[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
          For the Fiscal Year Ended December 31, 2011

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________.

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

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 15(d) of the Exchange Act.
[  ]  Yes          [X] No

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. [ ] Yes     [X] No

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

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.

i

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

The registrant had 43,047,169 shares of common stock outstanding as of April 12, 2012.

ii

iii

Certain statements made in this annual report on Form 10-K constitute "forward-looking statements" as that term is defined in applicable securities laws. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "intend," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include: (1) a continued downturn in international economic conditions; (2) any adverse occurrence with respect to our patented technology; (3) our ability to bring new products to market; (4) market demand for our products; (5) shifts in industry capacity; (6) product development or other initiatives by our competitors; (7) fluctuations in the availability and cost of materials required to produce our products; (8) potential negative financial impact from claims, lawsuits and other legal proceedings or challenges; and (9) other factors beyond our control. Important factors that you should also consider, include, but are not limited to, the factors discussed under "Risk Factors" in this annual report.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. These forward-looking statements speak only as of the date on which they are made, and except to the extent required by applicable law, including the securities laws of the United States, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this annual report.

Hubei Minkang Pharmaceutical Ltd. files annual, quarterly and current reports with the Securities and Exchange Commission (the "Commission" or "SEC"). You may read and copy documents referred to in this annual report on Form 10-K that have been filed with the Commission at the Commission's Public Reference Room, 100 F Street, N.E., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission's website at http://www.sec.gov.

As used in this annual report: (i) the terms "we," "us," "our," "Hubei Minkang" and the "Company" mean Hubei Minkang Pharmaceutical Ltd. and its direct and indirect wholly-owned subsidiaries, HBMK Pharmaceutical Limited and Hubei Minkang Pharmaceutical Co., Ltd.; (ii) "SEC" refers to the Securities and Exchange Commission; (iii) "Securities Act" refers to the United States Securities Act of 1933, as amended; (iv) "Exchange Act" refers to the United States Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

Hubei Minkang Pharmaceutical Ltd. was incorporated in the State of Nevada on April 17, 2006, under the name DGT Corp. Our shares of common stock were quoted for trading on the Over-the-Counter Bulletin Board (the "OTCBB") on December 22, 2006, under the symbol "DGTR". On September 20, 2007, our Company and its wholly owned subsidiary, Blackrock Petroleum Corp. merged and our name changed to Blackrock Petroleum Corp.

1

Our trading symbol on the OTCBB was changed to "BRPC". On May 21, 2008, we underwent another merger with our wholly owned subsidiary Nexgen Petroleum Corp. At that time our name was changed to Nexgen Petroleum Corp. and our trading symbol on the OTCBB was changed to "NXPE" effective June 9, 2008. On October 20, 2010, we merged with our wholly owned subsidiary, Hubei Minkang Pharmaceutical Ltd., and as result of such merger our name changed to Hubei Minkang Pharmaceutical Ltd. and our trading symbol on the OTCBB was changed to "HBMK" effective October 21, 2010.

Effective September 20, 2007, a forward stock split of our authorized, issued and outstanding common stock was undertaken on a fifteen (15) to one (1) basis. As a result, our authorized capital increased from 90,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001 to 1,350,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. Our issued and outstanding share capital increased from 9,000,000 shares of common stock to 135,000,000 shares of common stock.

On April 18, 2008, Mr. Hsien Loong Wong, our then President, CEO and a director of the Company, who held in aggregate 94,500,000 post forward stock split shares of common stock of the Company, voluntarily agreed to surrender for cancellation in aggregate 80,000,000 shares of common stock in order to encourage equity investment into the Company. The cancellation of these 80,000,000 shares took place on April 18, 2008, resulting in Mr. Wong reducing his share holdings to only 14,500,000 shares registered in his name.

Effective October 20, 2010, a reverse stock split of our authorized, issued and outstanding common stock was undertaken on a one (1) to eight (8) basis. As a result, our authorized capital decreased from 1,350,000,000 shares of common stock with par value of $0.001 per share and 10,000,000 shares of preferred stock with par value of $0.001 per share to 168,750,000 shares of common stock with par value of $0.001 per share and 10,000,000 shares of preferred stock with par value of $0.001 per share. As at October 20, 2010, our issued and outstanding capital decreased from 64,765,941 shares of common stock to 8,095,747 shares of common stock.

When we operated as DGT Corp., we were in the business of providing professional digital photo editing services for photo studios. However, in late 2007 we changed our business plan and focused our activities on the oil and gas industry as an exploration stage corporation. We intended to acquire interests in leases for oil and gas prospects either through farmout arrangements, participation arrangements or the straight acquisition of oil and gas interests, and then drill exploratory and development wells with the help of other industry participants. We did not operate or intend to operate any properties. With respect to the projects that we participated in, we provided the operator with timely funding for our proportionate share of costs as well as with technical input on how best to develop the property. However, as we were not as successful as hoped at developing our oil and gas interests in Morgan County, Tennessee and had no sources of revenue from our business plan, we determined to seek out a new business opportunity to increase value for our shareholders.

On July 8, 2011, we entered into a share exchange agreement with HBMK Pharmaceutical Limited ("HBMK"), a BVI corporation, and all of the shareholders of HBMK (the "Vendors"), which was disclosed in the Company's Form 8-K filed on July 11, 2011. The closing of the share exchange agreement occurred on September 21, 2011. Pursuant to the terms of the share exchange agreement, we acquired all of the issued and outstanding shares of capital stock of HBMK from the Vendors in exchange for the issuance of 33,500,000 shares of our common stock to the Vendors on a pro rata basis in accordance with each Vendor's percentage ownership in HBMK.

a result of the closing of the share exchange agreement, HBMK has become our direct wholly-owned subsidiary and Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei Minkang PRC") has become our indirect wholly-owned subsidiary as HBMK is the sole owner of Hubei Minkang PRC, a company organized under the laws of the People's Republic of China.

HBMK Pharmaceutical Limited was incorporated on June 29, 2010 pursuant to the laws of the British Virgin Islands. As a result of the closing of the share exchange agreement, the Company is the sole shareholder of HBMK Pharmaceutical Limited ("HBMK"). HBMK's directors are Lee Tong Tai, Ang Siew Khim, Koh Sock Hua and Lee Tong Jiuh. Pursuant to a share purchase agreement between HBMK and Sensori Holdings (S) Pte. Ltd., a Singapore corporation, dated August 28, 2010, HBMK acquired all of the registered capital of Hubei Minkang Pharmaceutical Co., Ltd., which share purchase agreement closed on October 12, 2010.

2

On December 11, 2003, Hubei Provincial Foreign Economic and Trade Department issued the Approval Reply for the establishment of a foreign solely invested company Hubei Minkang Pharmaceutical Company Limited, E Wai Jing Mao Shen [2003] No. 121. On the same day, Hubei Provincial Foreign Trade and Economic Cooperation Department issued Certificate of Approval for Establishment of Enterprises with Foreign Investment in the People's Republic of China, Wai Jingmao E Shen [2003] No. 4509.

On December 18, 2003, Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei Minkang PRC") was established upon the issuance of Enterprises Business Licenses by Yichang Industry and Commerce Administration Bureau. The business scope of Hubei Minkang PRC is to produce and sell Chinese traditional and western and biological preparations (Valid to December 31, 2015), import and export products produced by its own and conduct other import and export business (except those forbidden or limited by the state), research and develop relative new products (within the permitted scope by the state), and prepare for the producing and selling of the material used medicine, cosmetics, and health product.

The directors of Hubei Minkang PRC are Lee Tong Tai, Ang Siew Khim, Koh Sock Hua and Lee Tong Jiuh.

The business of the Company will be conducted through its subsidiary, HBMK, which, in turn will conduct its business through its subsidiary, Hubei Minkang PRC.

Hubei Minkang PRC is a large-scale pharmaceutical company that mainly produces and markets Traditional Chinese Medicines ("TCM") and some chemical pharmaceuticals, which most are able to be purchased Over-the-Counter ("OTC") and some by prescription only. Hubei Minkang PRC has three Good Manufacturing Practice ("GMP") certifications, with seven production lines capable of producing 10 different product types including pills, tablets, capsules, granules, oral liquids, syrups, mixtures and injections, in more than 400 formulations and dosages.

Our vision is to become a truly national, fully vertically integrated pharmaceutical company in China by nurturing the physical, financial and social well being of customers, employees, shareholders and corporate and community partners.

We intend to realize this vision by executing on our mission of producing high quality TCM products in an environmentally friendly manner using advanced technology and techniques, and distributing the products throughout China and the world.

Our strategy for executing our mission is to:

• focus production on its highest margin products;
• continuously improve production facilities and process;
• lower production costs while maintaining product quality;
• increase direct sales while reducing distribution costs;
• acquire control of raw material supply;
• develop and acquire new products for manufacture; and
• expand distribution throughout China and overseas.

Traditional Chinese Medicine ("TCM") is a comprehensive medical system that originated in China more than 3,000 years ago.

3

Core concepts are based on the theories of Yin-Yang and the five elements, which are based on the ancient Chinese observing nature's cycles and changes. They held that wood, fire, earth, metal, and water were the basic substances constituting the material world. These five basic substances were considered an indispensable part of daily life. They also noted that the material world is in a constant state of flux due to the dynamic movement and mutual antagonism of yin and yang factors. TCM holds that a person's health depends on a constant struggle between the opposing forces of yin and yang, or heat and cold, as expressed through the five elements. TCM sees excesses or imbalances in the body as the cause of illness or disease.

TCM uses Chinese herbal medicines to help to restore balance and enable the body to regain health. These medicines comprise a combination of herbs, minerals and animal products, and complement other related therapies such as acupuncture, acupressure, massage and restorative physical exercises, such as T'ai Chi or Qi Qong.

In January 2008, the Chinese government moved to enhance the quality and safety of herbal medicine production. China's State Food and Drug Administration (SFDA) began to require all TCM "ready form" makers to be Good Manufacturing Practice (GMP) certified. Ready form is a herbal medicine that is processed, and can be taken after being boiled with water.

The Chinese government also implemented several more policies aimed at further standardizing production and research and development of Chinese traditional medicine. A key policy component is the supplementary regulation on TCM registration, which brings herbal medicines more in line with Western medicines in terms of drug registration.

