in TCM medical uses of those products:   

NAME	USES
Fuling	Fungus that grows on pine roots. • Treats insomnia & palpitations •Improves spleen function •Used as a diuretic & quality ingredient in food, healthcare & beauty products. •Fuling amylase is also believed to have an anti-tumor effect.
Tianma	•Treats headaches & dizziness, numbness in limbs, epileptic seizures & tetanus. •Often used as a pediatric sedative & also a high quality ingredient in food & healthcare products
Duzhong	•Used in TCM for strengthening bones & muscles •Treatment of hypertension.
Gegen	•Antioxidant believed to be beneficial for dispelling exopathogens. •Commonly used for the treatment of hypertension & coronary heart disease.
Salvia Miltiorrhiza	•Prevent and treat heart conditions and strokes. •May have some activity against human cancer cells and HIV.
Corydalis	•Invigorate the blood and alleviate pain, including menstrual, abdominal and hernia. •Offers some protection against strokes by lowering heart rates and blood pressure levels.  •This herb has shown the ability to help insomniacs fall asleep.
Chrysanthemum	•Treat reddened and sore eyes. •Reduce the elevated temperature in the body affected by fever, as well as to counter infection, and in detoxifying the body in general. •Alleviate tension headaches

Marketing and Sales

Our distribution network is anchored by our distribution facility in Anqing, Anhui Province, which positions us close to the five rural provinces of our core market.  All of our sales are made in China.  In 2009, the majority of our net sales are

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made in Anhui province and the reminder of the sales of mainly made in the Jiangxi, Hubei, Zhejiang, and Jiangsu provinces.  

To build and foster close and long term relationships and to keep abreast of their latest product requirements, the sales staff regularly visit and obtain feedback from our customers as well as hospitals and other medical agencies.

Our marketing and sales personnel are required to meet prescribed sales volumes that are set depending on the designated areas which they are responsible for. Our marketing and sales employees are also responsible for providing our customers with information and updates on our products, taking sales orders, liaising with our customers on their requirements and getting feedback from customers. We own and operate a delivery fleet of trucks to provide delivery service to our customers.  

We believe that our marketing and sales team plays a crucial role in securing customers’ confidence in our products because it is the first point of contact between our Company and our customers.  Accordingly, we provide comprehensive training to all our sales employees to equip them with the relevant knowledge and skills necessary to enhance their work performance and technical skills, and our marketing and sales team also includes qualified doctors. Training for our marketing and sales personnel covers areas such as basic medical and pharmaceutical knowledge, product knowledge including information on the uses, forms, dosages and curative effects of our pharmaceutical products, market analysis, client identification and negotiation and contract management skills.

In addition to direct sales to customers, the sales offices also participate in tender exercises under the centralized tendering system applicable to non-profit medical organizations (such as public hospitals and clinics) established by county or higher levels of government in the PRC. We supply our products to medical organizations under the centralized tendering system by either directly bidding for the tender and entering into a contract with the relevant medical organization or alternatively, by entering into supply contracts with companies which have successfully tendered for the supply of the products.

Customers

Our current customer base includes hospitals, clinics, pharmacies and sub-distributors.  The following table shows the number of customers in each of these categories to which we sold products in 2007, 2008 and 2009:

	2009	2008	2007
Hospitals	140	106	67
Clinics	2,910	988	484
Pharmacies	898	483	130
Distributors	218	176	122
TOTAL	4,166	1,753	803

Sales made to distributors currently account for a majority of our sales.  The following table shows the dollar volume of our sales to each category of customers for 2007, 2008 and 2009:    

	2009	2008	2007
Hospitals	$11,280,241	$3,863,442	$3,608,637
Clinics	$13,101,895	$9,601,819	$9,733,781
Pharmacies	$32,645,599	$16,081,222	$18,779,444

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Distributors	$29,092,336	$35,226,339	$42,070,336
TOTAL	$86,120,071	$64,772,822	$74,192,198

Competition

In China, distributors of pharmaceutical products are seldom appointed on an exclusive basis because of the large size of the country and the inability of any one distributor to have a large enough sales network to cover every part of the country.  Accordingly, most of the suppliers and manufacturers we represent appoint us on a non-exclusive basis to distribute their products. Although we are not the exclusive distributor for most of the products we sell, we believe we are able to successfully compete in this market is based on several factors including the following:

•

We are one of the largest medical distribution companies in Anhui Province, which is a well- known pharmaceutical products trading center in the PRC

•

We have large warehousing facilities equipped with a computer system which allows us to track product shelf life, sales details, customers sales records, etc

•

We maintain a large fleet of delivery trucks

•

We have a strong financial status and are able to maintain adequate inventories which allows us to meet the needs of hospitals, clinics and other customers on a timely basis

•

We are GSP Certified

For customers such as hospitals which require competitive bidding, they normally consider several factors in selecting a distributor for pharmaceutical products including price, company financial status, GSP certification, inventory management systems, the availability of a tracking system (including a drug recall system for products near their expiration date), and references from other customers.  Based on these factors, we believe we are able to maintain a competitive position in the market.

Our competition is mainly in the area of sales of pharmaceutical products to chain pharmacies. In that area, our main competitors are currently Anqing Medical Limited and Shanghai Medical Group.  One competitive advantage we have over these competitors is that they do not have plantations where they grow natural herbs.

Growth Strategies

Our strategies for future growth include expanding the size of our natural herb plantation in order to increase production and to broaden our market segment by introducing new types of natural herbs.  In 2010, we plan to expand our plantations to approximately 18.7 million square meters, as compared to approximately 15.1 million square meters in 2009, and to increase the number of herbs we grow from 7 to 13.  Future plans call for continuing to expand the size of our plantations to approximately 28.7 million square meters in 2013 and for increasing the number of herbs we grow to 18.

Our strategy for growth of the natural herb business also includes expanding our warehousing and distribution center and entering the complimentary business of processing natural herbs.  This will allow the Company to capitalize on synergies in its operations and provide the market opportunity to increase margins by selling herbs directly to end users instead of selling them to other processors.  These synergies include the fact that the Company’s distribution operations allow it to identify TCM end users who will be potential customers for its processed herbs.  In addition, management believes it will be able to take advantage of cost savings because it will be able to use its existing employees and its existing distribution network for distribution of both pharmaceutical products and processed herbs.  Finally, management believes that

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entering the business of distributing TCM drugs will enable it to collect market feedback and information on the demand for TCM drugs, which will assist in its the selection of herbs to be grown on its plantation.

Our growth strategies for the distribution business include plans to seek to expand into additional geographic areas by acquiring existing distributors with leading market position and logistic networks in other 2^nd and 3^rd tier cities, further expanding the sales and marketing team to increase coverage, and seeking to obtain exclusive national distribution rights for selected products to further enhance the Company’s margins and competitiveness.  

Intellectual Property

We do not currently have any patents, trademarks, trade secrets or licenses which we own, use, or rely on in the conduct of our business.

Government Regulation

Regulatory Structure

The Law of the PRC on the Administration of Pharmaceuticals (“Pharmaceuticals Administration Law”), which was promulgated in 1984 and revised in 2001, and the Implementing Regulations of the Law of the PRC on the Administration of Pharmaceuticals (“Implementing Regulations”) which were promulgated in 2002, created the legal framework for the establishment of pharmaceutical manufacturing enterprises and pharmaceutical trading enterprises in the PRC.  The Pharmaceuticals Administration Law also regulates the packaging, trademarks and the advertisement of pharmaceutical products in the PRC.

The State Food & Drug Administration of the PRC (“SFDA”) is the principal supervisory authority in the pharmaceutical industry in the PRC.  It was established in March, 2003, and is responsible for the administrative and technological supervision of the research, production and trading of pharmaceutical products and supervision of the safety management of food, health care products and cosmetic products.

The main responsibilities of the SFDA in connection of the pharmaceutical products and health care products include:

(a)

formulation of the laws and administrative regulations in respect of the management of the pharmaceutical products and health care products and the supervision of the enforcement thereof;

(b)

registration of pharmaceutical products and formulation and revision of the State standards for pharmaceutical products;

(c)

formulation and administration of the classification of the prescription medicines and over-the-counter medicines; and

(d)

formulation, revision and supervision of the enforcement of the quality control regulations in respect of the research, production, trading and use of pharmaceutical products  

In order to engage in either the manufacture or distribution of pharmaceutical products in the PRC an enterprise must first obtain the necessary permit from the relevant drug administration authority at the provincial level where the enterprise is located. For pharmaceutical manufacturing, the required permit is the Pharmaceutical Manufacturing Enterprises Permit, and for pharmaceutical distribution, the required permit is the Pharmaceutical Trading Enterprises Permit.  After obtaining the required permit for manufacture or distribution of pharmaceuticals, the enterprise must then obtain a Business License issued by the relevant administrative Bureau of Industry and Commerce.

