UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-KSB

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(Mark one)

[X]  Annual Report Under Section 13 or 15(d) of The  Securities  Exchange Act of
     1934 for the fiscal year ended December 31, 2005

[ ]  Transition Report Under Section 13 or 15(d) of The Securities  Exchange Act
     of 1934

         For the transition period from ______________ to _____________

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                        Commission file number: [0-29523]

                              TS ELECTRONICS, INC.
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        (Exact name of small business issuer as specified in its charter)



                Delaware                                 73-1564807
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      (State or Other Jurisdiction               (I.R.S. Employer I.D. No.)
     incorporation or organization)


    2nd  Floor, No. 17, Jinpan Road,                      570216
     Haikou, Hainan Province, China
----------------------------------------    ------------------------------------
(Address of principal executive offices)                (Zip Code)


    Issuer's telephone number                         858-776-8880 (USA)
                                                   86-898-66811730 (China)
                                             -----------------------------------


Unit 8, D Area, Office Hall, Haikou Bonded Zone, Haikou, Hainan Province, China.
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              (Former name, former address and former fiscal year,
                         if changed since last report)


                                       1


       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:
                         Common stock, $0.001 par value
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Check  whether  the issuer  has (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period the Company was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of Company's knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ].

The issuer's revenue for the fiscal year ended December 31, 2005 was $8,657,813.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  prices of such common  equity,  as of a
specified date within the past 60 days:  9,444,671 shares held by non-affiliates
had an aggregate market value of $ 11,805,838.75 as of March 28, 2006.

As of March 27, 2006,  there were  34,723,056  shares of Common Stock issued and
outstanding.

                       DOCUMENT INCORPORATED BY REFERENCE

EXHIBITS incorporates by reference certain information which has been filed with
the Securities and Exchange Commission.

Transitional Small Business Disclosure Format: Yes    No X


                                       2


                               TS ELECTRONICS INC.

                                Table of Contents

                                                                     Page Number
                                                                     -----------
Part I

Item 1       Description of Business                                           4
Item 2       Description of Property                                          31
Item 3       Legal Proceedings                                                32
Item 4       Submission of Matters to a Vote of Security Holders              32

Part II

Item 5       Market for Company's Common Stock and Related                    32
             Stockholders Matters
Item 6       Management's Discussion and Analysis or Plan of Operation        33
Item 7       Financial Statements                                             41
Item 8       Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosures
Item 8A      Controls and Procedures                                          41

Part III

Item 9       Directors, Executive Officers, Promoters and Control Persons;    41
             Compliance with Section 16(a) of the Exchange Act
Item 10      Executive Compensation                                           44
Item 11      Security Ownership of Certain Beneficial Owners and              46
             Management and Related Stockholder Matters
Item 12      Certain Relationships and Related Transactions                   46
Item 13      Exhibits                                                         46
Item 14      Principal Accountant Fees and Services Signatures                47

FINANCIAL STATEMENTS                                                         F-1

EXHIBITS





                                       3


                                     PART I

Certain statements in this Form 10-KSB constitute "forward-looking  statements."
These forward-looking statements involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, performance or achievements
to be materially different from any future results,  performance or achievements
expressed  or implied by the  forward-looking  statements.  The  forward-looking
statements  in this Form  10-KSB are  identified  by words  such as  "believes",
"anticipates",  "expects", "intends", "may", "will", "estimate",  "continue" and
other similar expressions regarding our intent, belief and current expectations.
However, these words are not the exclusive means of identifying such statements.
In addition,  any statements  that refer to  expectations,  projections or other
characterizations  of future events or circumstances  and statements made in the
future  tense  are  forward-looking   statements.   Actual  results  may  differ
materially from those projected in the forward-looking statements as a result of
various  factors,  many of  which  are  beyond  our  control.  We  undertake  no
obligation   to  publicly   release  the  results  of  any  revisions  to  these
forward-looking  statements that may be made to reflect events or  circumstances
occurring  subsequent to the filing of this Form 10-KSB with the  Securities and
Exchange  Commission.  Readers are urged to  carefully  review and  consider the
various  disclosures  made by us in this Form 10-KSB,  including those set forth
under "Risk Factors".

Item 1 - Description of Business

Overview

TS Electronics, Inc. (formerly, Softstone, Inc.) was incorporated on January 28,
1999 pursuant to the provisions of the General  Corporation  Act of the State of
Delaware. On May 31, 1999, we merged with Soft Stone Building Products, Inc., an
Oklahoma  corporation  that was a  predecessor  to our company's  business.  Our
initial business operations were conducted at 620 Dallas Drive, Denton TX 76205.
On February 1, 2000, we moved our offices and facilities to Ardmore, OK. In June
2002, we moved our office  facilities  to Pottsboro,  TX. On August 13, 2003, we
changed our name to TS Electronics, Inc.

Our focus initially was solely on realizing the commercial benefits of a process
developed and patented by our first president,  Frederick  Parker.  This process
converted waste tires into useful products.  We were not successful in promoting
this business, wrote off all assets associated with the business and shifted our
attention  to  the  commercial   possibilities   of  a  then,  newly  discovered
devulcanization  process to which we acquired a 5.5-year  exclusive  license for
the Western Hemisphere.  In addition,  we entered into the business of importing
hard-to-find  and specialty  crumb rubber.  We were also not successful in these
endeavors, and have abandoned all efforts regarding these pursuits.


                                       4


Effective  August 11, 2004, the company entered into a Stock Exchange  Agreement
with Mr. Hou Xiao, the sole  stockholder of China ESCO Holdings  Limited ("China
ESCO"), a company  organized in the Hong Kong Special  Administration  Region in
the  People's  Republic  of China and its  wholly  owned  operating  subsidiary,
AsiaNet  PE Systems  Limited.  China ESCO was  engaged  in the  development  and
manufacturing of electrical energy saving systems and products in the PRC.

The  consummation of the transaction  with China ESCO was subject to a number of
conditions,  including  receipt by us of financial  statements  of China ESCO as
required  under  applicable  regulations,  and  satisfaction  of all  applicable
regulatory  requirements.  In  January  2005,  we  declared  China ESCO to be in
material breach of the agreement and rescinded the agreement.

Effective  February 8, 2005,  we  executed a Letter of Intent with Osage  Energy
Company,  LLC ("Osage")  whereby Osage would acquire 90% of the equity interests
of the company. This transaction was never consummated by the parties.

The company had no  operations  or  significant  assets from the last quarter of
2004 to May 2005.

On May  11,  2005,  we  sold to  Halter  Financial  Group,  Inc.,  in a  private
placement,  1,875,045  shares of restricted  common stock at a purchase price of
$0.1066641 per share,  pursuant to the terms of a Stock Purchase  Agreement (the
"Purchase  Agreement").  The private  placement was exempt from the registration
requirements of the Securities Act of 1933, as amended, in reliance upon Section
4(2)  thereunder.  As a result of the purchase,  Halter  Financial  Group,  Inc.
became our controlling  stockholder,  owning approximately 75% of our issued and
outstanding shares of common stock.

Immediately  subsequent  to and as a result of the  closing of the  transactions
contemplated by the Purchase Agreement, Gene F. Boyd, Keith P. Boyd, Fredrick W.
Parker and Leo G. Templer resigned as officers and directors, as applicable,  of
the  company.  Timothy P. Halter was  concurrently  appointed as a member of the
Board of Directors,  and Mr. Halter was elected as President,  Chief  Accounting
Officer, and Secretary of the company.

On October  19,  2005 we  entered  into a  Securities  Exchange  Agreement  (the
"Exchange  Agreement") with Onny and its original stockholders pursuant to which
we  acquired  all of the  issued  and  outstanding  shares  of  Onny  from  said
stockholders  in exchange for  27,499,940  shares of our common stock.  Upon the
effectiveness  of an amendment to the Company's  Certificate of Incorporation to
increase its common capital stock, as more  particularly  described  below,  the


                                       5


Company  shall issue to Heung Mei Tsui,  the principal  stockholder  of Onny, an
additional 4,723,056 shares of common stock (the "Post Closing Shares") to which
she would  otherwise  have been  entitled if the  Company had enough  authorized
shares  as  of  the  closing  of  the  Exchange   Transaction   (the   "Exchange
Transaction").  Upon the  issuance of the Post  Closing  Shares,  Ms. Tsui holds
25,278,385  shares or approximately  72.8% of the issued and outstanding  common
capital stock of the Company and Onny became the sole subsidiary of the company.

The Company filed an Information  Statement on March 15, 2006 in accordance with
Section 14 of the Securities  Exchange Act of 1934, as amended,  for the purpose
of  increasing  the  Company's  authorized  common  capital  stock to 60,000,000
shares,  to change the Company's name to China Pharma  Holdings,  Inc. after the
Information  Statement  is mailed to our  stockholders  and  ending  six  months
thereafter.

Onny

Onny was  incorporated  on January 12, 2005 under the laws of the British Virgin
Islands. At the time of incorporation, Onny's authorized capital was $50,000 and
there were 50,000  shares of one class and one series,  $1.00 par value,  issued
and outstanding.  Ms. Heung Mei TSUI was at the time of  incorporation  the sole
stockholder  and  director  of  Onny.  On  July 6,  2005,  Onny  adopted  a sole
stockholder's  resolution  and a sole  director's  resolution  that  resolved to
change Onny's  authorized  capital to $50,000  divided into  4,000,000  ordinary
shares, $0.01 par value, and 100 preferred shares, $100 par value. On August 18,
2005,  Onny increased its authorized  capital to $5,000,000  divided into 40,000
ordinary shares,  $100.00 par value, and 10,000  preferred  shares,  $100.00 par
value.  As of October 20, 2005,  there were 39,700  ordinary  shares  issued and
outstanding,  all of which are held by the  company.  No  preferred  shares were
currently issued and outstanding.

On May  25,  2005,  Onny  acquired  all  the  equity  interests  in  Helpson  in
consideration of approximately  $3,456,790.  Effective as of June 21, 2005, Onny
became the sole stockholder of Helpson and Helpson became a wholly foreign-owned
enterprise as defined by Chinese laws.