The quality of a finished TCM varies largely as a result of factors closely linked to the raw materials used in TCM production. The quality of such raw materials is liable to fluctuate because environmental conditions, including weather, vary according to region and season. The new regulations ask TCM makers to identify the source and location of plantations for their ingredients during the registration process. The SFDA has begun drafting TCM production technology requirements, which should make them more unified and thus, more stable. The best way to achieve uniform quality in finished TCMs at the moment is to improve production technology standards.

Another key element of the supplementary regulation on TCM registration is that the SFDA requires that a generic version of TCM be subject to the same quality standards as the innovative version in terms of the compound, location of raw material cultivation, production procedure and production technology. This will result in stricter quality control of generic TCMs, which previously relied simply on performing quality tests that were very different from the proprietary version.

Hubei Minkang PRC currently has 148 pharmaceutical product registration certificates issued by the Food and Drug Administration Authority to produce the specified TCM and chemical medicines. 117 of such pharmaceutical registration certificates have received re-registration in June 2011. The other 31 pharmaceutical registration certificates are in the approving process of re-registration as of June 2011. There are currently 24 TCM and western-style medicines being produced and sold by Hubei Minkang PRC.

• 92 of Hubei Minkang PRC's permitted pharmaceuticals are listed in the Administration Catalogue for Overall Social Medical Insurance
• 49 are listed in the Basic Administration Catalogue for Medicine
• 66 are Over The Counter (OTC) products
• 1 of Hubei Minkang PRC's products are protected by China state government
• 1 of Hubei Minkang PRC's production techniques have been granted patent rights

4

In addition, Hubei Minkang PRC has obtained the PRC Medicine Production License (Ref. Number: E 20110016, valid to December 31, 2015) issued by Food and Drug Administration authority, which allows Hubei Minkang PRC to produce the medicines with the scope confirmed thereby.

Furthermore, Hubei Minkang PRC has obtained four (4) Free Sale Certificates from Hubei Food and Drug Administration of the PRC to approve the manufacture and free sale on the market in China of 28 popular TCM products, which certificates also certify that the manufacturer conforms to the requirements of the Chinese Good Manufacturing Practice laid down in accordance with recommendation of the World Health Organization.

Yinxing Damo Zhusheye (56 per cent of sales)

Hubei Minkang PRC's flagship drug, a chemical medication injectable made of Ginkgo biloba extract and dipyridamole is used for the prevention and treatment of coronary heart disease. As Hubei Minkang PRC's best-selling product, it has won about a 35 per cent share of its category. Annual sales are approximately 40 million units. Yinxing, sold by prescription, is in high demand and commands a premium price from distributors, who must pre-pay for orders.

An Ka Huangmin Jiaonang (26 per cent of sales)

An OTC capsule, this chemical medication relieves cold and flu symptoms including fever, headache, sore throat and sneezing.

Wei C Yinqiao Pian (6 per cent of sales)

An OTC pill, this TCM for relieving symptoms of cold and influenza, including body aches, cough, fever, headache and sore throat. Hubei Minkang PRC's 3^rd-best selling product, Wei C is approved by the US Food and Drug Administration for sale in the USA.

Xumeian Capsule (3 per cent or sales)

Xuemeian Capsule is a prescription TCM medication used for leucopenia, a decrease in the number of white blood cells, which places individuals at increased risk of infection. Low white cell counts are associated with chemotherapy, radiation therapy.

Shuxin Koufouye (1 per cent of sales)

A prescription TCM oral medication for promoting blood circulation and relieving chest pain, shortness of breath and fatigue associated with coronary heart disease.

Hubei Minkang PRC's current production (2011) includes 24 products: seven prescription TCM products and one chemical or western-style medicine, and 16 OTC products, two of which are chemical and the rest TCM medicines:

5

6

7

Hubei Minkang PRC currently has 72 sales people in 20 provinces in China, as well as an extensive distribution network in China that covers:

• 1200 hospitals
• 10,000 medical halls (the Chinese term for TCM pharmacies, which now generally include western style medicines as well).

Core markets are the Provinces of Hubei (10 per cent of sales), Yunnan (16 per cent of sales) and Henan (5 per cent of sales). They have a combined population of more than 200 million. Hubei Minkang PRC's export network covers 15 countries, including the world's two largest pharmaceutical markets, the USA and Japan. Hubei Minkang PRC's third best-selling product,Wei C, is approved by the US Food and Drug Administration for OTC sale in the USA. Hubei Minkang PRC also exports to Vietnam, Malaysia, Singapore, Philippines, Hong Kong, Indonesia and several European countries.

Hubei Minkang PRC's marketing efforts focus strongly on participation in what it has found to be the most cost-effective vehicles, including:

• industry events, such as domestic and international trade fairs and conferences;
• high-impact outdoor advertising on buses and trucks;
• upgraded packaging; and
• print advertising.

Hubei Minkang PRC regularly exhibits at major trade exhibitions in China, such as Guanzhou and Xi'an, as well as overseas events in Singapore, Indonesia and London.

A key element of Hubei Minkang PRC's growth strategy is to reduce its reliance on the wholesales and distributor channel, which adds middleman costs to the final drug prices. Hubei Minkang PRC is already expanding its sales to pharmacies, particularly retail chains, which will be a more profitable channel for both Hubei Minkang PRC and the retailer.

Current Sales Percentage by Channel

• 44 percent through wholesalers and distributors
• 37 percent Hubei Minkang PRC sales force
• 18 percent direct sales
• 1 percent for promotion

The Chinese medicine industry is regarded as a highly important component and driver of the national economy. It has played a vital role in promoting the national economic development and social progress in China.

China has approximately 6,600 medicine/drug manufacturing plants or factories at present, more than 4000 product varieties; and about 18,000 commercial wholesale medicine/drug businesses.

China's medicine development is rapid and in 2009 overall market sales were about RMB 991,590,000,000, which is a growth rate of 21.4% as compared to 2008. In 2010, the gross value of industrial output was approximately RMB 1,193,382,000,000, which is a grow rate of approximately 27% compared to 2009. From January to March 2011, the pharmaceutical industry (including medical equipments & instruments), has realized sales of approximately

8

RMB 293,000,000,000, which is a growth rate of approximately 27% compared to the same period in 2010. Therefore, even with the instability of the financial markets in recent years, this industry has realized a consistent growth rate of about 20%.

Also, based on the March 23, 2011 forecast according to China National Development and Planning Commission in the official on-line forecast message, the national medicine trade is expected to have a market size of about RMB 860,000,000,000, which is a growth rate of about 23%.

Of the approximately 6,700 drug manufacturing enterprises in China, there are approximately 1,000 Traditional Chinese Medicine enterprises.

The dosage-form used by the TCM enterprises has reached 40 different forms such as injection, medicinal powder, soft capsule, slow release medicinal preparation, tablets, pills, granules, oral liquids, syrups, aerosol, etc.

The TCM industry sales level and product profit margin has been fairly high. The development of TCM is rapid and in 2010 the TCM industry realized an industrial output of about RMB 317,200,000,000, which is a growth rate of about 29% compared to 2009. TCM comprises about 25.3% of the total pharmaceutical market share.

Hubei Minkang PRC is a reputable TCM manufacturer with a history more than 50 years in the TCM industry. Our superior technology in low-power injection, the concentration pill, the micro pill craft, and our TCM extraction technology has set an advanced professional standard. Hubei Minkang PRC's concentration pill, the unique micro pill production technique, and its technological advances, have enabled it to unify and incorporate the traditional manual technology and the modern industrialization production method. "MinKang" branding and series of concentration pill is notable for our superior quality, product stability, accurate curative effect, luminous outward appearance and consistently even size. "MinKang" brand of concentration nasosinusitis pill once had the honor to receive the China national quality silver medal. Our nasosinusitis pill is able to be exported to Japan due to the extensive Japanese medical research, which confirmed that our product can repair damage to the nose's mucous membranes effectively than other drugs or competitors products.

Hubei Minkang PRC's products are good quality, have good product efficacy and have received wide recognition in the China market.

Yinxing Damo Zhusheye

This product, which is a prescription injectable of ginko leaf extract and dipyridamole and is used for the prevention and treatment of coronary heart disease, has received about 50% of the China market share. There are three competitor manufacturers to this product. Hubei Minkang PRC's competitive advantage for this product is its product quality, high product tendering rate and a comprehensive sales network coverage. However, Hubei Minkang PRC's weaknesses to such product are that it heavily relies on its sole distributor for this product, the distribution does not cover all of China and the competitors have good distribution networks and they also adopt aggressive pricing strategy.

This product (Paracetamol, Caffein, Artificial Cow-bezoar and chlorphenamine maleate capsules), which is a chemical medication used to relieve cold and flu symptoms including fever, headache, sore throat and sneezing, has received about 20% of the market share in Yunnan Province and about 10% of the market share in Hubei Province. There are two competitor manufacturers to this product. Hubei Minkang PRC's competitive advantage for this product is its product quality, branding due to long existence in the market and product efficacy, and product reliability and affordability. Hubei Minkang PRC's weaknesses to such product are its thin profit margin due to low price and that there are many product substitutes in the market.

This product, which is used for relieving symptoms of cold and influenza, including body aches, cough, fever, headache and sore throat, has received about 20% of the market share in Hubei Province and about 10% of the

9

market share in Henan Province. There are two competitor manufacturers to this product. Hubei Minkang PRC's competitive advantage for this product is its product quality, branding due to long existence in the market and good working relationship with distributor. Hubei Minkang PRC's weaknesses to such product are its thin profit margin due to low price, competitors apply a low pricing strategy and the competitors have engaged in aggressive advertising and promotion and selling strategy.

This product is used for leucopenia, a decrease in the number of white blood cells places individuals at increased risk of infection, which is associated with chemotherapy radiation therapy, has received about 60% of the China market share. There are two competitor manufacturers to this product. Hubei Minkang PRC's competitive advantage for this product is Hubei Minkang PRC is the originator of this product, product quality, product efficacy and good working relationship with distributors. Hubei Minkang PRC's weaknesses to such product are its thin profit margin due to low tendering pricing.