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A qualification permit for manufacture or distribution of pharmaceutical products is effective for a period of 5 years.  A pharmaceutical manufacturing or trading enterprise is required to apply for renewal within six months prior to expiration of the permit and is subject to reassessment by the relevant regulation authorities in accordance with the then prevailing legal and regulatory requirements for purposes of such renewal.

As more fully discussed below, the Company has obtained all necessary permits for the conduct of its business.

In 2005, SFDA adopted regulations regarding registration of pharmaceutical products in the PRC.  All pharmaceutical products must be registered under these registration regulations before they may be manufactured in the PRC or imported from outside the country for sale in the PRC.  

Under the registration regulations, provincial drug administration authorities are responsible for conducting an examination for completeness of formalities prior to acceptance of the application and for conducting a site examination. Thereafter, the SFDA is responsible for the technical examination of the pharmaceutical product, and it has the authority and responsibility for issuing the relevant approvals for registration.

Application procedures for registration of pharmaceutical products vary depending upon whether the application relates to a new pharmaceutical product which has not been previously marketed in the PRC, or whether it is a product for which the PRC government has previously established standards in respect of manufacture technique quality and examination method.  A registration application for a new pharmaceutical product requires the support of clinical research.  Applications relating to products for which standards have previously been set do not generally require clinical research except for products in solid form for oral consumption.

All pharmaceutical products distributed by the Company have been properly registered under applicable provincial and SFDA regulations.

Good Supply Practices (“GSP”) Certification

GSP is the abbreviation of Good Supply Practices. It is a set of management procedures and standards regulating the drugs supply chain. GSP covers mainly quality control in the stocking, depositing and sale of pharmaceutical products for pharmaceutical trading enterprises. Standards and management procedures of GSP also include facility requisites, personnel qualifications and responsibilities, regulations and processes for quality control and systems of document management.

GSP was developed for quality management of the drugs supply chain and was promoted by the World Health Organization (“WHO”). Many countries have formulated their own requirements for GSP based on the GSP promoted by WHO. The current GSP regulations in the PRC became effective on July 1, 2000, and all pharmaceutical trading enterprises in the PRC are now required to obtain GSP certification.

Permits and Approvals for Our Business Operations

The following are the principal permits and approvals which have been obtained by our Group for the purposes of our business and operations:

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Permit/Approval	Validity Period	Holder	Issuing Authority
Pharmaceutical Trading Enterprise Permit	1 January 2010 to 31 December 2014	Anqing Pharmaceutical	Anhui Province Food & Drugs Administration
Pharmaceutical Equipment Trading Enterprise Permit	30 March 2006  to 29 March 2011	Anqing Pharmaceutical	Anhui Province Food & Drugs Administration
GSP Certificate	24 October 2008 to 23 October 2013	Anqing Pharmaceutical	Anhui Province Drugs Administration

Renewal procedures for the permits and the approvals will be generally carried out between one to six months prior to the expiry of the validity period.

Employees

As of December 31, 2009 we had a total of 151 employees. The following table sets forth the number of our employees categorized by function as of that date:

  

	NUMBER OF EMPLOYEES
CEO Office	7
Quality Control	6
Transportation	12
Sales	43
Warehouse	52
Finance	10
Administrative/Office	15
Purchasing	6
TOTAL	151

ITEM 1A.  RISK FACTORS

Risks Relating to Our Business

We face and may continue to face substantial competition

We are a natural herbs producer, and medical products distributor.  Although we believe we do not have direct competitors who possess operations similar to ours, competition from other operators in each of our business segments may be intense.  In particular, in our sales and distribution business, we face and expect to face significant competition from existing competitors as well as new entrants.  Amongst the different locations we operate in, those in the southeastern parts of China may be particularly competitive. There may be new competitors that have better technical expertise, better pricing, larger clientele, larger teams and greater financial, technical, marketing and other resources than

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we do, and are in a better position to develop and expand their market share. If we fail to compete successfully, our business, financial condition and operating results may be materially adversely affected.

We do not own the land where our plantations are located, and there are risks associated with our leasing and use of such land

We do not own the land on which our plantations are located. The land is either state-owned or collectively owned by farmers of the surrounding villages and is leased to us either by local governments or by various villagers’ committees.  There are legal risks associated with the registration system for agricultural land use rights in China. In comparison with land in urban areas in China, the procedures and practices for issuing land use rights certificates for agricultural land in rural areas are not fully established, thereby creating uncertainties relating to evidence of title of the land use rights and their assignments. Although the Bureau of State Land Resource in Yuexi Municipal Government and Qianshan Municipal Government have each issued a letter to verify the title of our leased land and the authority of relevant village committees to enter into the lease agreements with us, our PRC Legal Adviser has advised us that such letters may not serve as conclusive evidence of the title and there is no means of conclusively determining the ownership and actual size of the agricultural land we leased for our plantation. In addition, as formal land surveys have not been conducted on the agricultural land, we are unable to determine if our plantation has kept to the geographical boundaries of the parcels of agricultural land leased to us. In the event that we are found to have exceeded the geographical boundaries, claims may be brought against us for trespass. The absence of well developed procedures and practice to evidence title to agricultural land and the absence of formal land surveys demarking geographical boundaries expose us to potential trespass claims, and other legal risks, which, if eventuated, will impact on our operations and financial results.

Our profitability may be affected if we fail to keep up with technological advancements in farming techniques

We believe that the pharmaceutical industry is characterized by rapid changes in technology in terms of farming techniques for herbs. Future technological improvements and continual product development in the pharmaceutical market in the PRC may affect our competitiveness. Therefore, our future success will largely depend on our ability to improve the efficacy of our existing farming techniques, and diversify our product range to meet the requirements of the changing market in the PRC. Should we fail to respond to these frequent technological advances by improving our existing products or developing new products in a timely manner or should such products fail to achieve a desirable level of market acceptance, there may be an adverse impact on our business and profitability.

We do not have product liability insurance

All of our products are currently sold in the PRC. We have not obtained any insurance against liability for any proprietary or third party pharmaceutical products sold or distributed by us as this is not a statutory requirement under current PRC laws and regulations and, to our knowledge, such product liability insurance is not typically available in China.  Under the Product Quality Law of the PRC, if a defective product causes property damage or personal injury, the manufacturers and vendors of the product are liable for the property damage or the personal injuries.  In addition, under the Law of the Protection of the Consumer’s Rights and Interests, the relevant administration for industry and commerce is authorised to impose penalties on manufacturers and vendors for such product liability. At present, all business entities must observe and comply with the Law of the Protection of the Consumer’s Rights and Interests in providing goods and/or consumer services. We may face claims of product liability from consumers of proprietary and third party pharmaceutical products, arising from the alleged harmful effects of consumption or use of our products. Although third-party manufacturers have agreed to indemnify us in relation to all losses arising or in connection with the sale of their products, any actions taken by consumers against us may jeopardize the image of our company which may in turn adversely affect our sales. We may be required to pay considerable compensation in claims related to alleged harmful effects of use of our proprietary products. Even if we are able to successfully defend such claims, there is no assurance that end-users will not lose confidence in our products, thereby adversely affecting our business and reputation. Further, we may have to incur

14

significant expenses, time and effort in defending such claims. Should any product liability claims be made against us, there would be an adverse impact on our business, financial and operating results and reputation.

Changes in governmental regulations in the PRC could adversely affect our business

At the present time, all of sales are made in the PRC and we do not currently have any plans to qualify our products for sale outside China. As such, we are especially vulnerable to changes in PRC governmental regulations regarding the pharmaceutical industry.  In particular, in an effort to meet the challenges of globalization and further improve the standards of quality and safety, the Chinese government may update or enhance its current polices and regulations governing manufacture and distribution of pharmaceutical products. If the existing policies and regulations are changed, or heightened requirements are established, our business could be adversely affected. There is no assurance that such changes will not adversely affect our financial performance and profitability.

We May Not Be Able to maintain the certificates, permits and business licenses needed to carry on our business operations.   

To carry out pharmaceutical business in the PRC, pharmaceutical manufacturing and trading enterprises are required to obtain certain certificates, permits and business licences from the SFDA and the local Bureau of Industry and Commerce. These certificates, permits and business licences are subject to periodic renewal and reassessment by the relevant PRC governmental authorities and the standards of compliance required in relation thereto may be changed from time to time. If we fail to meet certain standards imposed by the SFDA or other governmental agencies during their checks on our products and facilities, our certificates, permits and business licences may be suspended or revoked. Suspension, revocation or non-renewal of the certificates, permits and business licences which we require to operate our business will have a material adverse impact on our business, financial and operating results.