On October 20,  2005,  Onny  completed a private  placement of  $5,000,000  (the
"Offering") in consideration of the issuance of 10,000 shares of preferred stock
to 46  accredited  investors.  Participants  in this  Offering  exchanged  their
preferred  shares for ordinary  shares in  contemplation  of  participating  the
Exchange  Transaction  with the  Company.  As a  result,  offering  participants
received in the aggregate 6,944,611 shares of our common stock.


                                       6


Under the terms of the Offering, Ms. Heung Mei Tsui escrowed 6,944,611 shares of
the  Company's  common  stock  that she  received  as a result  of the  Exchange
Transaction,  which shares represent 20% of the Company's issued and outstanding
common  capital  stock  immediately   following  the  closing  of  the  Exchange
Transaction  (the  "Make  Good  Pool"),  so that in the event  the  consolidated
financial  statements  of the  Company  do not  reflect $8 million of Net Income
("NI") for the fiscal year ending  December 31, 2006 (the  "Guaranteed  NI") the
Make Good Shares can be distributed on a pro rata basis to the  participants  of
the Offering in accordance with the following formula:

Make Good Shares = (($8 million - Actual FY 06 US GAAP Net Income)  /$8m) X Make
Good Pool

If  required,  the Make Good Shares will be  delivered  to  participants  in the
Offering  within  ten (10)  business  days of the date the audit  report for the
period is filed with the SEC.

Ms. Heung Mei Tsui has also  escrowed  277,785  shares of the  Company's  common
stock that she  received as a result of the Exchange  Transaction,  which shares
represent  0.8% of the Company's  issued and  outstanding  common  capital stock
immediately  following the closing of the Exchange  Transaction  (the " HFG Make
Good Pool"), so that in the event the Company does not achieve the Guaranteed NI
the HFG Make Good Shares will be  distributed to HFG  International,  Limited in
accordance with the following formula:

HFG Make Good Shares = (($8  million - Actual FY 06 US GAAP Net  Income)  /$8m)X
HFG Make Good Pool

If required, the HFG Make Good Shares will be delivered within ten (10) business
days of the date the audit report for the period is filed with the SEC.

Helpson

Helpson is a foreign-invested  enterprise established in Haikou, Hainan Province
on February 25, 1993. Initially,  its name was Hainan Fulin Biomedical Co., Ltd.
and it changed to "Helpson" in 1999. The company was originally an "equity joint
venture" as defined by China's  laws on foreign  invested  enterprises.  The two
joint  venturers  were  Haikou   Biomedical   Engineering  Co.,  Ltd.   ("Haikou
Biomedical"),  a Chinese  company,  and Hong Kong Fudao  Development  Co.,  Ltd.
("Fudao"),  a  Hong  Kong  company.  Haikou  Biomedical  invested  approximately
US$367,197  for a 70% share of Helpson,  and Fudao  invested  $150,000 for a 30%
share of Helpson.

On June 16, 2001, Fudao entered into an equity interest transfer  agreement with


                                       7


Hainan  Kaidi  Technology  Co., Ltd  ("Kaidi").  In  accordance  with the equity
interest transfer agreement,  Fudao transferred all its 30% capital contribution
in Helpson to Kaidi. As a result of the transfer, Haikou Biomedical continued to
hold a 70% equity interest in Helpson,  while Kaidi had a 30% equity interest in
Helpson.  Furthermore,  Helpson  became a PRC  domestic  company,  rather than a
foreign-invested company.

Effective  on December 26, 2003,  Helpson  issued new shares to Chengdu  Huineng
Biomedical Co., Ltd.  ("Chengdu Bio") and Chongqing  Chemical  Medicine  Holding
Group ("Chongqing  Chemical").  Chengdu Bio contributed  US$370,370 for a 10.71%
equity interest in Helpson, and Chongqing Chemical contributed  US$617,284 for a
17.86%  equity  interest in Helpson.  After the issuance of shares,  Helpson had
four equity  holders:  Haikou  Biomedical,  which held a 50% equity  interest in
Helpson; Kaidi, which held a 21.43% interest in Helpson; Chengdu Bio, which held
a 10.71%  interest  in  Helpson;  and  Chongqing  Chemical,  which held a 17.86%
interest in Helpson.

On March 8, 2005,  Chongqing  Chemical entered into an equity interest  transfer
agreement with Haikou  Biomedical to transfer all its equity interest in Helpson
to Haikou Biomedical.  Upon completion of the transfer,  there remain only three
equity  holders  of  Helpson:  Haikou  Biomedical,  who  holds a  67.86%  equity
interest;  Kaidi, who holds a 21.43% equity interest, and Chengdu Bio, who holds
a 10.71% equity interest.

On May 25, 2005, Haikou Biomedical, Kaidi and Chengdu Bio entered into an equity
interest transfer agreement with Onny, a company organized in the British Virgin
Islands,  to  transfer  all  their  equity  interests  in  Helpson  to  Onny  in
consideration of approximately  $3,456,790.  Effective as of June 21, 2005, Onny
became  the  sole   stockholder   of  Helpson,   and  Helpson  became  a  wholly
foreign-owned enterprise as defined by Chinese laws.

Since  its  establishment,  Helpson  has  positioned  itself  in  the  research,
development,   manufacturing,  and  sales  of  a  series  of  bio-pharmaceutical
products.   Helpson's   products   focus   primarily  on  genetic   engineering,
bioengineering and peptidergic medicine, as well as chemical medicinal products.

Principal Products and Services
-------------------------------

Helpson's  primary business is drug  manufacturing  and drug sale and marketing.
Helpson  manufactures and markets products in three major categories in terms of
purpose:  cardiovascular and cerebrovascular medicine, raw materials for surface
wound, and anti-infection medicine.


                                       8


The following drugs have attained new medicine certifications:

Buflomedil   Hydrocholoride  tablets,   Buflomedil   Hydrocholorideforinjection,
Buflomedil  frozen powder aricula and raw materials.  This product is a chemical
medicine used for the nervous system.

PuSenOK  tablets.  PuSenOK is a new  anti-flu  medicine in the market mixed with
pseudoephederine  hydrochloride  with a  non-drowsy  formula  and a  runny  nose
suppressant.

Helpson  obtained  the  certifications  of two new drugs in the last  quarter of
2005:  Gastrodin and Hepatocyte  growth-promoting  factor for injection and they
have been put into manufacturing and market.

In addition to the above new medicines,  Helpson is manufacturing  the following
products:

Neurotrophicpeptide  2ml,  5ml, and 10ml:  This  product is a  biopharmaceutical
medicine intended for the nervous system.  Its effect is to provide nutrition to
the neural system and fight nerve system  diseases.  The product is administered
by injection.

Haizhu oral liquid:  This product is a Chinese herbal medicine.  It is available
in fluid form to be taken orally.

Andrographolide  tablet:  This  product  is a Chinese  herbal  medicine  that is
intended for use as an anti-infectant.  The product has low bacteria  resistance
and is suitable for long-term use. It is available in tablet form.

Clarithromycin  capsules  and  granules:  This  product is a  chemical  medicine
intended  to be  used  as  an  anti-infectant.  The  product  is  an  antibiotic
specifically  used for the  effective  curing of  Helicobacter.  The  product is
available in capsule and granule forms.

Roxithromycin:  This  product  is  a  chemical  medicine  that  is  used  as  an
anti-infectant.  The product has germ- and virus-resistant characteristics,  but
is also a troche type of Roxithromycin  that makes it more attractive for use by
patients with deglutition problems. It is administered through tablets.

Thymopetidum  Injection:  This product is used to adjust the immune system.  Its
function is to adjust and  increase  the  immunity of human being  cells.  It is
administered by injection.

At  present,  the  Helpson is  manufacturing  a total of 17 drugs  listed in the
following chart,  including five that have received new drug certifications.  In


                                       9


addition, there are eight drugs undergoing research and development. Among them,
two new drugs have gained the important national new product certificate.

1.        Buflomedil Hydrocholoride tablets.
2.        Buflomedil Hydrocholoride for injection
3.        Buflomedil Hydrocholoride frozen powder aricula
4.        Buflomedil Hydrocholoride raw materials
5.        PuSenOK tablets
6.        Neurotrophicpeptide 2ml
7.        Neurotrophicpeptide 5ml
8.        Neurotrophicpeptide 10ml
9.        Haizhu Oral Liquid
10.       Andrographolide tablet
11.       Thymopetidum Injection
12.       Clarithromycin capsules
13.       Clarithromycin granules
14.       Cefaclor dispersible tablets
15.       Roxithromycin dispersible tablets
16.       Gastrodin
17.       Hepatocyte growth-promoting factor for injection

Due to the  nature  of the  biotechnology  and  pharmaceutical  industries,  the
product  structure of the Company strives to change with market demand.  Helpson
traditionally focused on R&D and marketing of cardiovascular and cerebrovascular
medicine medicines. In 2005, Helpson launched Hepatocyte growth-promoting factor
for injection,  PuSenOK,  and Gastrodin,  which passed clinical  experiments and
entered the trial production stage, and awarded the new medicine certificate.

Helpson also plans to expand its  biotechnology  product series.  Based upon the
foundation  established  by Helpson's  Neurotrophicpeptide,  Helpson will launch
several additional biological medicines, including Brain peptide injections, and
injected Hepatocyte Growth-promoting Factors.

Helpson adjusts the delivery system and marketing for each of its products based
on the product's target patient group. Maintaining a variety of delivery systems
(e.g.  tablet,  injection,  powder,  etc) targeted for different groups enhances
Helpson's  competitive  position  in the  market.  Helpson's  present  types  of
delivery include covered tablet, capsule, troche, oral fluid, injection,  frozen
powder, acicula, and germfree powder acicula.