Hubei Minkang PRC has established long standing supply arrangements with approximately 27 reliable producers from whom it buys its raw materials directly. In most cases there are alternative suppliers to the raw materials required. Of the 200 raw materials that go into Hubei Minkang PRC's products, 16 are critical as they account for 90 percent of the cost of raw material purchases. Hubei Minkang PRC's procurement department constantly updates management on any pricing movement and progress of the main suppliers.

To control costs, Hubei Minkang PRC uses a tendering system where possible inviting known vendors certain vendors known to deliver quality materials, with the aim of replacing the lowest value supplier every year. Raw materials are stored in climate controlled GMP-certified warehouses.

Certain raw materials such as caffeine is a drug that is controlled by the local government and Hubei Minkang PRC can only purchase from the few appointed suppliers. However, caffeine only forms a very minimal aspect Hubei Minkang PRC's production and would not materially affect our production or revenue.

Our goal is to extend our vertical integration, which currently includes formulation, manufacturing, packaging and distribution, to developing our own sources of supply.

Hubei Minkang PRC's key customers are its distributors. Hubei Minkang PRC's main product, Yinxing Damo Zhusheye, which accounts for approximately 56% of sales, is distributed to hospitals all over the PRC through its sole distributor of such product, He Nan Sheng Wan Long Yi Yao Co., Ltd. Hubei Minkang PRC has a long standing relationship with He Nan Sheng Wan Long Yi Yao Co., Ltd. and has renewed a 3 year sole distributorship for such product with this company during the last quarter of the fiscal year ended December 31, 2010.

As for Hubei Minkang PRC's second main product, An Ka Huangmin Jiaonang, which accounts for approximately 26% of sales, is distributed by three main distributors for different territories in the PRC: Wuhan Huashanrenfu Pharmaceutical Co., Ltd. which distributes in Hubei Province and Chongqing City; Mr. Zhangdawei who distributes in Yunnan Province; and Mr. Huanglin which distributes in Henan Province. Hubei Minkang PRC has a long standing relationship with all three of these distributors for such product.

As for Hubei Minkang PRC's third main product, Wei C Yinqiao Pian, which accounts for approximately 6% of sales, is distributed by Wuhan Huashanrenfu Pharmaceutical Co., Ltd.

Hubei Minkang PRC has obtained 5 design patents, issued by PRC Intellectual Rights Bureau Patent Bureau, which are used on the package of its products. These patents are as follows:

10

Hubei Minkang PRC has received Notification of Granting Invention Patent issued by the State Intellectual Property Office of the PRC having patent number 201010163142.1 issued on May 19, 2011 and having a patent definition as "A formula and Chinese medicine that prevents the reduction of platelet."

Hubei Minkang PRC has received Notification of Receipt of Patent Application issued by the State Intellectual Property Office of the PRC having application number 200910062287.X issued on June 2, 2009 and having an invention definition as "A kind of oral liquid for the treatment of constipation." In addition, Hubei Minkang PRC has received a Notification of Receipt of Patent Application issued by the State Intellectual Property Office of the PRC having application number 201110070845.4 issued on March 24, 2011 and having an invention definition as "A formula and Chinese medicine that treats children's anaemia caused by inadequate functioning of the spleen."

Hubei Minkang PRC holds 41 valid PRC registered trademarks, among which 7 are protective MINKANG principal registered trademark, and holding 1 principal registered trademark of MINKANG in the United States of America (U.S. Registration Number: 2883901 registered on September 14, 20004).

There is 1 trademark in the process of application, which is a protective MINKANG principal registered trademark.

Also, the MINKANG principal registered trademark has been rewarded as Hubei Famous Trademark for 6 sessions continuously, with the last valid to May 2014. "MINGKANG XIN" and "KELI" trademark have been rewarded as Yichang Famous Trademarks; the application to certify "MINGKANG XIN" as Hubei Famous Trademarks has passed the examination by Hubei Provincial Industry and Commerce Bureau and is now in publicity period.

Hubei Minkang PRC is required to obtain a PRC Medicine Production License which is issued by the Food and Drug Administration authority in order to be able to produce the medicines within the scope confirmed thereby.

Hubei Minkang PRC is also required to obtain pharmaceutical product registration certificates for each product that it intends to manufacture and sell.

After receiving the production license and registration certificates, Hubei Minkang submits an application for GMP certification. The PRC State Food and Drug Administration (SFDA) then organizes a group of specialists to validate the GMP facilities if the facilities satisfy the current GMP requirements. After GMP validation, if qualified, the GMP certificate may be issued. This provides approval for the equipment and control of the manufacturing workshop of the particular product(s).

Hubei Minkang PRC currently employs some 512 people on site, including:

• 253 specialized technical personnel
• 30 licensed pharmacists
• 10 R&D personnel (for product formulation and production methods)
• 30 quality control staff
• 53 maintenance personnel

HBMK will not have any full time staff, however, the Company will have two full time staff, Mr. Lee Tong Tai (President & CEO) and Ms. Ang Siew Khim (Secretary & Treasurer).

11

During the fiscal year ended December 31, 2011, we spent $67,639 on research and development. During the fiscal year ended December 31, 2010, we spent $127,389 on research and development

Our manufacturing operations are subject to numerous laws, regulations, rules and specifications relating to human health and safety and the environment.  These laws and regulations address and regulate, among other matters, wastewater discharge, air quality and the generation, handling, storage, treatment, disposal and transportation of solid and hazardous wastes and releases of hazardous substances into the environment.  In addition, third parties and governmental agencies in some cases have the power under such laws and regulations to require remediation of environmental conditions and, in the case of governmental agencies, to impose fines and penalties.  We make capital expenditures from time to time to stay in compliance with applicable laws and regulations.

We have obtained all permits and approvals and filed all registrations required for the conduct of our business, except where the failure to obtain any permit or approval or file any registration would not have a material adverse effect on our business, financial condition and results of operations.  We are in compliance in all material respects with the numerous laws, regulations, rules, specifications and permits, approvals and registrations relating to human health and safety and the environment except where noncompliance would not have a material adverse effect on our business, financial condition and results of operations.

The PRC governmental authorities have not revealed any material environmental liability that would have a material adverse effect on us.  We have not been notified by any governmental authority of any continuing noncompliance, liability or other claim in connection with any of our properties or business operations, nor are we aware of any other material environmental condition with respect to any of our properties or arising out of our business operations at any other location.  

It is possible that compliance with a new regulatory requirement could impose significant compliance costs on us. Such costs could have a material adverse effect on our business, financial condition and results of operations.

On January 20, 2011, Hubei Minkang PRC and Yichang City Commercial Bank Co., Ltd executed a Loan Contract ("Loan Contract #1"), where Hubei Minkang PRC loaned RMB 5,000,000.00 to be used as liquidity, with a loan period from January 20, 2011 to January 20, 2012 and having an interest rate of 6.435% per year, which is calculated and paid monthly on the 20^th of every month. This loan has been supplied to Hubei Minkang PRC by one lot on January 20, 2011 and is secured by the Maximum Pledge Contract, dated December 23, 2010. On January 10, 2012, Hubei Minkang PRC repaid such loan of RMB 5,000,000 to Yichang City Commercial Bank Co., Ltd.

The foregoing description of Loan Contract #1 does not purport to be complete and is qualified in its entirety by reference to the Loan Contract #1, which was attached as Exhibit 10.3 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

On April 8, 2011, Hubei Minkang PRC and Yichang City Commercial Bank Co., Ltd executed a Loan Contract ("Loan Contract #2"), where Hubei Minkang PRC loaned RMB 5,000,000.00 to be used as liquidity, with a loan period from April 8, 2011 to April 8, 2012 and having an interest rate of 7.04% per year, which is calculated and paid monthly on the 20^th of every month. This loan has been supplied to Hubei Minkang PRC by one lot on April 8, 2011 and is secured by the Maximum Pledge Contract, dated December 23, 2010. On April 1, 2012, Hubei Minkang PRC repaid such loan of RMB 5,000,000 to Yichang City Commercial Bank Co., Ltd.

The foregoing description of Loan Contract #2 does not purport to be complete and is qualified in its entirety by reference to the Loan Contract #2, which was attached as Exhibit 10.4 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

On May 5, 2011, Hubei Minkang PRC and Bank of Communications Co., Ltd. Yichang Branch executed a Loan Contract ("Loan Contract #3"), where Hubei Minkang PRC loaned RMB 10,000,000.00 to be used as liquidity, with a loan period from May 5, 2011 to May 5, 2012 and having an interest rate of 6.6255% per year, which is calculated

12

and paid monthly on the 20^th of every month. This loan has been supplied to Hubei Minkang PRC by one lot on May 5, 2011 and is secured by two Maximum Pledge Contracts, dated January 13, 2011 and May 1, 2011.

The foregoing description of Loan Contract #3 does not purport to be complete and is qualified in its entirety by reference to the Loan Contract #3, which was attached as Exhibit 10.5 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

On December 23, 2010, Hubei Minkang PRC and Yichang City Commercial Bank Co., Ltd. executed a Maximum Pledge Contract (the "Maximum Pledge Contract #1"), to take certain land use rights and buildings of Hubei Minkang PRC, as set forth in the Maximum Pledge Contract, as collateral to secure loans from Yichang City Commercial Bank Co., Ltd., where the maximum loans amount could be RMB 10,000,000.00.

The foregoing description of the Maximum Pledge Contract #1 does not purport to be complete and is qualified in its entirety by reference to the Maximum Pledge Contract #1, which was attached as Exhibit 10.6 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

On January 13, 2011, Hubei Minkang PRC and Bank of Communications Co., Ltd., Yichang Branch, executed a Maximum Pledge Contract (the "Maximum Pledge Contract #2"), to take the certain land use rights and buildings of Hubei Minkang PRC, as set forth in the Maximum Pledge Contract #2, as collateral to secure loans from the Bank of Communications Co., Ltd., where the maximum loan amount could be RMB 3,200,000.00.

The foregoing description of the Maximum Pledge Contract #2 does not purport to be complete and is qualified in its entirety by reference to the Maximum Pledge Contract #2, which was attached as Exhibit 10.7 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

On May 1, 2011, Hubei Minkang PRC and Bank of Communications Co., Ltd., Yichang Branch, executed a Maximum Pledge Contract (the "Maximum Pledge Contract #3"), to take the certain land use rights and buildings of Hubei Minkang PRC, as set forth in the Maximum Pledge Contract #3, as collateral to secure loans from the Bank of Communications Co., Ltd., where the maximum loan amount could be RMB 7,800,000.00.