In our effort to expand, we may be unable to meet our future funding requirements and may require additional funding, which may not be available to us

As part of our business strategy to expand and grow our business, it is anticipated that we may need to raise additional funds. If we require additional funding, we may have to raise capital by issuing equity or debt securities or by borrowing funds from banks or other sources. There is no assurance that any additional financing we may need, will be available on terms favourable to us, or at all.  Furthermore, if we need additional capital and cannot raise it on acceptable terms, we may not be able to fully realize our expansion plans or respond to competitive pressures or unanticipated requirements, in which case, our business, financial and operating results would suffer.

Our plantations rely on local farmers who we do not source or employ directly

Most of the cultivation work for our natural herbs is performed by hand and local farmers have been the main source of labor. We do not source or employ these farmers directly. Instead, the farmers are recruited and employed by the local Villagers' Committees that assign them to work on our plantations. Further, most of our plantations are located in high altitude which may be relatively difficult to access.  A shortage of suitable laborers or the availability of them at commercially acceptable costs may adversely affect our ability to harvest our natural herbs which would adversely affect our operations and financial results.

Our plantation may be affected by natural disasters and extreme changes in weather

15

Our natural herbs plantation is located in the Yuexi County, Anhui Province, PRC, with most of them located in high altitude. We generally sow the seeds for our natural herbs in the spring and harvest them in autumn. Although no natural disaster having material adverse effect has occurred to our natural herbs plantation so far, any extreme weather changes such as flood or drought or natural disasters such as soil erosion or earthquake may adversely affect our plantation.

Unexpected changes in political, economic and social conditions in the PRC or changes in expected demand for our pharmaceutical products may adversely affect the Company’s ability to market its products.

Unexpected changes in political or social conditions in China, changes to the Chinese economy or the introduction of new or different products that are found to be superior in quality or more innovative than our current products would adversely affect our revenues and profitability.

Our success is dependent on retaining key personnel who would be difficult to replace.

Our success depends largely on the continued services of our key management.  In particular, our success depends on the continued efforts of XueXiang AI, our Chief Executive Officer.  XueXiang AI has been instrumental in developing our business model and is crucial for our business development. There can be no assurance that XueXiang AI will continue in his present capacities for any particular period of time.  The loss of the services of XueXiang AI could materially and adversely affect our business development.  This could force us to curtail or cease our business operations.

Risks Relating to Our Common Stock

There is not currently a public market for our shares and there is no assurance that a public market will develop in the future.   

There currently is no public market for our shares, and no assurance can be given that a market will develop in the future.   We are contractually obligated under the terms of the Series A Preferred Stock Purchase  Agreement dated October 28, 2009, with DBS Nominees (Private) Limited, and Seavi Advent Equity V (A) Ltd, to use our reasonable best efforts to complete a qualified public listing of our common stock on the New York Stock  Exchange,  NASDAQ or an internationally recognized non-U.S. stock exchange on or before December 3, 2010.  However, there is no assurance that a public trading market for our shares will be created. In addition, even in the event that our shares are approved for public trading, there is no assurance that an active market will develop. The trading price of our shares may be highly volatile and trading volume may be sporadic.

The Company’s directors and executive officers beneficially own a majority of the Company’s outstanding common stock, which gives them control over certain major decisions on which the Company’s stockholders may vote, which may discourage an acquisition of the Company.

Following completion of the share exchange transaction, the Company’s officers and directors own, in the aggregate, approximately 59.22% of the Company’s outstanding common stock. The interests of the officers and directors may differ from the interests of other stockholders.  As a result, the officers and directors will have the right and ability to control virtually all corporate actions requiring stockholder approval, irrespective of how the Company’s other stockholders may vote, including the following actions:

· Electing or defeating the election of directors;

· Amending or preventing amendment of the Company’s Certificate of Incorporation or By-laws;

· Effecting or preventing a merger, sale of assets or other corporate transaction; and

· Controlling the outcome of any other matter submitted to the stockholders for vote.

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The stock ownership of the Company’s officers and directors may discourage a potential acquirer from seeking to acquire shares of the Company’s common stock or otherwise attempting to obtain control of the Company, which in turn could reduce the Company’s stock price or prevent the Company’s stockholders from realizing a premium over the Company’s stock price.

Risks Relating to Doing Business in the PRC

All of our assets are located in the PRC and all of our revenues are derived from our operations in the PRC. Accordingly, our business, financial condition, results of operations, and prospects are subject, to a significant extent, to economic, political and legal developments in the PRC.

The PRC’s economic, political and social conditions, as well as governmental policies, could affect the financial markets in the PRC, our liquidity and access to capital, and our ability to operate our business.

Our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.  The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth, growth has been uneven, both geographically and among various sectors of the economy.  The PRC government has implemented various measures to encourage economic growth and to guide the allocation of resources.  The PRC economy has been transitioning from a planned economy to a more market-oriented economy.  Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC are still owned by the PRC government.  In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over its economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.  Since late 2003, the PRC government has implemented a number of measures, such as raising bank reserves against deposit rates to place additional limitations on the ability of commercial banks to make loans and raise interest rates, in order to slow down specific segments of the PRC’s economy.  These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.

The PRC legal system embodies uncertainties which could limit the legal protections available to us.

The PRC legal system is a civil law system based on written statutes.  Unlike common law systems, it is a system in which decided legal cases have little precedential value.  In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.  The overall effect of legislation has been significantly enhanced protections afforded to various forms of foreign investment in the PRC.  However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties.  For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.  However, because PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. In addition, such uncertainties, including the inability to enforce our contracts, could materially and adversely affect our business and operation.  Also, intellectual property rights and confidentiality protections in the PRC may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments

17

in the PRC legal system, particularly with regard to the medical industry, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.  These uncertainties could limit the legal protections available to us.

The fluctuation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. As we rely entirely on revenues earned in the PRC, any significant revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we receive US dollars from an offering of our securities and thereafter seek to convert those dollars into Renminbi in order to use them for our operations, appreciation of the Renminbi against the U.S. dollar would diminish the value of the proceeds of the offering and this could harm our business, financial condition and results of operations. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common shares or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be reduced. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets.   Since 2005, the PRC government has permitted the Renminbi to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in significant appreciation of the Renminbi against the U.S. dollar. While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar.

Because our assets are located outside of the United States and all of our directors and officers reside outside the United States, it may be difficult for you to enforce your rights based on U.S. Federal Securities Laws against us and our officers and some directors in the U.S. or to enforce a U.S. court judgment against us or them in the PRC.

All of our directors and officers reside outside the United States. In addition, our operating subsidiaries, are located in the PRC and substantially all of their assets are located outside of the United States. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the U.S. Federal securities laws against us in the courts of either the U.S. or the PRC and, even if civil judgments are obtained in U.S. courts, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under the U.S. Federal securities laws or otherwise.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None

ITEM 2.  PROPERTIES.

Land Leases.  We currently have lease agreement covering approximately 15.1 million m² of arable land. This land is used to grow natural herbs.  The land where our plantations are located is owned collectively by all farmers living in the surrounding area. The local Villagers’ Committees and local governments enter into leasing agreements with us on behalf of the farmers who own the land collectively and the leasing term for the land ranges from 10 years to 50 years.

The local Villagers' Committee assigns farmers to work on our plantations and we do not directly employ those farmers. We specify the types of natural herbs to be cultivated and the farmers purchase seeds and provide the labor to carry on all cultivating activities, including seeding, sowing, fertilizing, watering and harvesting. We provide the farmers with

18

technical assistance and training including cultivation know-how and pickling techniques and we also supervise the plantations to ensure the quality of its output. We purchase the natural herbs from the local farmers after they are harvested at a price which reflects their labor and raw material costs.

Office and Warehouse Facilities.   We currently lease one office building and two warehouse buildings which are used for ordinary operations and for storage of goods. The address of these facilities is No. 2 Jin 9 Road, Wei 2 Middle Road, 1.3 Development Park, Anqing City, Anhui Province, PRC.

The present facility of 22,185 m² comprises 4 warehouses for western and TCM formulated drugs, 2 warehouses for medical supplies, 1 warehouse for processed Chinese herbs, and 1 administration building. All warehouses are GSP certified, climate controlled, and managed using the GSP-certified warehouse management system. Surveillance cameras are fixed at the packing bay for monitoring purposes.

The lease term for these facilities is until September 19, 2019.

ITEM 3.  LEGAL PROCEEDINGS.

The Company is not a party to any significant pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

ITEM 4.  (REMOVED AND RESERVED).

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

No Trading Market

As of December 31, 2009, and as of the date of this report, there was not an established public trading market for the Company’s shares.

Holders.  

As of December 31, 2009 there were 71,416,660 shares of common stock issued and outstanding and approximately 50 shareholders of record.  

Dividends.  