                                       10


Principal Markets
-----------------

The principal markets of Helpson lie within China. China has the world's largest
population of nearly 1.3 billion people.  The  pharmaceutical  industry accounts
for      approximately      3%     of     China's     annual     GDP     Source:
http://www.chinability.com/2004%20economic%20performance.htm).  In  2004,  PRC's
pharmaceutical  industry  realized  sales of US$42  billion  and net  profits of
US$3.7  billion;  a 17.44% increase in realized sales and 11.74% increase in net
profits from the previous year (Source:http://www.chinapharm.com.cn).  According
to a  Chinese  government  report,  China's  pharmaceutical  sales  in 2005  are
expected to be  approximately  US$ 45.5  billion,  growing 17% from the previous
year  (Source:  http://www.biotech.org.cn/news/news/show.php?id=21470).   It  is
estimated that China's pharmaceutical  industry will maintain at least a 12%-15%
growth    rate    through    the    year     2010(Source:     http://www.511511.
com/A1/200501/A1000003917200501 04093750375.shtml).

The predicted growth is based upon the relaxation of trade barriers following
China's accession to the World Trade Organization, advances in the Chinese
economy, and China's large, aging population.

Detailed Market Sectors
-----------------------

Reepitheliazation/Wound  rehabilitation medications:  These products belong to a
new and advanced  classification of drugs used to speed the  rehabilitation of a
wide variety of wounds ranging from lacerations and burns to injuries  sustained
during  childbirth  and  surgery.   Cardiovascular  &  Cerebrovascular   Disease
medications:  Cardiovascular & cerebrovascular diseases have become increasingly
common and have a serious  impact on people's  health.  The SFDA  estimated  the
market  share in 2003 of these  two  medicines  in the PRC to be  14.36%  of the
US$5.1       billion       (RMB42.2       billion)       market.        (Source:
http://www.specc.com.cn/hydt/ShowHydt.aspx?id=121 ).

OTC Cold & Flu medicines:  In 2003, the OTC medicine  market capacity in the PRC
was          approximately           US$3.6          billion,           (Source:
http://www.cnm21.com/xinwen2/041028_007.htm)  with cold & flu medicines having a
market                 of                 US$300                 million(Source:
http://www.fx120.net/ypsj/ypsc/scfx/200406101631184449.htm ).

The sales of such medicines make up 8.3% of total OTC medicine retail sales.

Anti-infection  medicines: In the past few years,  Anti-infection medicines have
become the best  selling  drugs within the PRC while also  maintaining  a growth
rate of 20%. In 2001,  the sales reached  roughly US$3.6  billion;  in 2003, the
sales reached more than US$4.8 billion,  achieving a 30% market share.  (Source:
SFDA Prospectus of Zhejiang Jingxin Pharmaceutical Co., Ltd.).


                                       11


Distribution
------------

Helpson's products are currently sold in more than 20 provinces,  sovereignties,
and autonomous regions. Helpson has 16 sales offices and approximately 250 proxy
agents in China.

Helpson  uses  a  flat  distribution  channel  system  of  independent  regional
distributors. In a typical distribution contract, a distributor will be provided
with certain  sales  targets for a particular  period  according to a set retail
price. If the distributor completes the sales task within the prescribed period,
the agent  distributor  will be given  greater  economic  incentives  and future
distribution opportunities.  If the distributor fails to complete the sales task
within  the  prescribed  period,  Helpson  will  cancel  its  contract  with the
distributor  and sign with  other  competent  distributors.  Helpson  also signs
reselling  contracts with franchise drug companies for the  distribution  of its
products.  The  franchise  drug  company,  as a reseller,  resells the Company's
products to local hospitals,  drug stores,  and other channel  distributors.  In
addition,  Helpson  sells its  products  directly to  hospitals  and retail drug
stores.

Industry Background and Competition

The  pharmaceutical  industry  accounts  for  approximately  3% of China's  GDP.
(Source: http://blog.fh21.com.cn/post/65/106). The industry's primary categories
include chemical medicine,  traditional Chinese medicinal material,  traditional
Chinese   medicinal  film,   prepared  Chinese  herbal  medicine,   antibiotics,
biological  products,   biological  medicine,   radioactive  medicine,   medical
appliances,  sanitation materials,  pharmaceutical machinery, medical packaging,
and trading.

There is a low degree of  consolidation  among  pharmaceutical  companies in the
PRC. According to the SFDA-reported statistics, in July of 2004, there were 5071
manufacturing   pharmaceutical  companies  (not  including  companies  producing
traditional  Chinese  medicinal  film,  medical  oxygen,   reagent  of  in-vitro
diagnosis  or  supplementary  materials).  The total  market share of the top 10
biggest companies was about 42%, compared to 66% in the US. (Source: SFDA(pound)
Prospectus of Zhejiang Jingxin Pharmaceutical Co., Ltd.)

Competition  in the  pharmaceutical  industry is reduced by barriers to entry. A
company  wishing  to enter the  industry  must  comply  with the  standards  and
regulations set forth by the government.  In the PRC, SFDA is the authority that
monitors  and  supervises  the  administration  of the  pharmaceutical  industry


                                       12


including   pharmaceutical   products,   medical   appliances,   and  equipment.
Pharmaceutical   manufacturing   enterprises   must   obtain  a   Pharmaceutical
Manufacturing   Enterprise   Permit   issued  by  the  relevant   pharmaceutical
administrative  authorities  and relevant  health  departments at the provincial
level where the enterprise is located.  Furthermore, all pharmaceutical products
produced in the PRC, with the exception of Chinese  herbal  medicines in soluble
form,  must  bear a  registered  number  approved  by the  appropriate  medicine
administration  authorities  in the PRC.  Lastly,  in accordance  with the World
Health  Organization,  the PRC now  requires  compliance  with GMP  standards in
pharmaceutical  production  in order  to  minimize  the  risks  involved  in any
pharmaceutical  production  that  cannot be  eliminated  through  testing  final
products.  As the regulatory  approval  process becomes more stringent,  it also
increases the industry's capital entry barrier.

Due to the  variety  of  consumer  demands  within  the  pharmaceutical  market,
pharmaceutical  companies  have  relatively  dispersed  product  lines.  We have
identified,  however,  two  primary  strategies  we must  adopt in order to stay
competitive.  In expanding market share of common traditional  medicine, we must
take advantage of 1) our large  manufacturing  scale and reasonable cost control
mechanisms, and 2) our strong sales network.

Employees

The Company  currently has 105 regular  employees.  Helpson is also aided by the
efforts of a 250 member outside sales and marketing team.


Risk Factors

As of December 31, 2005, we had the following Risk Factors:

WE MAY NEED TO RAISE  ADDITIONAL  CAPITAL  WITHIN THE NEXT TWELVE MONTHS TO FUND
OUR  OPERATIONS AND FAILURE TO RAISE  ADDITIONAL  CAPITAL MAY FORCE US TO DELAY,
REDUCE, OR ELIMINATE OUR PRODUCT DEVELOPMENT PROGRAMS

Due to the large funds required for research and  development and the subsequent
marketing of products,  the  pharmaceutical  industry is very capital intensive.
The industry is  characterized by large  receivable  turnovers,  which signifies
that we will  need  more  working  capital  as our  revenues  increase.  We have
traditionally   been  committed  to  biomedical  R&D,  and  are  now  developing
traditional  chemical medicines within specific market segments such as those of
anti-flu and anti-infection.  It is likely that we will need to raise additional
capital within the next twelve months.  Additional capital may be needed for the


                                       13


development  of  new  products  or  product  lines,  financing  of  general  and
administrative  expenses,  licensing or acquisition of additional  technologies,
and marketing of new or existing products.  There are no assurances that we will
be able to raise  the  appropriate  amount  of  capital  needed  for our  future
operations. Failure to obtain funding when needed may force us to delay, reduce,
or eliminate our product development programs.

WE RELY ON FEW  SUPPLIERS  AND ANY  DISRUPTION  WITH OUR  SUPPLIERS  COULD DELAY
PRODUCT SHIPMENTS AND ADVERSELY AFFECT OUR BUSINESS OPERATIONS AND PROFITABILITY

We have developed relationships with a single or limited number of suppliers for
materials  that are otherwise  generally  available.  Purchases from our largest
supplier  in  2005,   Hainan  Xinxin   Biotechnology   Company,   accounted  for
approximately  46.25% of the total purchases of our company.  Purchases from our
second-to-largest  supplier in 2005, Chengdu Xingwangji  Pharmaceutical  Company
accounted  for  41.82%  of  our  total  purchases.   Although  we  believe  that
alternative  suppliers  are available to supply  materials,  should any of these
suppliers terminate their business arrangements with us or increase their prices
of materials supplied, it could delay product shipments and adversely affect our
business operations and profitability.

WE MAY UNDERTAKE ACQUISITIONS IN THE FUTURE, AND ANY DIFFICULTIES IN INTEGRATING
THESE ACQUISITIONS MAY DAMAGE OUR PROFITABILITY

In the future, we may acquire additional  businesses or products that complement
our existing  business and expand our business  scale.  The  integration  of new
businesses  and  products  may  prove  to be an  expensive  and  time  consuming
procedure.  We can  offer  no  assurance  that we  will be able to  successfully
integrate  the newly  acquired  businesses  and products or operate the acquired
business in a profitable manner.  Failure to locate an appropriate M&A target or
failure to successfully  integrate and operate acquired  businesses and products
may adversely impact our operations and profits.

THE FAILURE TO MANAGE  GROWTH  EFFECTIVELY  COULD HAVE AN ADVERSE  EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OUR
OPERATIONS

The rapid market growth of our  pharmaceutical  products may require our company
to expand our employee base for managerial,  operational,  financial,  and other
purposes.  As of December 31, 2005, we had 105 regular employees.  The continued
future growth will impose significant added responsibilities upon the members of
management  to  identify,   recruit,  maintain,   integrate,  and  motivate  new
employees.  Aside  from  increased  difficulties  in  the  management  of  human


                                       14


resources,  we may also encounter  working capital issues,  as we need increased
liquidity to finance the purchases of raw  materials and supplies,  research and
development of new products, acquisition of new businesses and technologies, and
the hiring of additional employees. For effective growth management,  we will be
required to continue improving our operations, management, and financial systems
and control.  Our failure to manage growth  effectively  may lead to operational
and financial  inefficiencies  that will have a negative effect on the Company's
profitability.

WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND LOSS OF THESE KEY PERSONNEL  COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FIANANCIAL CONDITION AND RESULTS
OF OPERATIONS

Our Company's  success is, to a certain extent,  attributable to the management,
sales and marketing,  and pharmaceutical  factory  operational  expertise of key
personnel.  Ms. Zhilin Li, Mr. Heqi Cai, and Ms. Yao Huang perform key functions
in the  operation  of our  Company.  Ms.  Zhilin Li entered  into an  Employment
Agreement  with Helpson,  which  provided that Ms. Li was employed by Helpson to
act as its CEO.  The term of her  employment  is from  July 1,  2005 to June 30,
2010.  Mr. Heqi Cai entered into an Employment  Agreement with Helpson to act as
its Director of Development  Department for a term from July 1, 2005 to June 30,
2010. Ms. Yao Huang entered into an Employment  Agreement with Helpson to act as
its Head of Pharmaceutical  Plant for a term from July 1, 2005 to June 30, 2010.
There can be no assurance  that we will be able to retain these  officers  after
the term of their employment  contracts expire. The loss of these officers could
have a material  adverse  effect upon our  business,  financial  condition,  and
results of operations.  We must attract, recruit and retain a sizeable workforce
of technically  competent  employees.  Our ability to effectively  implement our
business  strategy  will  depend  upon,  among  other  factors,  the  successful
recruitment   and  retention  of  additional   highly  skilled  and  experienced
management  and other key  personnel.  We cannot  assure that we will be able to
hire or retain such employees.

IF ALL OR A SIGNIFICANT  PORTION OF OUR CUSTOMERS WITH TRADE RECEIVABLES FAIL TO
PAY ALL OR PART OF THE TRADE RECEIVABLES OR DELAY THE REPAYMENT,  OUR NET INCOME
WILL DECREASE AND OUR PROFITABILITY WILL BE ADVERSELY AFFECTED

Our Company had trade receivables,  net of allowance for doubtful  accounts,  of
approximately $5,709,762 as of December 31, 2005. During the year ended December
31, 2005, the debtors' turnover period was approximately [116] days.

It is usual  commercial  practice  that certain  customers may repay their debts
beyond  credit  periods  granted or may repay  slowly  when  transaction  volume
increases. There is no assurance that our trade receivables will be fully repaid
on a timely basis.


                                       15


If all or a significant  portion of our customers with trade receivables fail to
pay all or part of the  trade  receivables  or delay the  payment  due to us for
whatever  reason,  our net profit will  decrease and our  profitability  will be
adversely affected.

IF WE FAIL TO DEVELOP NEW PRODUCTS WITH HIGH PROFIT  MARGINS AND OUR HIGH PROFIT
MARGIN  PRODUCTS ARE  SUBSTITUTED BY  COMPETITOR'S  PRODUCTS,  OUR GROSS AND NET
PROFIT MARGINS WILL BE ADVERSELY AFFECTED

In the year ended December 31, 2005, the gross profit margin for our Company was
51%. However,  there is no assurance that we will be able to sustain such profit
margins in the future.  The  pharmaceutical  industry is very  competitive,  and
there may be pressure to reduce sale prices of products  without a corresponding
decrease  in the price of raw  materials.  To the extent that we fail to develop
new products with high profit  margins and our high profit  margin  products are
substituted by competitors' products, the gross profit margins will be adversely
affected.

WE FACE COMPETITION IN THE  PHARMACEUTICAL  INDUSTRY AND SUCH COMPETITION  COULD
CAUSE OUR SALES REVENUE AND PROTITS TO DECLINE

According to the State Food and Drug Administration of China (the "SFDA"), there
were approximately 5,071 pharmaceutical manufacturing companies in the PRC as of
the end of June 2004, of which approximately  3,237  manufacturers  obtained GMP
certification. After GMP certification became a mandatory requirement on July 1,
2004,  approximately  1,834  pharmaceutical  manufacturers  were forced to cease
production  (Source:  http://www.jlda.gov.cn/hyzx/showhyzx.x?id=789).  Only  the
3,237  pharmaceutical  manufacturers  with GMP certifications may continue their
manufacturing operations.  The certificates,  permits, and licenses required for
pharmaceutical  operation  in  the  PRC  create  a  potential  barrier  for  new
competitors seeking entrance into the market.  Despite these obstacles,  we face
competitors  that will  attempt to create or are  marketing  products in the PRC
that are similar to ours.  There can be no assurance  that our products  will be
either more effective in their  therapeutic  abilities and/or be able to compete
in price with that of our competitors.  Failure to do either of these may result
in decreased profits for our Company.

OUR SUCCESS IS HIGHLY  DEPENDENT  ON  CONTINUALLY  DEVELOPING  NEW AND  ADVANCED
PRODUCTS,  TECHNOLOGIES, AND PROCESSES AND FAILURE TO DO SO MAY CAUSE US TO LOSE
OUR COMPETITIVENESS IN THE PHARMACEUTICAL  INDUSTRY AND MAY CAUSE OUR PROFITS TO
DECLINE


                                       16


To  remain  competitive  in the  pharmaceutical  industry,  it is  important  to
continually  develop new and advanced  products,  technologies,  and  processes.
There is no assurance  that the  competitors'  new products,  technologies,  and
processes  will  not  render  our  Company's   existing   products  obsolete  or
non-competitive.  Our Company's  competitiveness  in the  pharmaceutical  market
therefore relies upon our ability to enhance our current products, introduce new
products,  and  develop  and  implement  new  technologies  and  processes.  Our
Company's  failure to  technologically  evolve  and/or  develop  new or enhanced
products may cause us to lose our competitiveness in the pharmaceutical industry
and may cause our profits to decline.

THE  COMMERCIAL  SUCCESS  OF OUR  PRODUCTS  DEPENDS  UPON THE  DEGREE  OF MARKET
ACCEPTANCE AMONG THE MEDICAL  COMMUNITY AND FAILURE TO ATTAIN MARKET  ACCPETANCE
AMONG THE MEDICAL  COMMUNITY MAY HAVE AN ADVERSE  IMPACT ON OUR  OPERATIONS  AND
PROFITABILITY

The  commercial  success  of our  products  depends  upon the  degree  of market
acceptance among the medical community. Even if our products are approved by the
SFDA,  there is no assurance  that  physicians  will  prescribe or recommend our
products to patients.  Furthermore,  a product's prevalence and use at hospitals
may be  contingent  upon  our  relationship  with  the  medical  community.  The
acceptance of our products  among the medical  community may depend upon several
factors,  including but not limited to, the  product's  acceptance by physicians
and patients as a safe and effective  treatment,  cost effectiveness,  potential
advantages over alternative treatments,  and the prevalence and severity of side
effects.  Failure to attain market  acceptance  among the medical  community may
have an adverse impact on our operations and profitability.

WE ENJOY CERTAIN PREFERENTIAL TAX CONCESSIONS AND LOSS OF THESE PREFERENTIAL TAX
CONCESSIONS WILL CAUSE OUR TAX LIABILITIES TO INCREASE AND OUR  PROFITABILITY TO
DECLINE

Helpson enjoys preferential tax concessions as a high-tech enterprise.  Pursuant
to the State Council's Regulations on Encouraging  Investment in and Development
of Hainan Island,  Hainan  Provincial  State Tax Bureau  recognized and approved
Helpson's  status as a high and new  technology  enterprise and thus Helpson was
granted a 50% reduction in its income tax  liability  for the years 2003,  2004,
and 2005.  As the  corporate  income tax in Hainan  province  is 15%,  Helpson's
income tax liability for the period between 2003,  2004, and 2005 is 7.5%.  This
preferential  tax rate was  expired  on  December  31,  2005 and  Helpson is now
applying for a renewal. If the application is successful, Helpson will enjoy the
7.5% of  preferential  income  tax rate.  But if not,  the  income  tax rate for
Helpson will be 15%.


                                       17


Pursuant to the  Examining  and  Administrative  Measures  Regarding  Income Tax
Deduction for Investment in PRC Made Equipment Used in Technical Reform,  40% of
the purchase  price in PRC-made  equipment can be used for income tax deduction.
In the case of Helpson, US$390,247 can be used for income tax deduction. For the
two years ending  December 31, 2005,  the amount of tax  deduction  approved was
USD221,921.

However,  there is no assurance that the  preferential  tax treatment  mentioned
above will remain  unchanged  and  effective.  Helpson's  tax  liabilities  will
increase and its profits may accordingly  decline if the reduced income tax rate
of 7.5% is no longer  applicable and/or the tax relief on investment in PRC-made
equipment is no longer available.

WE MAY BE  SUBJECT  TO THE  PRC'S  PRICE  CONTROL  OF DRUGS  WHICH MAY LIMIT OUR
PROFITABILITY AND EVEN CAUSE US TO STOP MANUFACTURING CERTAIN PRODUCTS

The State  Development and Reform  Commission  ("SDRC") of the PRC and the price
administration  bureaus  of the  relevant  provinces  of the  PRC in  which  the
pharmaceutical  products are  manufactured  are responsible for the retail price
control over our pharmaceutical  products.  The SDRC sets the price ceilings for
certain pharmaceutical  products in the PRC. Although our products have not been
subject  to such  price  control  as of the  date of this  10-KSB,  there  is no
assurance that our products will remain unaffected by it. Where our products are
subject to a price ceiling, we will need to adjust the product price to meet the
requirement and to accommodate for the pricing of competitors in the competition
for  market  shares.   The  price  ceilings  set  by  the  SDRC  may  limit  our
profitability,  and in some instances,  such as where the price ceiling is below
production costs, may cause us to stop manufacturing certain products.