The foregoing description of the Maximum Pledge Contract #3 does not purport to be complete and is qualified in its entirety by reference to the Maximum Pledge Contract #3, which was attached as Exhibit 10.6 to our Form 8-K filed on September 26, 2011, and is incorporated by reference herein.

We have engaged Quicksilver Stock Transfer, LLC as our stock transfer agent. Quicksilver Stock Transfer, LLC is located at 6623 Las Vegas Blvd. South, #255, Las Vegas, Nevada 89119. Their telephone number is (702) 629-1883 and their fax number is (702) 562-9791. The transfer agent is responsible for all record-keeping and administrative functions in connection with our issued and outstanding common stock.

We will need to raise further funds from the capital markets to finance expenditures for equipment, warehousing and to expand the production capacity and marketing of our existing and potential future products and for other corporate purposes. As of December 31, 2011, we had $3,104,846 in cash. We will need to undertake significant future financings for the following reasons:

• To proceed with the purchase of new production equipment and additional warehousing space;
• To proceed with research and development on existing and potential future products;
• To expand manufacturing capabilities;
• To increase commercialization our products, including the marketing and distribution of our existing and potential future products;
• To protect our intellectual property;
• To seek and obtain regulatory approvals; and
• To finance general and administrative and research activities that are not related to specific products under development.

In the past, Hubei Minkang PRC funded most of its fixed asset acquisitions, product research and development and other expenditures through investment of shareholders, grants and debt financing. We intend to raise additional funds in the near future because our current operating and capital resources are expected to be insufficient to meet future growth plans.

If we raise additional funds by issuing equity securities, it will result in further dilution to our existing shareholders, because the shares may be sold at a time when the market price is low, and because shares issued in equity financing will normally be sold at a discount to the current market price. Unforeseen problems, including materially negative developments relating to, among other things, product sales, new product rollouts, clinical trials, research and development programs, our strategic relationships, our intellectual property, litigation, regulatory issues in our industry, the Chinese market generally or in general economic conditions, could interfere with our ability to raise additional equity capital or materially adversely affect the terms upon which such funding is available. If we raise additional funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common shares, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to certain of our technologies, marketing territories, product candidates or products that we would otherwise seek to develop or commercialize ourselves, or be required to grant licenses on terms that are not favorable to us.

We do not know whether additional financing will be available to us on commercially acceptable terms when needed. If adequate funds are not available or are not available on commercially acceptable terms, we may need to suspend our expansion and product development plans.

14

We operate in a highly competitive environment, and the competition is expected to increase. Many of the competitors in this industry have longer operating track records and greater financial, technical, medical and marketing resources. Existing or new competitors in this industry generally compete with one another on key attributes, which include, reliability and quality of products and services, range of products, pricing and timeliness of product delivery, sufficient inventory levels of various products and geographical presence. Some of our competitors have greater name recognition and a larger customer base, which may allow such competitors to be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to create greater brand awareness for our brand name so that we can successfully compete with our competitors. We cannot guarantee that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

The technologies applied by our competitors and us are rapidly evolving, and new developments frequently result in price competition. Furthermore, research and development is important in this industry in order to maintain and innovate existing and new products in order to stay competitive. We may not be able to maintain continuous effective research and development for our existing and new products in order to remain competitive in this industry, which may have an adverse effect on our business.

Some of our competitors and potential competitors have greater product development capabilities and financial, scientific, marketing and human resources than we do. Alternative products may be developed that are more effective, work faster and are less costly than our products, which could make our products uncompetitive, which would have an adverse effect on our financial results.

Hubei Minkang PRC has the certificates, permits, and licenses required for the manufacturing, processing and distribution of Traditional Chinese Medicines and OTC Pharmaceuticals. In the event that we are not able to renew the certificates, permits and licenses, all or part of our operations may be terminated. Furthermore, if escalating compliance costs associated with governmental standards and regulations restrict or prohibit any part of our operations, it may adversely affect our operations and profitability.

A substantially portion of our current revenues are derived from the PRC. We intend to expand our operations in the PRC and internationally into Southeast Asia, Japan and in North America, which, if not planned and managed properly, could materially adversely affect our business, financial condition and operating results. Expanding internationally exposes us to legal uncertainties, new regulatory requirements, liability, export and import restrictions, tariffs and other trade barriers, difficulties in managing operations across disparate geographic areas, foreign currency fluctuations, dependence on local distributors and potential disruptions in sales or manufacturing. We may also face challenges in protecting our intellectual property or avoiding infringement of others' rights, and in complying with potentially uncertain or adverse tax laws.

Regulatory authorities also periodically inspect manufacturing facilities, including third parties who provide ingredients to us, and may challenge their quality, qualifications or competence. Pharmaceutical manufacturing facilities must comply with applicable good manufacturing practice standards, and manufacturers usually must invest substantial funds, time and effort to ensure full compliance with these standards and make quality products. We do not have control over our vendors' compliance with these requirements. Failure to comply with regulatory

15

requirements can result in sanctions, fines, delays, suspension of approvals, seizures or recalls of products, operating restrictions, manufacturing interruptions, costly corrective actions, injunctions, adverse publicity against us and our products and criminal prosecutions.

If we are unable to obtain sufficient supplies of ingredients, if climatic or environmental conditions adversely affect them or if they increase significantly in price, our business would be seriously harmed. If any of our current or future third-party suppliers cease to supply products in the quantity and quality we need to produce our products, or if they are unable to comply with applicable regulations, the qualification of other suppliers could be a lengthy process, and there may not be adequate alternatives to meet our needs. As a result, we may not be able to obtain the necessary ingredients used in our products in the future on a timely basis, if at all. This would negatively affect our business.

We may produce products which, despite proper testing, inadvertently have an adverse pharmaceutical effect on the health of individuals. Existing PRC law and regulations do not require us to maintain third party liability insurance to cover product liability claims and we do not maintain any as there is no such type of insurance in the PRC. However, if a product liability claim is brought against us, it may, regardless of merit or eventual outcome, result in damage to our reputation, breach of contract with our customers, decreased demand for our products, costly litigation, product recalls, loss of revenue, the inability to commercialize our products and diversion of management's attention from managing our business. We currently are not aware of any existing or anticipated product liability claim with respect to our products.

The marketing and sale of our products in countries other than the PRC entails inherent risks of product liability. As a manufacturer of products designed for human application, we may be subject to product liability claims that use of our products has resulted in injury in countries other than the PRC. Previously unknown adverse reactions resulting from human use of our products could occur. We may be held liable if serious adverse reactions result from the use of our products. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities and damage to our commercial reputation, or be required to limit commercialization of our products. Our inability to obtain sufficient product liability insurance outside of the PRC at acceptable cost against claims could reduce or inhibit commercialization of our products outside of the PRC. We may not be able to obtain insurance at reasonable cost, if at all. If we obtain insurance in the future, it may not adequately compensate us for all losses that we may incur, which could have a material adverse effect on our business.

Our manufacturing process may produce by-products such as effluent, gases and noise, which are harmful to the environment. We are subject to multiple laws governing environmental protection, such as "The Law on Environmental Protection in the PRC" and "The Law on Prevention of Effluent Pollution in the PRC", as well as standards set by the relevant governmental bodies determining the classification of different wastes and proper disposal. The PRC has substantial problems with environmental pollution. Accordingly, it is likely that the national, provincial and local governmental agencies will adopt stricter pollution controls. There can be no assurance that future changes in environmental laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. Our business's profitability may be adversely affected if additional or modified environmental control regulations are imposed upon us.

We depend to a great extent on principal members of our management. If we lose the services of any key personnel, in particular, Mr. Lee Tong Tai, our President and CEO, or Mr. Lee Tong Jiuh, the CEO of Hubei Minkang PRC, both who have been instrumental in the growth and expansion of the business, it could significantly impede our growth plans and corporate strategies, identifying business opportunities, recruiting new staff, and retaining existing capable staff. The recruiting and retaining qualified scientific, technical, managerial and research personnel is critical to our success. We do not currently have any key man life insurance policies. We may not be able to retain existing personnel or attract and retain qualified staff in the future. If we fail to hire and retain personnel in key

16

positions, we may be unable to develop or commercialize our existing or future products, which would have an adverse affect on our business.

Hubei Minkang PRC has experienced a period of rapid and substantial growth that has taken place and, if such growth continues, it will continue to place a strain on our administrative and operational infrastructure. If we are unable to manage this growth effectively, our business, results of operations or financial condition may be materially and adversely affected. Our ability to manage our operations and growth effectively requires us to continue to improve our operational, financial and management controls, reporting systems and procedures and hiring programs. We may not be able to successfully implement these required improvements.

We are managed by a management team that is relatively unfamiliar with the processes by which a U.S. public company should be managed and operated. Management is currently making efforts to familiarize itself with the relevant laws, rules and regulations and market practice, but there can be no assurance that it can master the relevant knowledge and skills and set up the required systems in time to prevent mistakes and to meet shareholder and market expectations.

Our senior financial staff do not have any formal training, and do not posses professional designations, in U.S. GAAP. This lack of formal training and designations in U.S. GAAP may result in our internal controls over financial reporting not being effective in the future due to the lack of experience in U.S. GAAP. Also, as a result of management's lack of U.S. GAAP experience, it may take us longer and cost more to prepare our financial statements, which may result in an increase in expenses and reduce our profitability, and possibly cause delays in the timely filing of our periodic and annual reports with the SEC.

PRC companies historically have not adopted a Western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal controls and computer, financial and other control systems. As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet standards required of U.S. public companies. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act. Any such deficiencies, weaknesses or lack of compliance could have a material adverse effect on our business.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products. As a result, we do not have any property or casualty insurance coverage for our facilities or business liability insurance coverage for our operations. If we incur any losses, we will have to bear those losses without any assistance. As a result, we may not have sufficient capital to cover material damage to, or the loss of, our manufacturing facilities due to fire, severe weather, flood or other causes, and such damage or loss would have a material adverse effect on our financial condition, business and prospects.