The Company has not declared or paid any cash dividends on its common stock during the fiscal years ended December 31, 2009 or 2008.  There are no restrictions on the common stock that limit our ability to pay dividends if declared by the Board of Directors and the loan agreements and general security agreements covering the Company’s assets do not limit its ability to pay dividends.  The holders of common stock are entitled to receive dividends when and if declared by the Board of Directors, out of funds legally available therefore and to share pro-rata in any distribution to the stockholders. Generally, the Company is not able to pay dividends if after payment of the dividends, it would be unable to pay its

19

liabilities as they become due or if the value of the Company’s assets, after payment of the liabilities, is less than the aggregate of the Company’s liabilities and stated capital of all classes

ITEM 6.   SELECTED FINANCIAL DATA.

Not Applicable

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS," "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Company Overview

Results of Operations

Consolidated Results of Operation for Sinocom Pharmaceutical, Inc., and Subsidiaries for the Fiscal Year Ended December 31, 2009 Compared to the Fiscal Year Ended December 31, 2008.

Revenue

Revenue for the fiscal year ended December 31, 2009, was $86,120,071, as compared to revenue of $64,772,822 for the fiscal year ended December 31, 2008, an increase of $21,347,249, or approximately 33%.  The increase in revenue was attributable to both the distribution of pharmaceutical products (for which revenues increased by $13,566,859, or approximately 24%, in 2009 as compared to 2008, and to sales of cultivated natural herbs (for which revenue increased by $7,780,390, or approximately 92.5%, in 2009 as compared to 2008).    The increase in revenue from sales of cultivated herbs is primarily attributable to an increase in the size of our natural herbs plantation from approximately 11.8 million square meters in 2008 to approximately 15.1 million square meters in 2009, and to an increase in the number of cultivated

20

herbs from 7 to 10.  The increase in revenue from distribution of pharmaceutical products is primarily attributable to the higher sales and marketing effort and the results of PRC's 2009 RMB850 billion Health Reform Plan where major efforts are focused on improving medical care for the rural population (where our distribution business is).

Gross Profit

Cost of Sales increased $14,773,251, or approximately 33%, to $59,552,594 for the fiscal ended December 31, 2009, as compared to $44,779,343 for the fiscal year ended December 31, 2008, primarily as a result of higher sales volume. Gross profit for the fiscal year ended December 31, 2009, increased $6,573,998, or approximately 32.9%, to $26,567,477 for the fiscal year ended December 31, 2009, as compared to $19,993,479 for fiscal year ended December 31, 2008.  The increase in gross profit is attributable to the increased sales volume for the same period.

Selling, General and Administrative Expenses

For the fiscal year ended December 31, 2009, selling, general and administrative expenses were $3,895,869 as compared to selling, general and administrative expenses of $2,965,623 for the fiscal year ended December 31, 2008. The increase of $930,246, or approximately 31%, was primarily attributable to increased sales promotional expenses

Income From Operations

Income from operations increased $5,643,752, or approximately 33%, to $22,671,608 for the year ended December 31, 2009 as compared to $17,027,856 for the fiscal year ended December 31, 2008 mainly due to higher sales achieved in the year.

Net Income

The Company recorded net income of $16,912,542 for the fiscal year ended December 31, 2009, as compared to net income of $12,809,211 for the fiscal year ended December 31, 2008. The increase of 4,103,331, or approximately 32%, was mainly due to higher sales achieved in 2009.

Liquidity and Capital Resources

We anticipate that the existing cash and cash equivalents on hand, together with the net cash flows generated from our business activities will be sufficient to meet our working capital requirements for our current level of operations and to sustain our business operations at the current levels for the next twelve months.  

Total Current Assets & Total Assets

As of December 31, 2009, we had current and total assets of $59,152,836 and $61,132,961, respectively, as compared to current and total assets of $20,092,321 and $20,783,951, respectively, as of December 31, 2008.  The increase in current assets and total assets from December 31, 2008 to December 31, 2009, of $39,060,515 and $40,349,010, respectively, each of which represents an increase of approximately 194%, are primarily attributable to higher cash and accounts receivables. The increase in cash is attributable both to net cash provided by operating activities and net cash provided by financing activities, while the increase in accounts receivable is attributable to higher sales achieved in 2009.

Total Current Liabilities

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As of December 31, 2009, we had total current liabilities of $18,473,992, as compared to total current liabilities of $8,191,403, as of December 31, 2008.  The increase in total current liabilities of $10,282,589, or approximately 126%, is primarily attributable to higher trade payables.

Operating Activities

Net cash provided by operating activities was $17,524,845 for the year ended December 31, 2009, as compared to $13,246,440 for the year ended December 31, 2008. The increase of $4,278,405, or approximately 32%, was attributable to higher net income and increases in both accounts payables and accrued expenses, but offset by the increase in accounts receivable as at December 31, 2009.

Investing Activities

Net cash used by investing activities was $1,473,815 for the year ended December 31, 2009, as compared to $202,132 for the year ended December 31, 2008. The increase of $1,271,683 was attributable to lease prepaid during the year ended December 31, 2009.

Financing Activities

Net cash provided by financing activities was $13,134,315 for the year ended December 31, 2009, as compared to $49,030,327 used by financing activities for the year ended December 31, 2008. The increase of $62,164,642 was attributable to the receipt of net proceeds of $13,191,849 from issuance of preferred shares on December 3, 2009, and to the fact that in the year ended December 31, 2008, prior to completion of the share exchange transaction with Rolling Rhine Holdings, Ltd., we paid dividends of $47,647,044.

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

SINOCOM PHARMACEUTICAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

TABLE OF CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	24
Consolidated Balance Sheets	25
Consolidated Statements of Income	26
Consolidated Statements of Cash Flows	27
Consolidated Statements of Stockholders’  Equity	28
Notes to Consolidated Financial Statements	29-41

 

 

23

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Sinocom Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of Sinocom Pharmaceutical, Inc. and its subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the two years in the period ended December 31, 2009.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these 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 audits 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 Sinocom Pharmaceutical, Inc. and its subsidiaries at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

BDO Limited

Hong Kong

September 29, 2010

24

SINOCOM PHARMACEUTICAL, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
ASSETS		12/31/2009		12/31/2008
		(restated)		(restated)
Current Assets
Cash and cash equivalents	$	34,363,124	$	5,302,591
Accounts receivable		22,488,263		11,912,091
Inventory		2,120,516		2,798,019
Prepaid expenses and other receivables		180,933		79,620
Total Current Assets		59,152,836		20,092,321
Prepaid lease		1,366,234		-
Property and equipment, net		613,891		691,630
Total Assets	$	61,132,961	$	20,783,951
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	14,537,732	$	5,984,004
Due to a related party		-		163,225
Accrued expenses and other payables		1,715,759		803,829
Income tax payable		2,220,501		1,240,345
Total Current Liabilities		18,473,992		8,191,403
Stockholders' Equity
Common stock, par value $.001; 150,000,000 shares authorized;  71,416,660 and 71,416,660 shares issued and outstanding at December 31, 2009 and 2008		71,417		67,132
Preferred stock, par value $.001; 20,000,000 shares authorized;15,847,099 and -0- shares issued and outstanding at December 31, 2009 and 2008		15,847		-
Additional paid in capital		15,490,448		1,962,107
Statutory reserve		5,677,041		5,677,041
Other comprehensive income		4,905,832		4,886,268
Retained earnings		16,498,384		-
Total Stockholders' Equity		42,658,969		12,592,548
Total Liabilities and Stockholders' Equity	$	61,132,961	$	20,783,951
The accompanying notes are an integral part of these consolidated financial statements.

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	SINOCOM PHARMACEUTICAL, INC.
	CONSOLIDATED STATEMENTS OF INCOME
	FOR THE YEAR ENDED DECEMBER 31,
			2009		2008
	Sales, net	$	86,120,071	$	64,772,822
	Cost of sales		59,552,594		44,779,343
	Gross profit		26,567,477		19,993,479
	Selling, general and administrative expenses		3,895,869		2,965,623
	Income from operations		22,671,608		17,027,856
	Other (income) expense
	Other expense		6,710		855
	Interest expense		-		240,861
	Interest (income)		(57,284)		(350,681)
	Total other (income) expense		(50,574)		(108,965)
	Income before income taxes		22,722,182		17,136,821
	Provision for income taxes		5,809,640		4,327,610
	Net income	$	16,912,542	$	12,809,211
	Deemed dividend from beneficial conversion feature of series A preferred stock		(356,624)		-
	Dividend on series A preferred stock		(57,534)		-
	Net income (loss) available to common shareholders	$	16,498,384	$	12,809,211
	Net income per common share
	Basic	$	0.233	$	0.191
	Diluted	$	0.233	$	0.191
	The accompanying notes are an integral part of these consolidated financial statements.