OUR CERTIFICATES,  PERMITS, AND LICENSES ARE SUBJECT TO GOVERNMENTAL CONTROL AND
RENEWAL AND FAILURE TO OBTAIN  RENEWAL WILL CAUSE ALL OR PART OF OUR  OPERATIONS
TO BE TERMINATED

Our Company is subject to various  PRC laws and  regulations  pertaining  to the
pharmaceutical  industry.  Our Company has attained  certificates,  permits, and
licenses  required for the  operation  of a  pharmaceutical  enterprise  and the
manufacturing  of  pharmaceutical  products in the PRC. We obtained the Medicine
Production  Permit in December 2005,  which is valid through  December 31, 2010.
When the  permit  expires,  our  Company  will not be able to  operate  medicine
production  which will cause our operations to be  terminated.  We also obtained
three GMP certificates  which are effective  through July 17, 2008,  December 2,
2009 and February 2, 2010 respectively. The pharmaceutical production permit and


                                       18


GMP  certificates  are valid for a term of five years and must be renewed before
their  expiration.  During the renewal  process,  we will be re-evaluated by the
appropriate  governmental  authorities  and must comply with the then prevailing
standards and regulations  which may change from time to time. 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 operation and profitability.

IF OUR PRODUCTS FAIL TO RECEIVE  REGULATORY  APPROVAL OR ARE SEVERELY LIMITED IN
THE PRODUCTS SCOPE OF USE, WE MAY BE UNABLE TO RECOUP CONSIDERABLE  RESEARCH AND
DEVELOPMENT EXPENDITURES

Our  products  that are approved to be  manufactured  include 17  medicines.  We
applied to the SFDA for  registration of manufacturing 21 medicines and SFDA has
accepted these  applications.  There are eight products in the stage of research
and development. The production of our pharmaceutical products is subject to the
regulatory   approval  of  the  SFDA.  The  regulatory  approval  procedure  for
pharmaceuticals can be quite lengthy, costly, and uncertain.  Depending upon the
discretion of the SFDA,  the approval  process may be  significantly  delayed by
additional  clinical  testing and  require  the  expenditure  of  resources  not
currently available; in such an event, it may be necessary for us to abandon our
application.  Even where  approval  of the  product is  granted,  it may contain
significant   limitations   in  the  form  of  narrow   indications,   warnings,
precautions,  or  contra-indications  with  respect  to  conditions  of use.  If
approval of our product is denied,  abandoned,  or severely  limited in terms of
the scope of products use, it may result in the inability to recoup considerable
research and development expenditures.

OUR  RESEARCH AND  DEVELOPMENT  MAY BE COSTLY  AND/OR  UNTIMELY AND THERE ARE NO
ASSURANCES  THAT OUR  RESEARCH  AND  DEVELOPMENT  WILL EITHER BE  SUCCESSFUL  OR
COMPLETED WITHIN THE ANTICIPATED TIMEFRAME, IF EVER

The  research  and  development  of our  new and  existing  products  and  their
subsequent  commercialization  plays an important role in our success. There are
eight  Products that are currently  under  research and  development,  including
rh-CNTF, rh-aFGF,  Thymopetidum for Injection,  Mycophenolate mofetil, Yimaikang
Capsule,  Compound  Ossotide for  Injection,  and  Deproteinised  Calf Blood for
Injection.  The  research  and  development  of new  products is costly and time
consuming,  and there are no assurances that our research and development of new
products will either be successful or completed within the anticipate timeframe,


                                       19


if ever at all.  There are also no assurances  that if the product is developed,
that it will lead to successful commercialization.

WE CANNOT  GUARANTEE THE PROTECTION OF OUR  INTELLECTUAL  PROPERTY RIGHTS AND IF
INFRINGEMENT OR COUNTERFEITING OF OUR INTELLECTUAL  PROPERTY RIGHTS OCCURS,  OUR
REPUTATION AND BUSINESS MAY BE ADVERSELY AFFECTED

To protect the  reputation of our products,  we have  registered and applied for
registration  of our  trademarks  in the PRC  where  we  have a  major  business
presence. Please refer to the paragraph headed "Intellectual property rights" in
Item 1 Description of Business of this 10-KSB.

All of our  products  are sold under  these  trademarks.  As of the date of this
10-KSB,  we have not experienced any  infringements of such trademarks for sales
of pharmaceutical products and as of the date of this 10-KSB, the Directors were
not aware of any  infringement of our  intellectual  property  rights.  However,
there is no assurance that there will not be any  infringement of our brand name
or other registered  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  amounts  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.

WE MAY SUFFER AS A RESULT OF PRODUCT LIABILITY OR DEFECTIVE PRODUCTS

We may  produce  products  which  inadvertently  have an adverse  pharmaceutical
effect on the health of individuals  despite proper  testing.  Existing PRC laws
and regulations do not require us to maintain third party liability insurance to
cover product liability claims. 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, and the inability
to  commercialize  some products.  We currently are not aware of any existing or
anticipated product liability claims with respect to our products.

WE  RELY  ON  THE  COOPERATION   WITH  RESEARCH   LABORATORIES,   PHARMACEUTICAL
INSITITUIONS, AND UNIVERSITIES AND IF THESE INSTITUTIONS CEASE TO COOPERATE WITH
US AND WE  CANNOT  FIND  OTHER  SUITABLE  SUBSTITUTE  RESEARCH  AND  DEVELOPMENT


                                       20


PARTNERS,  OUR ABILITY TO DEVELOP NEW  PRODUCTS MAY BE HINDERED AND OUR BUSINESS
MAY BE ADVERSELY AFFECTED

Helpson cooperates with several research institutions  including Chinese Academy
of Sciences, China University of Pharmaceuticals, Military Medical Academy Basic
Medical  Science  Institute,  Chongqing  Medical  Industry  Institute  and China
Sichuan  University.  Helpson relies to a certain extent on the  above-mentioned
institutions  for its  development  of new products.  There is no assurance that
these  institutions  will  continue  cooperating  with  Helpson to  develop  new
products.  In the event that these  institutions cease to cooperate with Helpson
and Helpson  cannot find other  suitable  substitute  research  and  development
partners,  our ability to develop new  products may be hindered and our business
may be adversely affected.

Risks Related to Doing Business in China

Helpson  operates from  facilities that are located in China.  Accordingly,  its
operations must conform to governmental regulations and rules of China.

THE PRC LEGAL  SYSTEM HAS  INHERENT  UNCERTAINTIES  THAT  COULD  LIMIT THE LEGAL
PROTECTIONS AVAILABLE TO US

The Chinese legal system is a civil law system based on written statutes. Unlike
common law  systems,  it is a system in which  decided  legal  cases have little
precedent value. In the late 1970s, the Chinese government began to promulgate a
comprehensive  system of laws and regulations  governing commercial matters. The
overall effect of legislation  enacted over the past 20 years has  significantly
enhanced the  protections  afforded to  foreign-invested  enterprises  in China.
However, these laws,  regulations,  and legal requirements are relatively recent
and are evolving  rapidly,  and their  interpretation  and  enforcement  involve
uncertainties.  These uncertainties could limit the legal protections  available
to foreign investors.

The  practical  effect of the PRC's legal system on our business  operations  in
China can be viewed from two separate but intertwined considerations.  First, as
a matter of  substantive  law,  the Foreign  Invested  Enterprise  laws  provide
significant  protection from government  interference.  In addition,  these laws
guarantee  the full  benefit of  corporate  articles  and  contracts  to Foreign
Invested  Enterprise  participants.  These laws,  however,  do impose  standards
concerning  corporate  formation  and  governance,  which are not  qualitatively
different from the corporation laws found in the United States.  Similarly,  PRC
accounting  laws mandate  accounting  practices which may not be consistent with
the US Generally Accepted Accounting  Principles.  China accounting laws require
that an annual  "statutory audit" be performed in accordance with PRC accounting
standards  and that the books of  account  of Foreign  Invested  Enterprises  be


                                       21


maintained in accordance  with Chinese  accounting  laws.  Article 14 of the PRC
Wholly Foreign-Owned  Enterprise Law requires a Wholly Foreign-Owned  Enterprise
to submit certain periodic fiscal reports and statements to designated financial
and tax authorities, at the risk of business license revocation.

Second,  while the enforcement of substantive  rights may appear less clear than
United States procedures,  Foreign Invested Enterprises and Wholly Foreign-Owned
Enterprises are Chinese registered companies that enjoy the same status as other
Chinese registered companies in  business-to-business  dispute resolutions.  The
Chinese legal  infrastructure  is significantly  different in operation from its
United  States  counterpart,  and may present a  significant  impediment  to the
operation of Foreign Invested Enterprises.

PRC  ECONOMIC  REFORM  POLICIES  OR  NATIONALIZATION  COULD  RESULT  IN A  TOTAL
INVESTMENT LOSS IN OUR COMMON STOCK

Since 1979, the Chinese government has reformed its economic  policies.  Because
many reforms are unprecedented or experimental,  they are expected to be refined
and improved.  Other political,  economic and social factors,  such as political
changes, changes in the rates of economic growth,  unemployment or inflation, or
in the disparities in per capita wealth between regions within China, could lead
to further  readjustment of the reform measures.  This refining and readjustment
process may negatively affect our operations.


Although the Chinese government owns the majority of productive assets in China,
in the past  several  years  the  government  has  implemented  economic  reform
measures  that  emphasize   decentralization   and  encourage  private  economic
activity.  Because  these  economic  reform  measures  may  be  inconsistent  or
ineffectual, there are no assurances that:


     -    We will be able to capitalize on economic reforms;
     -    The Chinese  government  will continue its pursuit of economic  reform
          policies;
     -    The economic policies, even if pursued, will be successful;
     -    Economic policies will not be significantly altered from time to time;
          and
     -    Business  operations  in China will not become  subject to the risk of
          nationalization.