Neither the Company nor HBMK Pharmaceutical Limited declared any dividends for their respective fiscal year ends. The combined company does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements,

17

and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

As a holding company, we have no direct business operations other than the ownership of our operating subsidiaries. Our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions relating to doing business in the PRC. If future dividends are paid in Renminbi, fluctuations in the exchange rate for the conversion of Renminbi into U.S. dollars may reduce the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.

We may not realize the benefits that we hoped to derive as a result of the closing of the share exchange agreement on September 21, 2011, which include:

• access to the capital markets of the United States;
• the increased market liquidity expected to result from exchanging stock in a private company for securities of a public company that are publicly traded;
• the ability to use securities to make acquisition of assets or businesses;
• increased visibility in the financial community;
• enhanced access to the capital markets;
• improved transparency of operations; and
• perceived credibility and enhanced corporate image of being a publicly traded company.

In addition, the attention and effort devoted to achieving the benefits of the share exchange and attending to the obligations of being a public company, such as reporting requirements and securities regulations, could significantly divert management's attention from operational issues, which could materially and adversely affect our operating results or stock price in the future.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business. We are considered a foreign person or foreign invested enterprise under PRC law. As a result, we are subject to PRC law limitations on foreign ownership of Chinese companies. These laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our business. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

18

The manufacture and sale of Traditional Chinese Medicines and OTC pharmaceutical products in the PRC is regulated by many state, provincial and local authorities. These regulations significantly increase the difficulty and costs involved in obtaining and maintaining regulatory approvals for marketing new and existing products. Our future growth and profitability depend to a large extent on our ability to obtain and maintain regulatory approvals. All manufacturers of pharmaceutical products are required to comply with applicable Good Manufacturing Practices ("GMP") certifications and we have received our certifications. However, should we fail to maintain the GMP certifications, our business would be materially and adversely affected.

We are required to comply with applicable GMP regulations, which include requirements relating to quality control and quality assurance as well as corresponding maintenance, record-keeping and documentation standards. Manufacturing facilities must be approved by governmental authorities before we can use them to commercially manufacture our products and are subject to inspection by regulatory agencies.

If we fail to comply with applicable regulatory requirements, including following any product approval, we may be subject to sanctions, including:

• Fines;
• Product recalls or seizure;
• Injunctions;
• Refusal of regulatory agencies to review pending market approval applications or supplements to approval applications;
• Total or partial suspension of production;
• Civil penalties;
• Withdrawals of previously approved marketing applications; or
• Criminal prosecution.

We are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Chinese companies and some other foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC, and our executive officers and employees have not been subject to the U.S. Foreign Corrupt Practices Act prior to the completion of the share exchange in September 2011. We can make no assurance that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act (the "SOX") and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our new management team, which has limited to nil prior experience operating a U.S. public company, will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

19

We are subject to reporting obligations under the US securities laws. The SEC, as required by Section 404 of the SOX, adopted rules requiring every public company to include a management report on such company's internal controls over financial reporting in its annual report, which contains management's assessment of the effectiveness of our internal controls over financial reporting. In addition, we may in the future be required to have an independent registered public accounting firm attest to and report on management's assessment of the effectiveness of our internal controls over financial reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm, if required, may still decline to attest to our management's assessment or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the SOX.

To protect the reputation of our products, we applied for registration of our trademarks in the PRC where our operating business is located as well as one trademark registration in the US.

Presently, all or substantially all of our products are sold under the brand name "MINKANG". We are not aware of any infringement of such trademark. However, there is no assurance that there will not be any infringement of our brand name or other trademarks or counterfeiting of our products in the future. Should any such infringement or counterfeiting occur, our reputation and business may be adversely affected. We may also incur significant expenses and substantial amount of time and effort to enforce our intellectual property rights in the future. Such diversion of our resources may adversely affect our existing business and future expansion plans.

Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Patent applications are maintained incognito until their publication 18 months from the filing date. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications are filed. The PRC, similar to many other countries, adopts the first-to-file system under which whoever first files a patent application (instead of the one who makes first actual discoveries) will be awarded patent. Even after reasonable investigation we may not know with certainty whether we have infringed upon a third-party's patent because such third-party may have filed a patent application without our knowledge while we are still developing that product. If a third-party claims that we infringe upon its proprietary rights, any of the following may occur:

• We may become involved in time-consuming and expensive litigation, even if the claim is without merit;
• We may become liable for substantial damages for past infringement if a court decides that our technology infringes upon a competitor's patent;
• A court may prohibit us from selling or licensing our product without a license from the patent holder, which may not be available on commercially acceptable terms, if at all, or which may require us to pay substantial royalties or grant cross licenses to our patents, and
• We may have to reformulate our product so that it does not infringe upon others' patent rights, which may not be possible or could be very expensive and time-consuming.

If any of these events occurs, our business will suffer and the market price of our common shares could decline.

20

The profitability of our products will depend in part on our ability to obtain and maintain protection for our intellectual property rights, such as patents, licenses and trade secrets, and the period our intellectual property remains exclusive. We must also operate without infringing on the proprietary rights of third parties and without third parties circumventing our rights. The proprietary rights of enterprises such as ours are uncertain and involve complex legal and factual questions for which important legal principles are largely unresolved. In addition, the scope of the originally claimed subject matter in a patent application can be significantly reduced before a patent is issued. Because patent applications are maintained in secrecy in some cases, we cannot be certain that we or our licensors are the first creators of inventions described in our pending patent applications or patents or the first to file patent applications for such inventions. Other companies may independently develop similar products and design around any patented or proprietary products we develop. We cannot assure you that:

• any of our applications for patent or exclusivity will result in their issuance;
• we will develop additional patentable or proprietary products;
• the patents or exclusive rights we have been issued will provide us with any competitive advantages;
• the patents of others will not impede our ability to do business; or
• third parties will not be able to circumvent our patents or proprietary rights.

Substantially all of our business operations are conducted in the PRC, and a substantial portion of our sales are currently made in the PRC. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in the PRC. The PRC economy differs from the economies of most developed countries in many respects, including:

• The extent of government involvement;
• The level of development;
• The growth rate;
• The control of foreign exchange; and
• The allocation of resources;

While the PRC economy has experienced significant growth in the past 20 years, 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 guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, 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. Since early 2004, the PRC government has implemented certain measures to control the pace of economic growth. Such measures may cause a decrease in the level of economic activity in the PRC, which in turn could adversely affect our results of operations and financial condition.

We conduct our business primarily through our PRC subsidiary, Hubei Minkang Pharmaceutical Co., Ltd. Our operations in the PRC are governed by PRC laws and regulations. We are generally subject to laws and regulations applicable to foreign investments in the PRC and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in the PRC. However, the PRC has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular,

21

because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in the PRC may be protracted and result in substantial costs and diversion of resources and management attention.

We conduct substantially all of our operations in the PRC and substantially all of our assets are located in the PRC. In addition, our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside of the United States. As a result, it may be difficult or not possible to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state.

There is uncertainty as to whether courts of the PRC would enforce:

• Judgments of United States courts obtained against us or these non-residents based on the civil liability provisions of the securities laws of the United States or any state, or
• In original actions brought in the PRC, liabilities against us or non-residents predicated upon the securities laws of the United States or any state. Enforcement of a foreign judgment in the PRC also may be limited or otherwise affected by applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors' rights generally and will be subject to a statutory limitation of time within which proceedings may be brought.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. We receive substantially all of our revenues in RMB. Under our current structure, our income is primarily derived from our PRC subsidiary. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also, at its discretion, restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Our revenues and costs are mostly denominated in RMB. Substantially all of our revenue is based on that generated by our PRC subsidiary. Any significant fluctuation in value of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our stock in US dollars. For example, an appreciation of RMB against the US dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert US dollars into RMB for such purposes.

Substantially all of our assets are located inside the PRC. Under the laws governing foreign invested enterprises in the PRC, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency's approval and supervision as well as the foreign exchange control. This may generate additional risk for investors in case of dividend payment and liquidation.

22

We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We intend to retain all earnings from our operations.

Our common stock is currently traded on a limited basis on the OTCBB under the symbol, "HBMK.OB" The quotation of our common stock on the OTCBB does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years, such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is thus subject to volatility. In the absence of an active trading market:

• investors may have difficulty buying and selling or obtaining market quotations;
• market visibility for our common stock may be limited; and
• lack of visibility for our common stock may have a depressive effect on the market for our common stock.

Our stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000, not including any equity in that person's or person's spouse's primary residence, or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA

23

requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained.

Our common stock has historically been sporadically or "thinly-traded", meaning the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

The market price for our common stock is particularly volatile given our status as a relatively small company with a small and thinly traded "float" and lack of current revenues that could lead to wide fluctuations in our share price. The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common stock is sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common stock are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky" investment due to our lack of revenues or profits to date and uncertainty of future market acceptance for our current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. The following factors may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes, additions or departures of our key personnel, as well as other items discussed under this "Risk Factors" section. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain their current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

Our directors and executive officers and their affiliates collectively control approximately 32% of our outstanding common shares as of December 31, 2011. These stockholders, if they act together, may be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and

24

approval of significant corporate transactions. The concentration of ownership of these shareholders may discourage, delay or prevent a change in control of the Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of the Company and might reduce the price of our common shares. These actions may be taken even if they are opposed by our other shareholders. In cases where the interests of our significant shareholders are aligned and they vote together, these shareholders may also have the power to prevent or cause a change in control. In addition, these shareholders could divert business opportunities from us to themselves or others.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act ("Rule 144"), subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied the required holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a one-year holding period. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.

The market price for our stock may be volatile and subject to wide fluctuations in response to factors including the following:

• actual or anticipated fluctuations in our quarterly operating results;
• changes in financial estimates by securities research analysts;
• conditions in pharmaceutical and agricultural markets;
• changes in the economic performance or market valuations of other pharmaceutical companies;
• announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;
• addition or departure of key personnel;
• fluctuations of exchange rates between RMB and the US dollar;
• intellectual property litigation;
• general economic or political conditions in the PRC.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.