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SINOCOM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008
		2009		2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	16,912,542	$	12,809,211
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization		173,584		119,065
Loss on disposal of property and equipment		301		-
(Increase) / decrease in assets:
Accounts receivables		(10,555,381)		863,320
Inventory		678,669		2,022,449
Prepaid expense and other receivables		(100,657)		(1,832)
Increase / (decrease) in current liabilities:
Accounts payable		8,553,730		(655,263)
Due to related parties		(163,225)		(727,796)
Accrued expenses and other payables		911,929		99,639
Income tax payable		1,113,353		(1,282,353)
Total Adjustments		612,303		437,229
Net cash provided by operating activities		17,524,845		13,246,440
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment		(10,128)		(202,132)
Prepaid lease		(1,463,687)		-
Net cash used by investing activities		(1,473,815)		(202,132)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable		-		(1,706,161)
Capital contributions		-		322,878
Proceeds from issuance of preferred stock		13,191,849		-
Preferred stock dividend paid		(57,534)		(47,647,044)
Net cash provided by financing activities		13,134,315		(49,030,327)
Effect of exchange rate changes on cash and cash equivalents		(124,812)		1,753,478
Net change in cash and cash equivalents		29,060,533		(34,232,541)
Cash and cash equivalents, beginning balance		5,302,591		39,535,132
Cash and cash equivalents, ending balance	$	34,363,124	$	5,302,591
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax	$	4,829,484	$	5,609,566
Interest	$	-	$	240,861
The accompanying notes are an integral part of these consolidated financial statements.

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28

SINOCOM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 1 - ORGANIZATION

Sinocom Pharmaceutical, Inc. (“Sinocom” or “Company”) was formed on September 13, 2007 in the State of Nevada. The Company was originally incorporated as Tiger Acquisitions, Inc. and changed its name to Sinocom on February 26, 2009.  Through a share exchange, Rolling Rhine Holdings, Ltd (“Rolling Rhine”) and its wholly-owned subsidiaries, China Zhongxi Yao Group Ltd and Anqing Zhongxi Yao Ltd (“Anqing Zhongxi Yao”), became wholly-owned subsidiaries of the Company. Rolling Rhine was incorporated in December 2007, under the laws of the British Virgin Islands as a holding company for the purposes of owning 100% of China Zhongxi Yao Group Ltd. Rolling Rhine formed China Zhongxi Yao Group Limited, a Hong Kong company, for the purpose of owning 100% of the equity interest of Anqing Zhongxi Yao. Anqing Zhongxi Yao, formed in December 1997, was organized under the laws of the People’s Republic of China (“PRC”) and was owned by a number of individuals until December 31, 2005 when it was acquired by a company, which was under the common control of Rolling Rhine and China Zhongxi Yao.

Note 2 - RESTATEMENT

When the Company accounted for the acquisition of Anqing Zhongxi Yao in 2006 from the former shareholders, the Company determined that pooling-of-interest method was appropriate. Recently, in preparing the latest Form 10-Q, the Company revisited the accounting treatment for the acquisition of Anqing Zhongxi Yao with its external consultant. After due consideration, the Company determined that the purchase method should be applied in accounting for the acquisition of Anqing Zhongxi Yao. The use of purchase method has resulted in significant changes to several components in the statement of stockholders’ equity as of January 1, 2006, and also changes to the balances carried forward in the subsequent periods. There is, however, no effect on the statements of cash flows, statements of income or total assets as presented in the financial statements the Company previously filed in its Form 10-K.

The restatement adjustments have been reflected in the statement of stockholders’ equity.

Note 3 - 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 accompanying consolidated financial statements have been presented in United States Dollars (“USD”).

In December 31, 2005, Anqing Zhongxi Yao was acquired by a company, which was under common control of Rolling Rhine and China Zhongxi. As discussed above, the acquisition has been accounted for using the purchase method of accounting.

In October 2008, Rolling Rhine and China Zhongxi Yao Group Limited entered into an agreement with the holding company of Anqing Zhongxi Yao, which was under common control of Rolling Rhine and China Zhongxi Yao.  The agreement has been accounted for as a transaction between entitites under common control in accordance with authoritative guidance issued by the Financial Accounting Standards Board. Therefore, the historical financial statements of Anqing Zhongxi Yao were carried forward.

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On January 20, 2009, Sinocom entered into an Exchange Agreement with Rolling Rhine and its shareholders (“Share Exchange”).  Upon the closing of the Share Exchange on February 20, 2009, the shareholders of Rolling Rhine delivered 300,000 shares of common stock of Rolling Rhine, representing all of its issued and outstanding common stock to Sinocom in exchange for 67,131,660 shares of common stock of Sinocom.

The Share Exchange is being accounted for as a “reverse merger” since the stockholders of Rolling Rhine own a majority of the outstanding shares of Sinocom’s common stock immediately following the Share Exchange.  Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. Thus the Share Exchange is equivalent to the issuance of stock by Rolling Rhine for the net monetary assets of Sinocom, accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the Share Exchange was identical to that resulting from a reverse acquisition, except no goodwill was recorded. Under reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Sinocom, are those of the legal acquiree, Rolling Rhine, which is considered to be the accounting acquirer, and thus represent a continuation of the financial statements of Rolling Rhine. Share and per share amounts stated have been retroactively adjusted to reflect the merger. The accompanying financial statements present the historical financial condition, results of operations and cash flows of the operating company prior to the recapitalization.

Translation Adjustment

The Company’s functional currency is USD and its main operating subsidiary’s functional currency is Chinese Yuan (“CNY”). For financial reporting purposes, the consolidated financial statements of the Company have been translated into USD. All assets and liabilities are translated at the exchange rates at the balance sheet dates, stockholders’ equity were translated at the historical rates and statements of income and cash flow items were translated at the weighted average exchange rate for the year. Any translation adjustments resulting are included in foreign currency translation adjustment to other comprehensive income, a component of stockholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

The Company’s operations are carried out in the PRC.  Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC’s economy.  The Company’s business may be influenced 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.

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

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Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. At December 31, 2009, there were no contingencies which required a loss provision.

Cash and Cash Equivalents

Cash and cash equivalents comprise primarily of cash held in major banks in the PRC with less than three months of maturity.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable.   Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.  Reserves are recorded primarily on a specific identification basis.  There were no allowances for doubtful accounts as of December 31, 2009 and 2008.

Inventories

Inventories are valued at the lower of cost (determined on a weighted average basis) or market. As of December 31, 2009 and 2008, inventory consisted of finished goods valued at $2,120,516 and $2,798,019, respectively.

 

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings	20 years
Transportation equipment	5 years
Furniture and equipment	5 years

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 At December 31, 2009 and 2008, Property and Equipment consist of the following:

			2009		2008
Buildings		$	809,494	$	809,494
Transportation equipment			199,602		197,123
Furniture and equipment			88,478		86,847
Total			1,097,574		1,093,464
Accumulated depreciation			(483,683)		(401,834)
		$	613,891	$	691,630

Depreciation expense was $81,849 and $95,287 for the year ended December 31, 2009 and 2008 respectively.

Long-Lived Assets  

The Company periodically evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate the carrying value may not be recoverable, and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

Fair Value of Financial Instruments

The Financial Instrument Topic of the FASB Accounting Standards Codification (“ASC 825”) requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

 

Revenue Recognition

Revenue from product sales is recognized at the time of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured.

 

Income Taxes

The Statement of Financial Accounting Standards, No. 109, “Income Taxes” requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred taxes to the amount expected to be realized.

In July 2006, the FASB released FASB interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109,” (FIN No. 48).  FIN No. 48 clarifies the accounting and reporting for uncertainties in income tax law.  This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.  This Statement is effective for fiscal years beginning after December 15, 2006. As a result of implementing FIN No. 48, there have been no adjustments to the Company’s financial statements.

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Basic and Diluted Earnings per Share

Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

 

The effects of Series A Preferred Stock have been excluded from the computation of diluted earnings per share for the year ended December 31, 2009 as their effects would have been anti-dilutive.

Statement of Cash Flows

 

In accordance with the Statement of Cash Flows Topic of the FASB Accounting Standards Codification (“ASC 230”), cash flows from the Company’s operations are 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 sheets.

 

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Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of whom are in China. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Recent Accounting Pronouncements

The Derivatives and Hedging Topic of the FASB Accounting Standards, Codification (“ASC 815”) permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company’s first fiscal year that begins after September 15, 2006.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment to FASB Statement No. 140.” SFAS No. 156 requires that an entity recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. The new standard is effective for fiscal years beginning after September 15, 2006. SFAS No. 156 was superseded by the Transfer and Servicing Topic of the FASB Accounting Standards Codification (“ASC 860”). The adoption of this new standard did not have a material impact on the Company’s financial position, results of operations or cash flows.

In September, 2006, FASB issued SFAS No. 157, “Fair Value Measurements.”  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements.  This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, this Statement does not require any new fair value measurements.  However, for some entities, the application of this Statement will change current practice.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  SFAS No. 157 was superseded by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification (“ASC 820”). The adoption of this Statement had no material impact on the Company’s results.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”).  SAB 108 was issued to provide interpretive guidance on how the effects of the carryover reversal of prior year misstatements should be considered in quantifying a current year misstatement. The provisions of SAB 108 are effective for the Company for its December 31, 2006 year-end.  The adoption of SAB 108 had no impact on the Company’s consolidated financial statements.