                                       22


Over the last few years,  China's  economy has  registered  high  growth  rates.
Recently, there have been indications that rates of inflation have increased. In
response,  the  Chinese  government  recently  has taken  measures  to curb this
excessively expansive economy.  These measures have included restrictions on the
availability of domestic credit,  reducing the purchasing  capability of some of
its  customers,  and  limited  recentralization  of  the  approval  process  for
purchases of certain  foreign  products.  These austere  measures  alone may not
succeed in slowing down the economy's  excessive expansion or control inflation,
and may  result in severe  dislocations  in the  Chinese  economy.  The  Chinese
government may adopt additional measures to further combat inflation,  including
the establishment of freezes or restraints on certain projects or markets. These
measures may adversely affect our operations.

There can be no  assurance  that the  reforms to China's  economic  system  will
continue  or that we will  not be  adversely  affected  by  changes  in  China's
political,  economic,  and social  conditions  and by changes in policies of the
Chinese government, such as changes in laws and regulations,  measures which may
be introduced to control  inflation,  changes in the rate or method of taxation,
imposition of additional  restrictions  on currency  conversion  and  remittance
abroad, and reduction in tariff protection and other import restrictions.


YOU MAY EXPERIENCE DIFFICULTIES IN EFFECTING SERVICE OF LEGAL PROCESS, ENFORCING
FOREIGN JUDGMENTS OR BRINGING ORIGINAL ACTIONS IN THE PRC BASED ON U.S. OR OTHER
FOREIGN LAWS AGAINST OUR MANAGEMENT AND US

Helpson,  our operating company,  is incorporated under the laws of the PRC, and
substantially all of our assets are located in the PRC. In addition, many of our
directors,   managers,  and  executive  officers  reside  within  the  PRC,  and
substantially  all of the assets of these persons are located within the PRC. As
a result,  it may not be possible to effect service of process within the United
States or  elsewhere  outside the PRC upon  certain  directors,  supervisors  or
executive officers, including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Moreover,  the PRC does not
have treaties  providing  for the  reciprocal  recognition  and  enforcement  of
judgments of courts with the United States,  the United  Kingdom,  Japan or many
other  countries.  As a  result,  recognition  and  enforcement  in  the  PRC of
judgments  of a court in the United  States  and any of the other  jurisdictions
mentioned  above in  relation  to any matter  may be  difficult  or  impossible.
Furthermore,  an  original  action  may be brought  in the PRC  against  us, our
directors,  managers, or executive officers only if the actions are not required
to be arbitrated by PRC law and Helpson's  articles of association,  and only if
the facts alleged in the complaint give rise to a cause of action under PRC law.


                                       23


In  connection  with any such  original  action,  a PRC court  may  award  civil
liability, including monetary damages.


BECAUSE WE RECEIVE SUBSTANTIALLY ALL OF OUR REVENUE IN RENMINBI, WHICH CURRENTLY
IS NOT A FREELY CONVERTIBLE  CURRENCY,  AND THE GOVERNMENT CONTROLS THE CURRENCY
CONVERSION AND THE FLUCTUATION OF THE RENMINBI, WE ARE SUBJECT TO CHANGES IN THE
PRCS' POLITICAL AND ECNOMONIC DECISIONS

We receive substantially all of our revenues in Renminbi, which currently is not
a freely  convertible  currency.  The Chinese government may, at its discretion,
restrict  access  in the  future  to  foreign  currencies  for  current  account
transactions.

The  value  of the  Renminbi  against  the  U.S.  dollar  and  other  currencies
fluctuates  and is  affected  by,  among  other  things,  changes  in the  PRC's
political and economic  conditions.  Since 1994, the conversion of Renminbi into
foreign  currencies,  including  Hong Kong and U.S.  dollars,  has been based on
rates  set by the  People's  Bank of China,  which  are set  daily  based on the
previous day's  inter-bank  foreign  exchange market rates and current  exchange
rates on the world financial markets. Since 1994, the official exchange rate for
the  conversion  of Renminbi to U.S.  Dollars  generally  has been  stable.  Any
devaluation of the Renminbi,  however,  may materially and adversely  affect the
value of, and any dividends  payable on, our shares in foreign  currency  terms,
since  we will  receive  substantially  all of our  revenues,  and  express  our
profits, in Renminbi. Our financial condition and results of operations also may
be  affected  by  changes  in the value of  certain  currencies  other  than the
Renminbi.  Our results of operation may be adversely  affected by changes in the
political and social conditions in the PRC, and changes in governmental policies
with  respect  to laws and  regulations,  anti-inflationary  measures,  currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.

THE GROWTH OF THE CHINESE ECONOMY HAS BEEN UNEVEN ACROSS GEOGRAPHIC  REGIONS AND
ECONOMIC  SECTORS,  AND A DOWNTURN IN CERTAIN REGIONS IN WHICH WE DO BUSINESS OR
IN OUR ECONMIC SECTOR WOULD SLOW DOWN OUR GROWTH AND PROFITABILITY


                                       24


The growth of the Chinese economy has been uneven across geographic  regions and
economic sectors.  For example,  during the years between 1978 and 2000, the per
capital GDP growth rate of Fujian Province in  Southeastern  China was 12% while
that of Gansu  Province  in  Northwestern  China  was 5.3%  (Source:  New  China
Statistical   Materials   Compilation   for  50  Years  and  2001  China  Annual
Statistics).  There can be no assurance that growth of the Chinese  economy will
be steady or that any downturn will not have a negative  effect on our business.
Our  profitability  may decrease due to a downturn in the Chinese economy.  More
specifically, the expansion of our sales area in the less economically developed
central and western provinces of China will depend on those provinces  achieving
certain income levels.

ANY  OCCURRENCE  OF SERIOUS  INFECTIOUS  DISEASES,  SUCH AS RECURRENCE OF SEVERE
ACUTE  RESPIRATORY  SYNDROME (SARS) CAUSING  WIDESPREAD  PUBLIC HEALTH PROBLEMS,
COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS

A renewed outbreak of SARS or other widespread  public health problems in China,
where all of our revenue is derived,  and in Hainan,  where our  operations  are
headquartered,  could have a negative effect on our  operations.  Our operations
may be  impacted by a number of public  health-related  factors,  including  the
following:

     o    quarantines or closures of our factories or  subsidiaries  which would
          severely disrupt its operations;

     o    the sickness or death of the key officers and employees; and

     o    general slowdown in the Chinese economy.

Any of the foregoing  events or other  unforeseen  consequences of public health
problems could adversely affect our business and results of operations.

WE ARE SUBJECT TO THE ENVIRONMENTAL PROTECTION LAWS OF THE PRC

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.  We have  properly
attained a waste disposal permit for our manufacturing  facility,  which details
the types and  concentration  of effluents and gases  allowed for disposal.  The


                                       25


temporary  waste  disposal  permit will expire on  September  28,  2009.  We are
responsible for the renewal of the waste disposal permit.  There is no assurance
that we will  obtain the renewal of the waste  disposal  permit when the current
permit expires.

China  is  experiencing   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.

RECENT PRC  REGULATIONS  RELATING TO  ACQUISITIONS  OF PRC  COMPANIES BY FOREIGN
ENTITIES MAY LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES AND ADVERSELY AFFECT THE
IMPLEMENTATION OF OUR STRATEGY AS WELL AS OUR BUSINESS AND PROSPECTS

The PRC State  Administration of Foreign Exchange,  or SAFE, issued the Circular
on Issues  Related to the  Administration  of  Foreign  Exchange  for  Corporate
Financing through Offshore Special Purpose Vehicles and Round-trip Investment by
Domestic Residents ("the Circular") on November 1, 2005. The No. 75 Circular has
set  forth  explicit   regulations   concerning  the   formalities   related  to
establishing offshore special purpose vehicle (SPV) and round-trip investment by
domestic residents or such SPV.

Under the Circular,  the domestic  residents must, prior to the establishment of
the SPV, make an application for overseas  investment to the local branch of the
SAFE at the  place  of the  applicant's  habitual  residence.  When  the SPV has
completed the offshore  financing,  the domestic residents shall remit the funds
to  China  in  accordance  with  the  Business  Plan.  The  Company  shall  file
applications to comply with relevant foreign exchange administration formalities
according to the existing laws and regulations  governing foreign investment and
foreign debts administration.

In addition,  the domestic residents shall file application with SAFE for filing
purpose within 30 days of the occurrence of any material events of the SPV which
does not involve the  acquisition  of the equity or assets of the  Company.  The
said  material  events  include  the changes in capital  structure,  share swap,
merger,  division,  investment  into other  company and  provision  of surety or
guarantee to third parties.  Any profits,  dividends  from and income  generated
from changes in capital structure of the SPV realized by the domestic  residents
shall, according to the Circular, be remitted back to China within 180 days.


                                       26


These provisions in the Circular sets forth explicit regulations  concerning the
formalities  related  to  establishing  offshore  special  purpose  vehicle  and
round-trip  investment by domestic  residents.  However,  it did not provide any
criteria or  condition on its  approval of the  application,  so that it is very
hard to predict the result of the registration applications, and in light of the
number of the competent local branches of the SAFE throughout the country, there
are greater  uncertainty in relation to the  application of the Circular.  Until
the  uncertainties in the Circular are made clear and the  implementing  measure
are  practically  adopted we cannot  predict  how the  Circular  will affect our
business  operations or future strategy.  For example, we may be subject to more
stringent  review and  approval  process  with  respect to our foreign  exchange
activities,  such as remittance  of dividends  and  foreign-currency-denominated
borrowings,  which may  adversely  affect our results of operation and financial
condition.  In  addition,  if we decide to acquire a PRC  company by stocks,  we
cannot assure that the owners of such company,  as the case may be, will be able
to  complete  the  necessary   approval,   filings  and  registrations  for  the
acquisition. This may restrict our ability to implement our acquisition strategy
and adversely affect our business and prospects.