Our operations are affected by local, national and worldwide economic conditions. Markets in the US and elsewhere have been experiencing extreme volatility and disruption for more than 12 months, due in part to the financial stresses affecting the liquidity of the banking system and the financial markets generally. The consequences of a potential or prolonged recession may include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity markets. Instability in the financial markets, as a result of recession or otherwise, also may affect the cost of capital and our ability to raise capital.

Not applicable as we are not an accelerated or large accelerated filer.

25

Our executive offices are located at 55 Ubi Ave. 3, #03-01, Mintwell Building, Singapore 408864.

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, affiliates or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Not applicable.

26

As of April 12, 2012, our common stock closed at a price of $1.02.

As of December 31, 2011, we had 85 shareholders of record.

No dividends have been declared or paid on our common stock. We have incurred recurring losses and do not currently intend to pay any cash dividends in the foreseeable future.

As of the end of the fiscal year ended December 31, 2011, we do not have any compensation plans under which equity securities are authorized for issuance.

On April 27, 2011, we issued 21,850 shares of our common stock to two individuals due to the closing of our private placement at $1.50 per share for total gross proceeds of $32,775.  We believe that the issuances are exempt from registration under Regulation S promulgated under the Securities Act as the securities were issued to the individuals through offshore transactions which were negotiated and consummated outside of the United States and based on representations and warranties provided by the purchasers of the shares in their respective subscription agreements.

On June 29, 2011, we issued 714,788 shares of our common stock to an individual in Singapore pursuant to an Agreement for Conversion of Indebtedness to Common Stock, dated June 28, 2011, entered into with the individual in Singapore at a price of $0.25 per share resulting in the elimination of $178,697 of indebtedness on our books.  We believe that the issuance is exempt from registration pursuant to Section 3(a)(9) and/or Regulation S promulgated under the Securities Act as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.

In addition, on June 29, 2011, we issued 714,784 shares of our common stock to an individual in Malaysia pursuant to an Agreement for Conversion of Indebtedness to Common Stock, dated June 28, 2011, entered into with the individual in Malaysia at a price of $0.25 per share resulting in the elimination of $178,696 of indebtedness on our books.  We believe that the issuance is exempt from registration pursuant to Section 3(a)(9) and/or Regulation S promulgated under the Securities Act as the securities were issued to the individual through an offshore transaction which was negotiated and consummated outside of the United States.

In connection with the closing of the share exchange agreement on September 21, 2011, we issued a total of 33,500,000 shares of our common stock to the holders of capital stock of HBMK in exchange for us receiving 100% of the issued and outstanding shares in the capital of HBMK. No underwriters were involved in the acquisition described herein. We believe that the issuances are exempt from registration pursuant to Regulation S promulgated under the Securities Act as the securities were issued to the individuals/entities through an offshore transaction which was negotiated and consummated outside of the United States and based on representations and warranties provided by such individuals/entities in the share exchange agreement.

Neither we nor any affiliated purchaser has made any purchases of our equity securities during the fourth quarter of our fiscal year ended December 31, 2011.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

27

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with (i) our audited financial statements for the fiscal years ended December 31, 2011 and 2010 and the notes thereto and (ii) the section entitled "Business", included elsewhere in this annual report. Our consolidated financial statements are prepared in accordance with U.S. GAAP. All references to dollar amounts in this section are in U.S. dollars unless expressly stated otherwise.

The matters discussed in these sections that are not historical or current facts deal with potential future circumstances and developments. Such forward-looking statements include, but are not limited to, the development plans for the Company's growth, trends in the results of the Company's development, anticipated development plans, operating expenses and the Company's anticipated capital requirements and capital resources. As such, these forward-looking statements may include words such as "plans," "intends," "anticipates," "should," "estimates," "expects," "believes," "indicates," "targeting," "suggests" and similar expressions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under "Risk Factors" and elsewhere in this annual report.

We were incorporated in the State of Nevada on April 17, 2006, under the name DGT Corp. and commenced operations shortly thereafter. We intended to provide professional digital photo editing services for photo studios targeting potential customers in North America, with plans to expand globally.

In late 2007 we determined to change our business plan from the professional digital photo editing services and intended to focus our activities on the oil and gas industry as an exploration and development company.

However, as we were not as successful as hoped at developing our oil and gas interests in Morgan County, Tennessee up to the time immediately prior to the closing of the share exchange agreement as discussed below and had no sources of revenue from our business plan, we determined to seek out a new business opportunity to increase value for our shareholders.

On July 8, 2011, we entered into a share exchange agreement with HBMK Pharmaceutical Limited ("HBMK"), a BVI corporation, and all of the shareholders of HBMK (the "Vendors"), which was disclosed in the Company's Current Report on Form 8-K filed with the SEC on July 11, 2011. The closing of the share exchange agreement occurred on September 21, 2011. Pursuant to the terms of the share exchange agreement, we acquired all of the issued and outstanding shares of capital stock of HBMK from the Vendors in exchange for the issuance of 33,500,000 shares of our common stock to the Vendors on a pro rata basis in accordance with each Vendor's percentage ownership in HBMK.

As a result of the closing of the share exchange agreement, HBMK has become our direct wholly-owned subsidiary and Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei Minkang PRC") has become our indirect wholly-owned subsidiary as HBMK is the sole owner of Hubei Minkang PRC, a company organized under the laws of the People's Republic of China.

Our current business is conducted through Hubei Minkang PRC, which is a large-scale pharmaceutical company that mainly produces and markets Traditional Chinese Medicines ("TCM") and some chemical pharmaceuticals, which most are able to be purchased Over-the-Counter ("OTC") and some by prescription only. Hubei Minkang PRC has three Good Manufacturing Practice ("GMP") certifications, with seven production lines capable of producing 10 different product types including pills, tablets, capsules, granules, oral liquids, syrups, mixtures and injections, in more than 400 formulations and dosages.

We maintain our statutory registered agent's office at Nevada Agency & Transfer Company, 50 West Liberty Street, Suite 880, Reno, Nevada, 89501 and our business office is located at 55 Ubi Ave. 3, #03-01, Mintwell Building, Singapore 408864. This is our mailing address as well.

We intend to focus on the business operations of our subsidiary Hubei Minkang PRC. Hubei Minkang PRC is a modern pharmaceutical company that is engaged in the research, development, manufacture and marketing of TCM

28

and some chemical pharmaceuticals in the PRC as well as markets its products to the US, Japan, Canada, Singapore, Malaysia, Thailand and Hong Kong among other countries.

During the next 12 months, management anticipates proceeding with expansion plans to acquire at least a 51% interest of a sales distribution company for approximately $1.5 million and to increase commercialization of Hubei Minkang PRC's products including the marketing distribution of existing and potential future products which is anticipated to cost approximately $700,000. However, if we are not able to raise the required funds for such expansion plans, then we may have to delay some or all of our expansion plans.

Our strategy for executing our mission of producing high quality TCM products in an environmentally friendly manner using advanced technology and techniques, and distributing the products throughout China and the world is to:

• focus production on its highest margin products;
• continuously improve production facilities and process;
• lower production costs while maintaining product quality;
• increase direct sales while reducing distribution costs;
• acquire control of raw material supply;
• develop and acquire new products for manufacture; and
• expand distribution throughout China and overseas.

The following table sets forth our results of operations for the fiscal years ended December 31, 2011 and 2010.

29

Advertising Expenses: Advertising expenses were $17,657 and $17,484 for the fiscal years ended December 31, 2011 and 2010, respectively.

Selling Expenses: Selling expenses were $2,602,799 and $2,583,098 for the fiscal years ended December 31, 2011 and 2010, respectively.

Professional Fees: Professional fees were $314,084 and $Nil for the fiscal years ended December 31, 2011 and 2010, respectively. This increase was due to the professional fees associated with the reverse acquisition of HBMK Pharmaceutical Limited by the Company.

Research and Development: Research and Development expenses were $67,639 and $127,389 for the fiscal years ended December 31, 2011 and 2010, respectively.

General and Administrative Expenses: General and Administrative expenses were $2,376,810 and $1,935,468 for the fiscal years ended December 31, 2011 and 2010, respectively. This increase was due to the increase in office expense and labour insurance during the fiscal year ended December 31, 2011.

Interest Expenses: Interest expenses were $175,684 and $141,597 for the fiscal years ended December 31, 2011 and 2010, respectively. This increase was due to the increase in loans in 2011, which increased interest expenses.

The net income (loss) was $(214,045) and $2,204,431 for the fiscal years ended December 31, 2011 and 2010, respectively. The decrease in net income of $2,418,476 resulted primarily from a decrease in sales of Yinxing Dame

30

Zhusheye and An Ka Huangmin Jiaonang, increase in selling expenses, increase in professional fees, increase in general and administrative expenses and the one time stamp taxes on the change in ownership of Hubei Minkang PRC. The sales of Yinxing Dame Zhusheye decreased by $2,748,399 for the fiscal year ended December 31, 2011, compared to the fiscal year ended December 31, 2010. The sales of An Ka Huangmin Jiaonang decreased by $48,834 for the fiscal year ended December 31, 2011, compared to the fiscal year ended December 31, 2010.

The financial records of the Company are maintained in their local currency, the Renminbi ("RMB"), which is the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the statement of stockholders' equity.

RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the "PBOC") or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC. Commencing July 21, 2005, China adopted a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. The exchange rate of the US dollar against the RMB was adjusted from approximately RMB 8.28 per U.S. dollar to approximately RMB 8.11 per U.S. dollar on July 21, 2005. Since then, the PBOC administers and regulates the exchange rate of the U.S. dollar against the RMB taking into account demand and supply of RMB, as well as domestic and foreign economic and financial conditions.

Unless otherwise noted, the rate presented below per U.S. $1.00 was the midpoint of the interbank rate as quoted by OANDA Corporation (www.oanda.com) contained in its financial statements. Management believes that the difference between RMB vs. U.S. dollar exchange rate quoted by the PBOC and RMB vs. U.S. dollar exchange rate reported by OANDA Corporation were immaterial. Translations do not imply that the RMB amounts actually represent, or have been or could be converted into, equivalent amounts in U.S. dollars. Translation of amounts from RMB into U.S. dollars has been made at the following exchange rates for the respective periods:

We had cash of $3,104,846 as of December 31, 2011.