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In February, 2007, FASB issued SFAS 159, ‘The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.”  This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments.  This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. SFAS No. 159 was superseded by the Financial Instruments Topic of the FASB Accounting Standards Codification (“ASC 825”). The adoption of this Statement had no impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements.”  This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. SFAS No. 160 was superseded by the Consolidation Topic of the FASB Accounting Standards Codification (“ASC 810”). Management is currently evaluating the effect of this pronouncement on financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.”  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133: and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows.  SFAS No. 161 was superseded by the Derivative and Hedging Topic of the FASB Accounting Standards Codification (“ASC 815”). Management is currently evaluating the effect of this pronouncement on financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.”  This Statement will provide a framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities.  With the issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from auditing literature to accounting literature. SFAS No. 162 was superseded by the Generally Accepted Accounting Principles Topic of the FASB Accounting Standards Codification (“ASC 105”).

In June 2008, the FASB ratified EITF No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF No. 07-5”). EITF No. 07-5 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF No. 07-5 is effective for fiscal years beginning after December 15, 2008. We adopted EITF No. 07-5 effective January 1, 2009. EITF No. 07-5 was superseded by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification (“ASC 815”). The adoption of ASC 815 has no impact on our financial statements.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued the following new accounting standards:

35

	·	FASB Staff Position FAS No. 157-4, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, (“FSP FAS No. 157-4”) provides guidelines for making fair value measurements more consistent with the principles presented in SFAS No. 157.  FSP FAS No. 157-4 provides additional authoritative guidance in determining whether a market is active or inactive and whether a transaction is distressed. It is applicable to all assets and liabilities (i.e., financial and non-financial) and will require enhanced disclosures. FSP FAS No. 157-4 was superseded by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification (“ASC 820”).

	·	FASB Staff Positions FAS No. 115-2, FAS 124-2, and EITF No. 99-20-2, Recognition and Presentation of Other-Than-Temporary Impairments, (“FSP FAS No. 115-2, FAS No. 124-2, and EITF No. 99-20-2”) provides additional guidance to provide greater clarity about the credit and noncredit component of an other-than-temporary impairment event and to more effectively communicate when an other-than-temporary impairment event has occurred. This FSP applies to debt securities. FSP FAS No. 115-2 and FAS No. 124-2 were superseded by the Investments-Debt and Equity Securities Topic of the FASB Accounting Standards Codification (“ASC 320”).

	·	FASB Staff Position FAS No. 107-1 and APB No. 28-1, Interim Disclosures about Fair Value of Financial Instruments, (“FSP FAS No. 107-1 and APB No. 28-1”) amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. FSP FAS No. 107-1 and APB No. 28-1were superseded by the Financial Instruments Topic of the FASB Accounting Standards Codification (“ASC 825”).

These standards are effective for periods ending after June 15, 2009. We are evaluating the impact that these standards will have on our consolidated financial statements.

In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements.

 

In June 2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

On July 1, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168 - The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards CodificationTM (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the Condensed Consolidated Financial Statements.

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In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2012); early adoption is permitted.  The Company is currently evaluating the impact of adoption.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

Note 4 – DUE TO A RELATED PARTY

 

The amount as of December 31, 2008 was due to the Company’s CEO, and was unsecured, interest-free and repayable on demand.

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Note 5 - INCOME TAXES

The Company, which is incorporated in the United States, is subject to U.S. tax law. Other than legal and professional expenses for the daily operations, the Company has no other activities which are taxable in the U.S.

The Company conducts substantially all of its business and earns substantially all of its net income through its operating subsidiary in the PRC, which has an applicable tax rate of 25%.

The following is a reconciliation of income tax expense for the year ended December 31, 2009 and 2008:

A reconciliation of the statutory income tax rates to the Company’s effective income tax rate is as follows:

		2009		2008
Statutory income tax rate		25.0	%	25.0	%
Expenses not subject to income tax		0.6		0.3
Effective tax rate		25.6	%	25.3	%

The Corporate Income Tax Law imposes a 5% withholding income tax for dividends distributed by a foreign invested enterprise to a Hong Kong incorporated enterprise, which arise from profits earned after January 1, 2008. Since the Company intends to reinvest its earnings to further expand its businesses in the PRC, the Company’s subsidiary does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, as of December 31, 2009, the Company has not recorded any withholding tax on the retained earnings of its PRC subsidiary.

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Note 6 – COMMITMENTS & CONTINGENCIES

The Company leases facilities under operating leases, extending through January 2018 that it pays for on an annual basis and accrues for throughout the year. For the year ended December 31, 2009 and 2008, rent expense was $442,932 and $316,369, respectively.  The future minimum obligations under these agreements are as follows:

Year 1	$	345,919
Year 2	$	345,919
Year 3	$	345,919
Year 4	$	345,919
Year 5	$	338,735
Thereafter	$	962,587

The Company has entered into a land lease for 50 years through April 30, 2059. Terms of lease call for 5 payments at the beginning of each ten year period.  The total future minimum obligation under the lease total $7,227,618 with second payment due May 1, 2019. Any breach by either party to the lease calls for a penalty payment of approximately $146,259 plus any economic loss incurred. The first payment has been capitalized as prepaid lease and is being amortized over ten years. Amortization of prepaid lease for the year ended December 31, 2009 and 2008 totaled $97,453 and $0, respectively.

Note 7 – STATUTORY RESERVES

As stipulated by the relevant laws and regulations in the PRC, the Company’s PRC subsidiary is required to maintain non-distributable Reserves, which include a statutory surplus reserve and a statutory welfare reserve. Appropriations to the statutory surplus reserve are required to be made at not less than 10% of profit after taxes as reported in the statutory financial statements of the Company’s PRC subsidiary until the balance reaches 50% of its registered capital. The statutory welfare reserve allocations are determined annually at the discretion of the board of directors of the Company’s PRC subsidiary. Once appropriated, these amounts are not available for future distribution to owners or shareholders. The statutory surplus reserve may be applied against prior year losses, if any, and may be applied to the purchase of capital assets upon the Board of Directors’ approval. As of December 31, 2008 and 2009, the balance of the statutory surplus reserve and the statutory welfare reserve were $5,677,041 and $5,677,041, respectively. There was no appropriation to the statutory surplus reserve and the statutory welfare reserve for the years ended December 31, 2009 and 2008,

Note 8 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

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

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Note 9 – MAJOR CUSTOMERS AND CREDIT RISK

No customer accounted for more than 10% of accounts receivable at December 31, 2009 and 2008.  No customer accounted for greater than 10% of sales for the year ended December 31, 2009 and 2008. No vendor accounted for more than 10% of accounts payable as at December 31, 2009 and 2008, No vendor accounted for more than 10% of purchases for the year ended December 31, 2009 and 2008. .

Note 10 – RELATED PARTY TRANSACTIONS

a)

The Company entered into a facility swap agreement with its CEO on August 20, 2008. Under the facility swap agreement, the Company agreed to swap all the benefits and costs associated with its office building with those of a warehouse and an office building owned by the CEO until July 31, 2019. On September 20, 2009, the Company and its CEO terminated the facility swap agreement and entered into a new rental agreement for the use of the warehouse and office building owned by the CEO. Under the new rental agreement, Anqing ZhongxiYao pays rent to the CEO at RMB 905,623 per year.

b)

During 2008, the Company incurred subcontracting fees of $7,864,281 in respect of certain products produced by a related party in which our chairman has a beneficial interest.

Note 11 – SERIES A CONVERTIBLE PREFERRED STOCK

On October 28, 2009, the Company entered into a Series A Preferred Stock Purchase Agreement with key shareholders and some investors. The Company authorized and issued to the investors $15,000,000 of the Company’s convertible, redeemable Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”) at a price of $0.9465 per share. The Series A Preferred Stock are convertible into shares of the Company’s common stock, par value $0.001 per share constituting 18.16% of the outstanding shares of common stock of the Company, determined on a fully-diluted basis.  

Holders of Series A Preferred Stock will be entitled to receive cash dividends, which will accrue at the rate of 5.0% per annum for the twelve month period following the issue date and at the rate of 10.0% per annum for each twelve month period thereafter.  The Series A Preferred Stock ranks, with respect to dividend rights and rights upon liquidation, senior to the Company’s common stock.