OUR  BUISNESS MAY BE  ADVERSELY  AFFECTED AS A RESULT OF CHINA'S  ENTRY INTO THE
WORLD  TRADE  ORGANIZATION  ("WTO")  BECAUSE  THE  PREFERENTIAL  TAX  TREATMENTS
AVAILABLE TO US MAY BE DISCONTINUED AND FOREIGN PHARMACEUTICAL MANUFACTURERS MAY
COMPETE WITH US IN THE PRC PHARMACEUTIAL INDUSTRY

The PRC  became a member of the WTO on 11th  December,  2001.  The  current  tax
benefits  enjoyed by our Company may be  regarded as unfair  treatment  by other
members of the WTO. Accordingly, the preferential tax treatments available to us
may be discontinued.  In such circumstances,  our profitability may be adversely
affected.  In  addition,  we  may  face  additional   competition  from  foreign
pharmaceutical  manufacturers if they set up their production  facilities in the
PRC or form Sino-foreign  joint ventures with our competitors in the PRC. In the
event that we fail to maintain our  competitiveness  against these  competitors,
our profitability may be adversely affected.

Risks Related to Our Common Stock

THE MARKET  PRICE FOR OUR COMMON  STOCK MAY BE VOLATILE  WHICH COULD RESULT IN A
COMPLETE LOSS OF YOUR INVESTMENT

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


                                       27


     o    actual or anticipated fluctuations in our quarterly operating results,

     o    announcements of new products by us or our competitors,

     o    changes in financial estimates by securities analysts,

     o    conditions in the pharmaceutical market,

     o    changes in the  economic  performance  or market  valuations  of other
          companies involved in pharmaceutical production,

     o    announcements   by  our   competitors  of  significant   acquisitions,
          strategic partnerships, joint ventures or capital commitments,

     o    additions or departures of key personnel, or

     o    potential litigation,

In  addition,  the  securities  markets  have  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 common stock.

WE MAY ISSUE ADDITIONAL SHARES OF OUR CAPITAL STOCK TO RAISE ADDITIONAL CASH FOR
WORKING  CAPITAL.  IF WE ISSUE  ADDITIONAL  SHARES  OF OUR  CAPITAL  STOCK,  OUR
STOCKHOLDERS WILL EXPERIENCE DILUTION IN THEIR RESPECTIVE OWNERSHIP PERCENTAGE

We may issue additional shares of our capital stock to raise additional cash for
working  capital.  If we issue  additional  shares  of our  capital  stock,  our
stockholders will experience dilution in their respective ownership percentage.

A  LARGE  PORTION  OF OUR  COMMON  STOCK  IS  CONTROLLED  BY A SMALL  NUMBER  OF
STOCKHOLDERS  AND AS A RESULT,  THESE  STOCKHOLDERS  ARE ABLE TO  INFLUENCE  THE
OUTCOME OF STOCKHOLDER VOTES ON VARIOUS MATTERS

A large  portion of our common stock is held by a small number of  stockholders.
For instance,  Ms. Tsui will hold 72.8% of the Company's  common stock after the
closing of the Exchange  Transaction.  As a result,  this stockholder is able to
influence the outcome of  stockholder  votes on various  matters,  including the
election  of  directors  and other  corporate  transactions  including  business


                                       28


combinations.  In addition,  the occurrence of sales of a large number of shares
of our common stock, or the perception that these sales could occur,  may affect
our stock  price and could  impair  our  ability  to obtain  capital  through an
offering of equity securities.  Furthermore,  the current ratios of ownership of
our common stock reduce the public float and liquidity of our common stock which
can in turn affect the market price of our common stock.

THERE IS CURRENTLY A LIMITED  TRADING MARKET FOR OUR COMMON STOCK WHICH MAY MAKE
IT DIFFICULT TO SELL SHARES OF OUR COMMON STOCK

Our  common  stock  is  traded  in  the  over-the-counter   market  through  the
Over-the-Counter  Electronic  Bulletin  Board.  While there is an active trading
market for our common  stock,  it is small.  Further,  there can be no assurance
that an active trading market will be maintained.  We cannot assure you that our
common stock will ever be included for trading on any stock  exchange or through
any other quotation  system  (including,  without  limitation,  the NASDAQ Stock
Market).

WE  ARE  LIKELY  TO  REMAIN  SUBJECT  TO  "PENNY  STOCK"  REGULATIONS  AND  AS A
CONSEQUENCE  THERE ARE ADITIONAL  SALES  PRACTICE  REQUIREMENTS  AND  ADDITIONAL
WARNINGS ISSUED BY THE SEC

As long as the trading  price of our common stock is below $5.00 per share,  the
open-market  trading  of our common  stock will be subject to the "penny  stock"
rules. The "penny stock" rules impose additional sales practice  requirements on
broker-dealers  who sell securities to persons other than established  customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding  $200,000 or $300,000  together with their spouse).  For
transactions  covered  by these  rules,  the  broker-dealer  must make a special
suitability  determination  for the purchase of securities and have received the
purchaser's   written   consent  to  the   transaction   before  the   purchase.
Additionally,  for any transaction  involving a penny stock,  unless exempt, the
broker-dealer  must  deliver,  before the  transaction,  a  disclosure  schedule
prescribed by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered  representative  and current quotations for the
securities.  Finally,  monthly  statements must be sent disclosing  recent price
information  on the limited  market in penny stocks.  These  additional  burdens
imposed on broker-dealers may restrict the ability of broker-dealers to sell the
common stock and may affect a stockholder's  ability to resell the common stock.
Stockholders  should  be  aware  that,  according  to  Securities  and  Exchange
Commission  Release No.  34-29093,  the market for penny  stocks has suffered in


                                       29


recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the  security  by one or a few  broker-dealers  that are often
related  to  the  promoter  or  issuer;  (ii)  manipulation  of  prices  through
prearranged  matching  of  purchases  and sales and false and  misleading  press
releases;  (iii) boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differential and markups by selling broker-dealers;  and (v)
the wholesale  dumping of the same  securities  by promoters and  broker-dealers
after prices have been manipulated to a desired level,  along with the resulting
inevitable  collapse of those prices and with consequent  investor  losses.  Our
management is aware of the abuses that have occurred  historically  in the penny
stock market.

WE ARE RESPONSIBLE FOR THE  INDEMNIFICATION  OF OUR OFFICERS AND DIRECTORS WHICH
COULD RESULT IN SUBSTANTIAL EXPENDITURES, WHICH WE MAY BE UNABLE TO RECOUP

Our  bylaws  provide  for  the  indemnification  of  our  directors,   officers,
employees, and agents, under certain circumstances,  against attorney's fees and
other  expenses  incurred by them in any litigation to which they become a party
arising  from  their  association  with or  activities  on  behalf  of us.  This
indemnification policy could result in substantial expenditures, which we may be
unable to recoup.

COMPLIANCE  WITH THE  SARBANES-OXLEY  ACT COULD COST  HUNDREDS OF  THOUSANDS  OF
DOLLARS,  REQUIRE  ADDITIONAL  PERSONNEL  AND  REQUIRE  HUNDREDS OF MAN HOURS OF
EFFORT, AND THERE CAN BE NO ASSURANCE THAT WE WILL HAVE THE PERSONNEL, FINANCIAL
RESOURCES OR EXPERTISE TO COMPLY WITH THESE REGULATIONS

The US Public  Company  Accounting  Reform and Investor  Protection Act of 2002,
better  known as  Sarbanes-Oxley,  is the most  sweeping  legislation  to affect
publicly traded companies in 70 years.  Sarbanes-Oxley  created a set of complex
and burdensome  regulations.  Compliance with such regulations requires hundreds
of  thousands  of dollars,  additional  personnel  and  hundreds of man hours of
effort.  There can be no assurance  that we will have the  personnel,  financial
resources or expertise to comply with these regulations.

SOME  OF  THE  INFORMATION  IN  THIS  ANNUAL  REPORT  CONTAINS   FORWARD-LOOKING
STATEMENTS.

Some  of  the  information  in  this  Annual  Report  on  Form  10-KSB  contains
forward-looking statements that involve substantial risks and uncertainties. You


                                       30


can identify these statements by  forward-looking  words such as "may",  "will",
"expect",  "intend",  "anticipate",  "believe",  "estimate"  and  "continue"  or
similar words.  You should read  statements  that contain these words  carefully
because they:

     -    discuss our expectations about our future performance;

     -    state other "forward-looking" information.

We believe it is important to communicate our expectations to our  stockholders.
There may be  events in the  future,  however,  that we are not able to  predict
accurately  or over which we have no control.  The risk  factors  listed in this
section,  as well as any  cautionary  language  in this Annual  Report,  provide
examples of risks, uncertainties and events that may cause our actual results to
differ  materially  from the  expectations  we describe  in our  forward-looking
statements.  Before you invest in our common stock, you should be aware that the
occurrence of any of the events described in these risk factors and elsewhere in
this  prospectus  could  have a material  and  adverse  effect on our  business,
results of operations  and financial  condition and that upon the  occurrence of
any of these events, the trading price of our common stock could decline and you
could lose all or part of your investment.

Item 2 - Description of Property

Helpson owns a factory with a floor area of 663.94 square meters  located at the
East Wing, 6/F, 5 Jianshe Road, Jinpan Industrial Development Zone, Haikou.

Helpson also owns the land use rights to another 31,050 square meters located at
plot C09-2,  Hainan  Bonded Zone,  Haikou.  Helpson built a factory with a floor
area of approximately 7,300 square meters on this parcel.

In  addition,  Helpson  entered  into a  lease  agreement  with  Hainan  Zhongfu
Going-abroad  Personnel Service Center  ("Zhongfu"),  under which Helpson rented
the offices  located at 2/F,  Jiahai  Building owned by Zhongfu as its principal
executive offices.  The term of the lease is 10 years, from November 21, 2000 to
November  20,  2010.  The rent from  November  21, 2000 to November  20, 2005 is
RMB3,600 per month.  The rent from November 21, 2005 to November 20, 2010 may be
adjusted within 5% of the original rent.