As at December 31, 2011, Hubei Minkang PRC had loans payable of $1,572,698 due to Bank of Communications Limited, Yichang Branch, collateralized by certain of Hubei Minkang PRC's buildings and land use rights, with interest at 110% of the bank's benchmark rate, per annum, payable monthly, which the principal is due and payable on May 5, 2012. Furthermore, as at December 31, 2011, Hubei Minkang PRC had loans payable of $786,349 and $786,349 due to Yichang City Commercial Bank, collateralized by certain of Hubei Minkang PRC's buildings and land use rights, with interest at 110% of the bank's benchmark rate, per annum, payable monthly, with the principal due and payable on January 20, 2012 and April 7, 2012, respectively. On January 10, 2012, Hubei Minkang PRC repaid the loan payable to the Yichang City Commercial Bank that was due on January 20, 2012. In addition, on April 1, 2012, Hubei Minkang PRC repaid the loan payable to the Yichang City Commercial Bank that was due on April 7, 2012.

As at December 31, 2011, Hubei Minkang PRC received a working capital advance from an unrelated third party in China in the amount of $786,349, which bears no interest and may be converted into shares of common stock of the Company at the same price per share as the Company's future equity financing via public offering or private placements.

Our primary source of funds for the fiscal year ended December 31, 2011, included cash flow from operations, loans from the Bank of Communications, Yichang Branch and the Yichang City Commercial Bank, and a working capital advance from an unrelated third party. During the next 12 months, management anticipates proceeding with

31

expansion plans to acquire at least a 51% interest of a sales distribution company for approximately $1.5 million and to increase commercialization of Hubei Minkang PRC's products including the marketing distribution of existing and potential future products which is anticipated to cost approximately $700,000. However, if we are not able to raise the required funds for such expansion plans, then we may have to delay some or all of our expansion plans. There can be no assurance that further sources of debt or equity will be available or on acceptable terms.

During the fiscal year ended December 31, 2011, our net cash increased by $1,70,041, which included net cash used in operating activities of ($746,813), net cash used in investing activities of ($315,756) and net cash provided by financing activities of $2,715,368 and effect of exchange rate changes on cash of $57,242.

Net cash used in operating activities of $746,813 was mainly comprised of (i) net loss of ($214,045); (ii) non-cash depreciation and amortization expense adjustments of $537,379; and (iii) collection of accounts receivable of $300,273, increase in banker's acceptance notes receivable of $1,476,942, advance on purchases of $149,207, inventories of $42,499 and prepayments and other current assets of $24,895 from operating assets, increases in customer deposits of $903,504, decreases in accounts payable of $290,229, taxes payable of $591,137, and accrued expenses and other current liabilities of $219,788 from operating liabilities.

During the fiscal year ended December 31, 2011, cash used in investing activities of $315,756 consisted of (i) cash acquired from acquisition of $558, (ii) release of restricted cash - unearned government grant of $3,801, and (iii) purchases of property, plant and equipment of $320,115.

During the fiscal year ended December 31, 2011, cash provided by financing activities of $2,715,368 consisted of (i) proceeds from loans payable of $3,145,396, (ii) repayment of loans payable of $880,711, (iii) payments to stockholders of $335,666, and (iv) working capital advances of $786,349.

On June 28, 2011, a shareholder who had a loan payable of $357,393, sold and assigned $178,697 of such loan payable to an individual in Singapore, who was also a shareholder, and $178,696 of such loan payable to an individual in Malaysia pursuant to an Agreement for the Sale and Assignment and Affirmation of Obligations (the "Assignment and Affirmation Agreement") entered into with each of the individuals and us. On the same date and in conjunction with the Assignment and Affirmation Agreements, the assignees under such agreements entered into Agreements for Conversion of Indebtedness into Common Stock (the "Conversion Agreements"), whereby we agreed with each assignee to convert the indebtedness into an aggregate of 1,429,572 shares of common stock at a price of $.25 per share, which resulted in the elimination of $357,393 of indebtedness on our books.

As at December 31, 2011, Hubei Minkang PRC had loans payable of $1,572,698 due to Bank of Communications Limited, Yichang Branch, collateralized by certain of Hubei Minkang PRC's buildings and land use rights, with interest at 110% of the bank's benchmark rate, (6.6255%) per annum, payable monthly, which the principal is due and payable on May 5, 2012. Furthermore, as at December 31, 2011, Hubei Minkang PRC had loans payable of $786,349 and $786,349 due to Yichang City Commercial Bank, collateralized by certain of Hubei Minkang PRC's buildings and land use rights, with interest at 110% of the bank's benchmark rate, (6.435% and 7.04%, respectively) per annum, payable monthly, with the principal due and payable on January 20, 2012 and April 7, 2012, respectively. On January 10, 2012, Hubei Minkang PRC repaid the loan payable to the Yichang City Commercial Bank that was due on January 20, 2012. In addition, on April 1, 2012, Hubei Minkang PRC repaid the loan payable to the Yichang City Commercial Bank that was due on April 7, 2012.

In addition, during the fiscal year ended December 31, 2011, Hubei Minkang PRC received a working capital advance from an unrelated third party in China in the amount of $786,349, which bears no interest and may be converted into shares of common stock of the Company at the same price per share as the Company's future equity financing via public offering or private placements.

32

On January 10, 2012, Hubei Minkang PRC repaid a loan of RMB 5,000,000 to Yichang City Commercial Bank (now Hubei Bank Corporation Limited. (Yichang Branch) due to the merger between Yichang City Commercial Bank and Hubei Bank Corporation Limited (Yichang Branch)) that was due on January 20, 2012.

On January 11, 2012, Hubei Minkang PRC and Hubei Bank (Yichang Branch) executed a loan contract, where Hubei Minkang PRC loaned RMB 5,000,000.00 to be used as liquidity, with a loan period from January 11, 2012 to January 11, 2013 and having an interest rate of 7.315% per year, which is calculated and paid monthly. This loan has been secured by the same maximum pledge contract, dated December 23, 2010 between Hubei Minkang PRC and Yichang City Commercial Bank, however, Hubei Minkang PRC is required to renew the insurance plan on the collateral for another 12 months.

In February 2012, Hubei Minkang PRC entered into a Memorandum of Understanding with Henan Wanlong Pharmaceutical Co., Ltd. ("Henan Wanlong"), a Chinese company, with respect to a proposal for our subsidiary to acquire 51% of Henan Wanlong to expand distribution and increase sales growth.

In March 2012, the Company entered into a Memorandum of Understanding with Hubei Merryclin Pharmaceuticals Co., Ltd. ("Hubei Merryclin"), a Chinese company, with respect to a proposal for the Company to acquire a 30% to 51% interest in Hubei Merryclin and gain use of GMP certified production facilities to expand production.

On April 1, 2012, Hubei Minkang PRC repaid a loan of RMB 5,000,000 to Hubei Bank (Yichang Branch) (formerly Yichang City Commercial Bank) that was due on April 7, 2012.

On April 5, 2012, Hubei Minkang PRC and Hubei Bank (Yichang Branch) executed a loan contract, where Hubei Minkang PRC loaned RMB 5,000,000.00 to be used as liquidity, with a loan period from April 5, 2012 to April 5, 2013 and having an interest rate of 7.315% per year, which is calculated and paid monthly. This loan has been secured by the same maximum pledge contract, dated December 23, 2010 between Hubei Minkang PRC and Yichang City Commercial Bank, however, Hubei Minkang PRC is required to renew the insurance plan on the collateral for another 12 months.

On April 10, 2012, the Company entered into a common stock subscription agreement with an unrelated third party individual (the "investor") who provided RMB 5,000,000 working capital advances to Hubei Minkang PRC whereby the investor has agreed to convert his RMB 5,000,000 working capital advance to Hubei Minkang PRC (approximately $793,047 on the date of conversion) into 1,132,924 shares of the Company's common stock at $0.70 per share.

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

33

F-1

To the Board of Directors and Stockholders of
Hubei Minkang Pharmaceutical Ltd.
Singapore

We have audited the accompanying consolidated balance sheets of Hubei Minkang Pharmaceutical Ltd and Subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 purposes of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amount and disclosures in the consolidated financial statements. An audit also includes 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 the Company as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/Li & Company, PC
Li & Company, PC

Skillman, New Jersey
April 16, 2012

F-2

Hubei Minkang Pharmaceutical Ltd.

Consolidated Balance Sheets

Hubei Minkang Pharmaceutical Ltd.

Consolidated Statements of Operations and Comprehensive Income

Hubei Minkang Pharmaceutical Ltd.
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 2011 and December 31, 2010

Hubei Minkang Pharmaceutical Ltd.
December 31, 2011 and 2010
Notes to the Consolidated Financial Statements

Hubei Minkang Pharmaceutical Ltd. (formerly Nexgen Petroleum Corp., Blackrock Petroleum Corp. or DGT Corp.) ("Hubei" or the "Company") was incorporated on April 17, 2006 under the laws of the State of Nevada.  Through various acquisitions and name changes, the Company engaged in the business of acquiring, exploring and developing oil and gas properties.

On October 20, 2010, the Company changed to its current name, Hubei Minkang Pharmaceutical Ltd. to reflect its intended acquisition of HBMK Pharmaceutical Limited ("HBMK"), a BVI corporation.

The Company discontinued its oil and gas exploration business upon consummation of the share exchange agreement ("Share Exchange Agreement") with HBMK and all of the shareholders of HBMK on September 21, 2011.

HBMK Pharmaceutical Limited was incorporated on June 29, 2010 under the laws of the Territory of the British Virgin Islands ("BVI"). HBMK was formed by the stockholders of Sensori Holdings (S) Pte Ltd., the sole stockholder of Hubei Minkang Pharmaceutical Co., Ltd. for the sole purpose of acquiring all of the registered and contributed capital of Hubei Minkang Pharmaceutical Co., Ltd.

Prior to October 12, 2010, the date of recapitalization, HBMK was inactive and had no assets or liabilities.

Hubei Minkang Pharmaceutical Co., Ltd. ("Minkang") was incorporated on December 18, 2003 under the laws of the People's Republic of China ("PRC"). Minkang engages in the research, development, manufacturing and distribution of traditional Chinese medicine.