The fair value of Series A Preferred Stock was $0.969, which was determined by using the discounted cash flow with the following assumptions:

1.		Discount rate of 20% as calculated under the weighted average cost of capital method. Assumptions used are as follow.
			Discount Rate Build Up Computation /Capital Asset Pricing Model (CAPM)
Risk free Rate:			3.64%	Market yield to maturity on 10 yr PRC Bond
Cost of Debt			5.94%	Pre-tax expected lending rate (tax rate 25%)
CAPM (Beta) Adjustment: .93			15.3%	Weighted average Cost of capital

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Specific Company Risk Adjustment:			4.80%	Per Specific Company Risk Adjustment Computation (rounded)
Market Risk Premium Rate and Expected Market Return Rate are based on market return less risk-free rate, and the weighted average of the internal rate of return of all members of the Company's major index.
Total Discount Rate			20%
2.	The management’s anticipated future results of the benefit stream to the owners of the Company based on its four year forecasts.
3.
.	Discount for Lack of Marketability (DLOM) of 20% based on the observation range

The Company recognized a beneficial conversion feature discount on Series A Preferred Stock at its intrinsic value which was the fair value of the common stock at the commitment date for Series A Preferred Stock investment, less the effective conversion price but limited to the $13,191,849 of proceeds received from the sale. The Company recognized the $356,624 beneficial conversion feature as an increase in paid in capital in the consolidated balance sheet on the date of issuance of Series A Preferred Stocks since these shares were convertible at the issuance date.

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ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable

ITEM 9A(T).    CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the

participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.  

As reported in a filing on Form 8-K dated August 6, 2010, subsequent to the filing of our report on From 10-Q for the period ended March 31, 2010, we changed accountants and appointed BDO Limited as our principal independent accountant to audit our financial statements for the fiscal year ended December 31, 2010. We changed accountants solely in order to obtain BDO Limited’s greater experience in auditing the financial statements of global public companies.  In addition, because we desire to have only one accountant included in our prospective filings, we also engaged BDO Limited to re-audit our financial statements for the years ended December 31, 2007, 2008 and 2009.

In conjunction with the re-audit of our financial statements from prior years, management determined that a restatement was required of our financial statements for the year ended December 31, 2009, included in our report on Form 10-K for the fiscal year ended December 31, 2009, and of our interim unaudited financial statements for the period ended March 31, 2010, included in our report on Form 10-Q for the period ended March 31, 2010. The restatement of our financial statements for the fiscal year ended December 31, 2009, was necessary in order to amend and restate our stockholders’ equity for the fiscal years ended December 31, 2009 and 2008, and the related notes thereto, in light of a change in the application of accounting for business combination from the pooling-of-interest method to the purchase method for the

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2006 acquisition of Anqing Zhongxi Yao Ltd. The restatement of our interim unaudited financial statements for the period ended March 31, 2010, was necessary to reflect the effects of the December 31, 2009 restatement on our March 31, 2010 financial statements. As a result of the foregoing, management determined that a material weakness existed with respect to our reporting of complex and non-routine transaction. This weakness was a result of our incorrect conclusion regarding the correct method of accounting to be used in conjunction with the acquisition of Anqing Zhongxi Yao Ltd.

As a result of the material weakness identified with respect to our reporting of complex and non-routine transaction, our chief executive officer and chief financial officer re-evaluated our disclosure controls and procedures andconcluded that our disclosure controls and procedures were not adequate, as of December 31, 2009, to ensure that the information required to be disclosed by us in our SEC reports was recorded, processed, summarized and reported within the time periods specified.  

Subsequent to December 31, 2009, to remediate the weakness in our disclosure controls and procedures, we hired third party consultants to assist us in identifying and analyzing complex non-routine transactions and with determining the appropriate accounting treatment for any such complex, non-routine transactions.

Internal Control Over Financial Reporting

The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company also is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of December 31, 2009 based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of December 31, 2009, the Company's internal control over financial reporting was effective.

Our management revised its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009, originally included in our report on Form 10-K filed on March 31, 2010. Subsequent to filing our

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annual report on Form 10-K on March 31, 2010, we identified errors in our 2009 financial statements and have restated those financial statements in this report on Form 10-K/A.  Management has concluded that these errors resulted from control deficiencies that represent material weakness in internal control over financial reporting.  As a result, management has revised its assessment of the effectiveness of our internal control over financial reporting due to material weakness in our reporting of complex, non-routine transactions, and concluded that as of December 31, 2009, our internal control over financial reporting was not effective.  

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report on Form 10-K.

There was no change in the Company's internal control over financial reporting during the year ended December 31, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Subsequent to December 31, 2009, to remediate the weakness in our internal controls over financial reporting, we hired third party consultants to assist us in identifying and analyzing complex non-routine transactions and determining the appropriate accounting treatment for any such complex non-routine transactions.  

ITEM 9B.     OTHER INFORMATION.

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following table sets forth, as of December 31, 2009, the names and ages of the directors and executive officers of the Registrant, the principal positions with the Registrant held by such persons and the date such persons became a director or executive officer. The executive officers are elected annually by the Board of Directors. The directors serve one year terms or until their successors are elected.  

Name	Age	Position Held and Tenure
Chi Kwong WAN	49	Chairman
XueXiang AI	48	CEO and Director
Tuck Wing PANG	44	CFO and Director
Stanley Leung	46	Director

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Biographical Information

Mr. Chi Kwong Wan is the Chairman of the Board of Directors.  Mr. Wan has been affiliated with Anqing Zhongxi since 2003. From 2003 to 2005 he was a business advisor to the company, and in 2005, following a change in the law of the PRC to permit foreign ownership of pharmaceutical companies, he acquired all of the equity ownership of Anqing Zhongxi. From 1995 to 2003, he was the general manager of China C&C Holdings Limited and was responsible for the management of chemical material import and export activities in the PRC.  From 1993 to 1994, he worked with Hingsky Investment Co., Ltd as a manager and was responsible for the purchase and sales of chemical materials.  

Mr. XueXiang Ai is the Chief Executive Officer and is a member of the Board of Directors. He joined Anqing Pharmaceutical in 2001 and has served as its the President and General Manager responsible for overall management and operations. From 2000 to 2001 he was a manager of Anqing Medical Co, Ltd., where he was responsible for marketing and sales.  From 1992 to 1998, he worked with Zhengxing Pharmaceutical Department of Anqing City Biochemistry Pharmaceutical as the manager in respect of marketing and sales activities.  From 1985 to 1991, Mr Ai worked with Shihua Xiangming Construction Material Co as a product purchaser.     

Mr. Tuck Wing Pang is the Chief Financial Officer and is a member of the Board of Directors. Mr. Pang is responsible for corporate governance and corporate communications with external parties and regulatory bodies with regarding to the group’s financial matters.  Prior to joining the Company, Mr. Pang was the key finance personnel for several leading companies in Singapore like RGM Entertainment, Savi Technology Asia, and Asia Food & Properties.  From 2002 to 2004 he was President and Chief Financial Officer of WinEdge & Wireless Pte Ltd.  He is Fellow Certified Public Accountant of Singapore and a member of Mensa, Mr Pang graduated from the National University of Singapore, with a Masters in Business Administration (UK).

Mr. Stanley Leung was appointed as a director of the Company on December 3, 2009. Mr. Leung is a Senior Vice President in DBS Private Equity. Mr. Leung's business  experience includes over 23 years of management experience in various roles including auditor and reporting accountant of private and listed companies, regulator in the listing division of the Stock Exchange of Hong Kong, investment banker with Citigroup, and transactor with CVC Asia Pacific for leveraged buy-outs in the PRC and South East Asian region. He obtained a Master of Commerce degree from the University of New South Wales in Australia and is a fellow member of the Australian Society of Certified Practicing Accountants.

Family Relationships

There are no family relationships between any of the current directors or officers of the Company.

Involvement in Certain Legal Proceedings

None of our officers, directors, promoters or control persons has been involved in the past five (5) years in any of the following:

(1)

Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

(2)

Any conviction in a criminal proceedings or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

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(3)

Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

(4)

Being found by a court of competent jurisdiction (in a civil action), the SEC or the U.S. Commodity Futures Trading Commission to have violated a federal or state securities laws or commodities law, and the judgment has not been reversed, suspended, or vacated.

Directorships

None of the Company’s executive officers or directors is a director of any company with a class of equity securities registered pursuant to Section 12 of the Securities exchange Act of 1934 (the “Exchange Act”) or subject to the requirements of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership of Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission.  Such officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.  Based solely on its review of the copies of such forms received by it, the Company believes that, during the fiscal year ended December 31, 2009, all Section 16(a) filing requirements applicable to its officers, directors and 10% stockholders were satisfied.  

Code of Ethics

The Company has not yet adopted a code of ethics.  The Company intends to adopt a code of ethics in the near future.  

ITEM 11.  EXECUTIVE COMPENSATION.

Executive Compensation

The Company’s chief executive officer , chief financial officer and all other executive officers did not receive remuneration in excess of $100,000 during the fiscal years ended December 31, 2009 and 2008.  The total compensation paid to the Company’s chief executive officer for the fiscal years ended December 31, 2009 and 2008, was $43,667 and $30,736, respectively.  

Option Grants in Last Fiscal Year

There were no options granted to any of the named executive officers during the fiscal year ended December 31, 2009.

Employment Agreements

 

The Company has entered into employment agreements with its executive officers, copies of which are attached as exhibits to this Annual Report on Form 10-K.

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Aside from the foregoing, we have no written employment agreements with our officers and directors.  Compensation was determined after discussion about expected time commitments, remuneration paid by comparable organizations and the flexibility provided to the Company by not having extended terms and other terms typical of employment agreements.  We have no plans or packages providing for compensation of officers after resignation or retirement.

Equity Compensation Plan Information

The Company currently does not have any equity compensation plans.

Director Compensation

We do not currently compensate our directors for their services as directors. Accordingly, no compensation was awarded to, earned by, or paid to any of our directors for their services rendered as directors for the fiscal year ended December 31, 2009 or for any prior fiscal year. Directors are reimbursed for their reasonable out-of-pocket expenses incurred with attending board or committee meetings.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of December 31, 2009, certain information with respect to the common stock beneficially owned by (i) each director, nominee to the Board of Directors and executive officer of the Company; (ii) each person who owns beneficially more than 5% of the common stock; and (iii) all directors and executive officers as a group:

Title and Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of class
Common	Mr. Chi Kwong WAN (1) Room 3, 21/F., Far East Consortium Building,121 Des Voeux Road Central, HK	34,237,146	47.94%
Common	Eastern Wealthy International Invest Limited (2) Sea Meadow House, Blackburne Highway (P.O. Box 116), Road Town, Tortola, British Virgin Islands	8,055,799	11.28%
Common	Always Host International Development Limited (3) Sea Meadow House, Blackburne Highway (P.O. Box 116), Road Town, Tortola, British Virgin Islands	4,027,899	5.64%

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Common	Siang Meng TAN Room 3, 21/F., Far East Consortium Building,121 Des Voeux Road Central, HK	4,699,217	6.58%
Common	Wei Seng KONG Room 3, 21/F., Far East Consortium Building,121 Des Voeux Road Central, HK	4,699,217	6.58%
Common	Choon Giok LOW Apt Blk 516, Jurong West Street 52 #03-79, Singapore, 640516	4,699,217	6.58%
Common	XueXiang AI (1) Block 1, Room 502, Zhuang Yuan Fu Street, Ying Jiang District, Anqing City, Anhui Province. PRC.	8,055,799 (4)	11.28%
Common	Tuck Wing PANG (1) 334 Kang Ching Road, #08-250 Singapore  610334	0	0
Common	Stanley Leung 6 Shenton Way DBS Building, Tower 1 Singapore  068809	0	0
Common	DBS Nominees (Private) Ltd 6 Shenton Way DBS Building, Tower 1 #30-01 CapMkts-Private Equity Singapore 068809	8,451,786 (5)
Common	SEAVI Advent Equity V (A), Ltd c/o #05-04/05 Odeon Towers 331 North Bridge Road Singapore  188720	7,395,313 (6)

Common	All Directors and Executive Officers as a Group ( 4 in number)	42,292,945	59.22%

(1)

The person listed is currently an officer, a director, or both, of the Company.

(2)

Eastern Wealthy International Invest Limited is owned by XueXiang AI.  Accordingly, he may be deemed to be the beneficial owner of the shares held in the name of Eastern Wealthy International Invest Limited.  

(3)

Always Host International Development Limited is owned by Mr. XiaoGao XU and Mr. XianQian XU

(4)

Includes 8,055,799 shares held in the name of Eastern Wealthy International Invest Limited, of which Mr. Ai may be deemed to be the beneficial owner.

(5)

Includes 8,451,786 shares underlying the conversion of Series A Preferred Stock held by the named shareholder.

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(6)

Includes 7,395,313 shares underlying the conversion of Series A Preferred Stock held by the named shareholder.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Transactions

There were no material transactions, or series of similar transactions, during our Company’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which our Company was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of the small business issuer’s total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.

Director Independence

The NASDAQ Stock Market has instituted director independence guidelines that have been adopted by the Securities & Exchange Commission.  These guidelines provide that a director is deemed “independent” only if the board of directors affirmatively determines that the director has no relationship with the company which, in the board’s opinion, would interfere with the director’s exercise of independent judgment in carrying out his or her responsibilities.  Significant stock ownership will not, by itself, preclude a board finding of independence.

For NASDAQ Stock Market listed companies, the director independence rules list six types of disqualifying relationships that preclude an independence filing.  The Company’s board of directors may not find independent a director who:

1.

is an employee of the company or any parent or subsidiary of the company;

2.

accepts, or who has a family member who accepts, more than $60,000 per year in payments from the company or any parent or subsidiary of the company other than (a) payments from board or committee services; (b) payments arising solely from investments in the company’s securities; (c) compensation paid to a family member who is a non-executive employee of the company’ (d) benefits under a tax qualified retirement plan or non-discretionary compensation; or (e) loans to directors and executive officers permitted under Section 13(k) of the Exchange Act;

3.

is a family member of an individual who is employed as an executive officer by the company or any parent or subsidiary of the company;

4.

is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than (a) payments arising solely from investments in the company’s securities or (b) payments under non-discretionary charitable contribution matching programs;

5.

is employed, or who has a family member who is employed, as an executive officer of another company whose compensation committee includes any executive officer of the listed company; or

6.

is, or has a family member who is, a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit.

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Based upon the foregoing criteria, our Board of Directors has determined that XueXiang AI is not an independent director under these rules as he is also employed by the Registrant as its CEO and Tuck Wing Pang is not an independent director under these rules as he is also employed by the Registrant as its CFO.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

BDO Limited billed the Company $40,000 for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2009 and 2008.

Audit Related Fees

BDO Limited did not bill the Company any amounts for audit related services for the fiscal years ended 2009 and 2008.

Tax Fees

BDO Limited did not bill the Company any amounts for tax compliance, advice and planning for the fiscal years ended December 31, 2009 and 2008.

All Other Fees

 

BDO Limited did not bill the Company for any products and services other than the foregoing during the fiscal years ended December 31, 2009 and 2008.

Audit Committee's Pre-approval Policies and Procedures

The Company does not have an audit committee per se. The current board of directors functions as the audit committee.

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)  Exhibits.

2.1	Share Exchange Agreement dated January 20, 2009, by and between Tiger Acquisitions, Inc., Rolling Rhine Holdings, Ltd., and the shareholders of Rolling Rhine Holdings, Ltd, incorporated by reference from exhibit to Current Report on Form 8K filed with the Securities and Exchange Commission on February 20, 2009.
3.1(i)	Articles of Incorporation filed with the State of Nevada on September 13, 2007, incorporated by reference from exhibit to Form 10 filed with the Securities and Exchange Commission on May 1, 2008.

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3.1(ii)	Bylaws incorporated by reference from exhibit to Form 10 filed with the Securities and Exchange Commission on May 1, 2008.
3.3	Amended and Restated Articles of Incorporation incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009
3.4	Amended and Restated Bylaws incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 12, 2009
4.1	Certificate of Designations of Series A Preferred Stock incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.1	Series A Preferred Stock Purchase Agreement incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 30, 2009.
10.2	Investors’ Rights Agreement dated as of December 3, 2009 by and among the Company, the Investors and the Key Shareholders incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.3	Registration Rights Agreement dated as of December 3, 2009 by and among the Company and the Investors incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.4	Voting Agreement dated as of December 3, 2009 by and among the Company, the Investors and the Key Shareholders incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.5	Indemnification Agreement dated as of December 3, 2009 by and among the Company and the Series A Director incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.6	Guarantee dated as of December 3, 2009 by and among the Guarantors and the Investors incorporated by reference from exhibit to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 8, 2009.
10.7	Executive Employment Agreement dated January 18, 2010, by and among the Company and Xuexiang AI, the Chief Executive Officer, incorporated by reference from exhibit to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.
10.8	Executive Employment Agreement dated January 18, 2010, by and among the Company and Tuck Wing Pang, the Chief Financial Officer, incorporated by reference from exhibit to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.
10.9	Service Agreement dated January 18, 2010, by and among the Company and Chi Kwong Wan, Chairman of the Board of Directors, incorporated by reference from exhibit to Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010.

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31.1	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed Herewith

SINOCOM PHARMACEUTICAL, INC.

By:  /S/ Xuexiang AI

Xuexiang Ai, Chief Executive Officer

Date:  September 29, 2010

In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

By:  /S/ Xuexiang AI

Xuexiang Ai, Chief Executive Officer and Director

Date:  September 29, 2010

By:  /S/ Tuck Wing PANG

Tuck Wing Pang, Chief Financial Officer, Principal Accounting Officer, and Director

Date:  September 29, 2010

 

By:  /S/ Chi Kwong WAN

Chi Kwong WAN, Chairman

Date:  September 29, 2010

By:  /S/ Stanley LEUNG

Stanley LEUNG, Director

Date:  September 29, 2010

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