On October 12, 2010 HBMK acquired all of the registered and contributed capital of Minkang from Sensori Holdings (S) Pte Ltd., Minkang's then sole stockholder in exchange for 3,620,000 shares of the HBMK's common stock. The number of shares issued represented 100% of the issued and outstanding common stock immediately after the consummation of the Minkang acquisition.

As a result of the ownership interests of the former stockholder of Minkang, for financial statement reporting purposes, the merger between HBMK and Minkang has been treated as a reverse acquisition with Minkang deemed the accounting acquirer and HBMK deemed the accounting acquiree under the purchase method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of Minkang (the accounting acquirer) are carried forward to HBMK (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of HBMK and the assets and liabilities of Minkang which are recorded at historical cost. The equity of the combined entity is the historical equity of Minkang retroactively restated to reflect the number of shares issued by HBMK in the transaction.

F-7

On July 8, 2011 Hubei entered into a share exchange agreement (the "Share Exchange Agreement") with HBMK and all of the shareholders of HBMK and consummated the Share Exchange Agreement on September 21, 2011 with the HBMK stockholders representing 100% of then issued and outstanding capital stock of HBMK. Pursuant to the terms of the Share Exchange Agreement, Hubei acquired all of the issued and outstanding shares of capital stock of HBMK from HBMK's then stockholders in exchange for 33,500,000 shares of the Hubei's common stock. The number of shares issued represented approximately 77.8% of the issued and outstanding common stock immediately after the consummation of the Share Exchange.

As a result of the ownership interests of the former stockholders of HBMK, for financial statement reporting purposes, the merger between Hubei and HBMK has been treated as a reverse acquisition with HBMK deemed the accounting acquirer and Hubei deemed the accounting acquiree under the purchase method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of HBMK (the accounting acquirer) are carried forward to Hubei (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of Hubei and the assets and liabilities of HBMK which are recorded at historical cost. The equity of the combined entity is the historical equity of HBMK retroactively restated to reflect the number of shares issued by Hubei in the transaction.

The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The consolidated financial statements include all accounts of the Company and its entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

All inter-company balances and transactions have been eliminated.

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

The Company's significant estimates and assumptions include the fair value of financial instruments; allowance for doubtful accounts, normal production capacity, inventory valuation and obsolescence; the carrying value, recoverability and impairment of long-lived assets, including the values assigned to and the estimated useful lives of property, plant and equipment, land use rights, and purchased formulae; interest rates; revenue and government grant realized or realizable and earned; sales returns and allowances; value added tax rate, income tax rate and related tax provision; foreign currency exchange rate and functional currency of foreign subsidiaries. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

F-8

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification ("Paragraph 820-10-35-37") to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company's financial assets and liabilities, such as cash, restricted cash - unearned government grants, banker's acceptance notes receivable, accounts receivable, advance on purchases, prepayments and other current assets, accounts payable, customer deposits, taxes payable, unearned government grants, accrued expenses and other current liabilities approximate their fair values because of the short maturity of these instruments.

The Company's loans payable approximate the fair value of such instruments based upon management's best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2011 and December 31, 2010.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.

F-9

The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company's long-lived assets, which include property, plant and equipment, land use rights, and purchased formulae are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

The key assumptions used in management's estimates of projected cash flow deal largely with forecasts of sales levels, gross margins, and operating costs of the manufacturing facilities. These forecasts are typically based on historical trends and take into account recent developments as well as management's plans and intentions. Any difficulty in manufacturing or sourcing raw materials on a cost effective basis would significantly impact the projected future cash flows of the Company's manufacturing facilities and potentially lead to an impairment charge for long-lived assets. Other factors, such as increased competition or a decrease in the desirability of the Company's products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

The impairment charges, if any, is included in operating expenses in the accompanying consolidated statements of income and comprehensive income (loss).

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

The Company follows paragraph 210-10-45-4 of the FASB Accounting Standards Codification for restricted cash, unearned government grants. Restricted cash, unearned government grants represents grants received from the City of Yichang government to be used in the Company's environmental protection and improvement projects.

F-10

The Company accepts bankers' acceptance notes in payment of accounts receivable with certain customers. These notes are usually of a short term nature, approximately three to nine months in length. They are non-interest bearing, are due on the date of maturity; are paid by the customers' bank or credit worthy issuer upon presentation.

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

Advance on purchases primarily represents amounts paid to vendors for future delivery of products ranging from three (3) months to nine (9) months, all of which are fully or partially refundable depending upon the terms and conditions of the purchase agreements.

The Company follows paragraph 330-10-30-3 of the FASB Accounting Standards Codification for the allocation of production costs and charges to inventories. The Company allocates fixed production overhead to inventories based on the normal capacity of the production facilities expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. Judgment is required to determine when a production level is abnormally low (that is, outside the range of expected variation in production). Factors that might be anticipated to cause an abnormally low production level include significantly reduced demand, labor and materials shortages, and unplanned facility or equipment down time. The actual level of production may be used if it approximates normal capacity. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased so that inventories are not measured above cost. The amount of fixed overhead allocated to each unit of production is not increased as a consequence of abnormally low production or idle plant and unallocated overheads of underutilized or idle capacity of the production facilities are recognized as period costs in the period in which they are incurred rather than as a portion of the inventory cost.

F-11

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company's production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

Property, plant and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property, plant and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from five (5) years to twenty (20) years. Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of income and comprehensive income (loss). Leasehold improvements, if any, are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

The Company follows the guidance of paragraph 360-10-25-5 of the FASB Accounting Standards Codification ("Paragraph 360-10-25-5"), which prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities. Paragraph 360-10-25-5 also requires disclosures regarding the method of accounting for planned major maintenance activities and the effects of implementing the Paragraph 360-10-25-5. The guidance in Paragraph 360-10-25-5 affects the Company with regard to its manufacturing facility requiring periodic major maintenance to meet the Certification of Good Manufacturing Practices ("GMP") requirement every five (5) years in connection with its pharmaceutical products manufacturing license as mandated by China State Food and Drug Administration ("SFDA"). As a result, the Company has retroactively applied the required change in accounting, electing the deferral method of accounting for planned major maintenance activities. The deferral method requires the capitalization of planned major maintenance costs at the point they occur and the depreciation and amortization of these costs over their estimated useful lives or the period until future maintenance activities of five (5) years are repeated, whichever is shorter.

Land use rights represent the cost to obtain the rights to use certain parcels of land in the City of Yichang, Hubei Province, PRC. Land use rights are carried at cost and amortized on a straight-line basis over the lives of the rights of fifty (50) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

The Company has adopted paragraph 350-30-25-3 of the FASB Accounting Standards Codification for purchased formulae. Under the requirements, the Company amortizes the costs of purchased formulae over their

F-12

estimated useful lives of ten (10) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Customer deposits primarily represent amounts received from customers for future delivery of products, all of which were fully or partially refundable depending upon the terms and conditions of the sales agreements.

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. aamounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated 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 assesses 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 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 therein.

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 consolidated 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, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows.

F-13

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

The Company derives the majority of its revenue from sales contracts with customers with revenues being generated upon the shipment of goods. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from trucking or rail company and title transfers when the goods arrive at their destination, based on free on board ("FOB") destination; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

Net sales of products represent the invoiced value of goods, net of value added taxes ("VAT"). The Company is subject to VAT which is levied on all of the Company's products at the rate of 17% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales, if any.

The Company accounts for shipping and handling fees in accordance with paragraphs 605-45-45-19 through 605-45-45-23 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.

The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2 "Accounting for Research and Development Costs") and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 68 "Research and Development Arrangements") for research and development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment, material and testing costs for research and development as well as research and development arrangements with unrelated third party research and development institutions. The research and development arrangements usually involve specific research and development projects. Often times, the Company makes non-refundable advances upon signing of these research and development arrangements. The Company adopted paragraph 730-20-25-13 and 730-20-35-1 of the FASB Accounting Standards Codification (formerly Emerging Issues Task Force Issue No. 07-3 "Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and Development Activities") for those non-refundable advances. Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or the related services are performed. The management continues to evaluate whether the Company expect the goods to be delivered or services to be rendered. If the management does not expect the goods to be delivered or services to be rendered, the capitalized advance payment are charged to expense.

Receipts of government grants (i) to construct environmental protection and improvement projects and (ii) to encourage research and development and (iii) to subsidize energy conservation activities which are non-refundable are credited to unearned government grants upon receipt. The grants are used for purchases of assets, to

F-14

subsidize the research and development and energy conservation expenses incurred, for compensation expenses already incurred or for good performance of the Company.

Grants applicable to the construction of the environmental protection and improvement projects are recorded as a credit to the total cost of pollution prevention projects upon completion of the pollution prevention projects. For research and development expenses, the Company matches and offsets the government grants with the expenses of the research and development activities as specified in the grant approval document in the corresponding period when such expenses are incurred and records related government grants as credit to research and development and pollution prevention project cost accordingly. For government grants received as compensation for expenses already incurred are recognized as income in the period they become recognizable.

The Company applies the guidelines as set out in Section 830-20-35 of the FASB Accounting Standards Codification ("Section 830-20-35") for foreign currency transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards Codification, foreign currency transactions are transactions denominated in currencies other than U.S. Dollar, the Company's reporting currency or Chinese Yuan or Renminbi, the Company's functional currency. Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction generally shall be included in determining net income for the period in which the transaction is settled. The exceptions to this requirement for inclusion in net income of transaction gains and losses pertain to certain intercompany transactions and to transactions that are designated as, and effective as, economic hedges of net investments and foreign currency commitments. Pursuant to Section 830-20-25 of the FASB Accounting Standards Codification, the following shall apply to all foreign currency transactions of an enterprise and its investees: (a) at the date the transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction shall be measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date as defined in section 830-10-20 of the FASB Accounting Standards Codification; and (b) at each balance sheet date, recorded balances that are denominated in currencies other than the functional currency or reporting currency of the recording entity shall be adjusted to reflect the current exchange rate.

Net gains and losses resulting from foreign exchange transactions, if any, are included in the Company's statements of income and comprehensive income (loss).

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires 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 tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of income and comprehensive income (loss) in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification ("Section 740-10-25"). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also

F-15

provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management's opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.