Intellectual Property

Helpson owns 10 registered  trademarks and logos used in connection with western
medicine,   raw  material   medicine,   Chinese  herbal  medicine  and  medicine
injections,  which are: Funalin, Fukexing, Helspon, Beisha, Shiduotai, Xinuo and
HPS logo and  three  other  logos;  one logo  used in  connection  with  bathing
cosmetics,  shampoo, hair stimulating shampoo,  facials, nail polish, cosmetics,


                                       31


perfume,  perfume essence oils, skin care toner, and cosmetics cleansers;  and 1
registered  trademark,  Helpson,  and one logo,  used in connection with medical
appliances and equipment, surgical implants, surgical implanted artificial eyes,
surgical   artificial   crystalline   lens,   surgical   artificial   skin,  and
artificialeyes.  In addition, Helpson is applying for registration of nine other
trade marks used in connection  with western  medicine,  raw material  medicine,
Chinese herbal medicine and medicine injections.

Helpson  owns  the  intellectual  property  rights  of its  genetic  engineering
technology for rh-CNTF and rh-aFGA,  and fungi form  engineering  and production
techniques.


Item 3 - Legal Proceedings

We have no pending legal  proceedings.  From time to time, we may be involved in
various  claims,  lawsuits,  disputes  with  third  parties,  actions  involving
allegations of  discrimination  or breach of contract actions  incidental to the
normal operations of the business.


Item 4 - Submission of Matters to a Vote of Security Holders

None.

                                     PART II

Item 5 - Market for Company's Common Stock and Related Stockholder Matters

We trade on the OTCBB  under the  symbol  "TSET.OB".  The  following  quotations
reflect the high and low bids for our common stock based on inter-dealer  prices
without retail  mark-up,  markdown,  or commission and may not represent  actual
transactions.  The high and low bid prices  for our  common  stock for each full
financial quarter for the two most recent full fiscal years were as follows:

                 Quarter Ended                        High              Low
     --------------------------------------      ---------------   -------------
     2005                                             $2.65            $1.75
     --------------------------------------      ---------------   -------------
     3rd Quarter                                      $2.25            $1.05
     --------------------------------------      ---------------   -------------
     2nd Quarter                                      $2.00            $0.50
     --------------------------------------      ---------------   -------------
     1st Quarter                                      $2.25            $1.05


                                       32


     2004
     --------------------------------------
     4th Quarter                                      $1.15            $.40
     --------------------------------------      ---------------   -------------
     3rd Quarter                                      $5.40            $1.01
     --------------------------------------      ---------------   -------------
     2nd Quarter                                      $0.65            $.52
     --------------------------------------      ---------------   -------------
     1st Quarter                                      $0.20            $.60
     --------------------------------------      ---------------   -------------

     2003
     --------------------------------------      ---------------   -------------
     4th Quarter                                      $5.20            $2.00
     --------------------------------------      ---------------   -------------
     3rd Quarter                                      $5.40            $0.08
     --------------------------------------      ---------------   -------------
     2nd Quarter                                      $0.10            $0.05
     --------------------------------------      ---------------   -------------
     1st Quarter                                      $0.10            $0.10
     --------------------------------------      ---------------   -------------

On March 23, 2006, the closing price of our common stock on the OTCBB was $1.15.
As of March 23,  2006,  the  stockholders'  list for our common stock showed 226
registered shareholders of record, which figure does not take into account those
stockholders  whose certificates are held in the name of broker-dealers or other
nominees and 30,000,000 shares of common stock issued and outstanding.

Dividend Policy

Since  inception,  we have not paid,  nor declared,  any dividends and we do not
intend to declare any such dividends in the foreseeable  future.  Our ability to
pay dividends is subject to limitations  imposed by Delaware law and the laws of
the PRC.

Transfer Agent

The Transfer  Agent and Registrar  for our common stock is  Securities  Transfer
Corporation,  2591  Dallas  Parkway,  Suite  102,  Frisco,  Texas  75234 and its
telephone number is 469.633.0100.

Item 6 - Management's Discussion and Analysis or Plan of Operation

The following  discussion  should be read in conjunction  with our  consolidated
financial  statements and the notes thereto and the other financial  information
appearing elsewhere in this document. In addition to historical information, the
following   discussion  and  other  parts  of  this  document   contain  certain
forward-looking information. Our financial statements are prepared in accordance
with accounting principles generally accepted in the United States. When used in
this discussion,  the words  "believes,"  "anticipates,"  "expects," and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ  materially from those projected due to a number of factors beyond our
control.


                                       33


We do not  undertake  to  publicly  update or revise any of the  forward-looking
statements even if experience or future changes show that the indicated  results
or events will not be realized. You are cautioned not to place undue reliance on
these  forward-looking  statements,  which speak only as of the date hereof. You
are also urged to carefully  review and consider our  discussions  regarding the
various  factors,  which  affect our  business,  included  in this  section  and
elsewhere in this report.

Factors that might cause actual  results,  performance or achievements to differ
material,  among  other  things:  lay from  those  projected  or implied in such
forward-looking statements include: (i) the impact of competitive products; (ii)
changes in law and  regulations;  (iii) adequacy and  availability  of insurance
coverage;  (iv)  limitations on future  financing;  (v) increases in the cost of
borrowings  and  unavailability  of debt or equity  capital;  (vi) the effect of
adverse  publicity  regarding our  products;  (vii) our inability to gain and/or
hold market  share;  (viii)  exposure to and expense of resolving  and defending
product liability claims and other litigation;  (ix) consumer  acceptance of our
products;  (x) managing and maintaining  growth;  (xi) customer  demands;  (xii)
market and industry conditions including pricing and demand for products, (xiii)
the  success of  product  development  and new  product  introductions  into the
marketplace;  (xiv) the departure of key members of management; (xv) our ability
to  efficiently  market our products;  as well as other risks and  uncertainties
that are  described  from time to time in our filings  with the  Securities  and
Exchange Commission.

Notwithstanding the above,  Section 27A of the Securities Act and Section 21E of
the  Securities  Exchange Act  expressly  state that the safe harbor for forward
looking  statements does not apply to companies that issue  securities that meet
the definition of a penny stock,  as such,  the safe harbor for forward  looking
statements does not apply to us.

Overview

On  June  16,  2005,  Onny  Investment  Limited  ("Onny")  acquired  all  of the
outstanding  common  shares of Hainan  Helpson  Medical  Biotechnology  Co., Ltd
("Helpson"),  a privately  held Chinese  joint  venture,  in exchange for common
stock  dividends  payable to the  Helpson  shareholders  of  $4,154,041  and for
non-interest  bearing promissory notes totaling  $3,413,265 payable on September
16, 2005. The acquisition of Helpson was recognized as a business combination.


                                       34


On October  20,  2005,  Onny issued  10,000  preferred  shares in  exchange  for
$4,313,000 in cash, net of offering costs and estimated  registration costs, and
on that same date, those preferred shares were converted into 10,000 Onny common
shares.  Also on  October  20,  2005,  Onny was  reorganized  as a  wholly-owned
subsidiary of TS Electronics,  Inc. The  reorganization  was accomplished by the
original Onny common  shareholder  exchanging  her 29,700 Onny common shares for
20,555,329  common shares of TS  Electronics,  Inc. and for the commitment by TS
Electronics, Inc. to issue the original Onny common shareholder 4,723,056 common
shares  following  an  amendment  of  the  TS  Electronics,   Inc.  articles  of
incorporation  increasing  the number of common shares  authorized to 60,000,000
shares.  In addition,  the prior Onny  preferred  shareholders  exchanged  their
10,000 Onny common shares for 6,944,611 common shares of TS Electronics, Inc.

We  launched  an  anti-flu  product  named  PuSenOK,  which is the only anti flu
medicine in the market  mixed with pseudo  ephedrine  hydrochloride,  that has a
non-drowsy  formula  and a  runny  nose  suppressant.  We  plan  to  expand  our
biotechnology  product  series.  Based on the foundation  established by some of
Helpson's widely recognized medicine labels such as Neurotrophicpeptide, we will
launch  several  additional  biological  medicines,  including the brain peptide
injection,  injected hepatocyte growth-promoting factors, as well as new genetic
medicines,  rh-CNTF and rha-FGF,  which will give us a new growth following that
of Neurotrophicpeptide.

Our  products  have  been  sold in more than 20  provinces,  sovereignties,  and
autonomous  regions. We have 16 sales offices and approximately 250 proxy agents
in the whole  country.  The main channels we use to deliver our products were as
follows:  (1)  Distribution  system  (Proxy  Agency);  (2) Direct sale system to
hospitals;  (3)  Direct  representation  in  clinic  hospitals  through  medical
representatives;  and (4)  Distribution  of products to local medical  companies
through logistics companies.

Our recent business activities include the following:

2005: Helpson launched a new anti-flu medicine: PusenOK.
2003: Helpson gained GMP authentication.
2003: Helpson named "the best  enterprise  for storing SARS  medicine" by Hainan
      Food and Drug Administration.


                                       35


2000: Helpson awarded as one of 50 best enterprises in Hainan by Hainan Economic
      and Trade Bureau and Hainan Statistical Bureau.

Buflomedil Hydrochloride (Raw material; injection; & troche)

o    Received the best technology  commercialization  award in Hainan in 2004 by
     Hainan Scientific and Technological Result Examination Committee.
o    Received the national  key new  products  certificate  in 2003 by the State
     Science and  Technology  Department,  State  Taxation  Bureau,  Ministry of
     Commerce,  State Bureau of Quality Supervision,  Inspection and Quarantine,
     and State Environmental Protection Bureau.
o    Designated  as the key  technology  project  in  Hainan  in 2003 by  Haikou
     Municipality.

Operations Analysis for the period from
January 12, 2005 (date of inception) through December 31, 2005

The following table presents the operation of the Company for the period January
12 through December 31, 2005:

                                   For the period from January 12, 2005 (Date of
                                   Inception) through December 31,2005
Revenues                           $   8,657,813
                                   ---------------------------------------------
Cost of revenues                       4,166,965
Operating expenses                       247,032
Income from operations                 4,243,816
Interest expense                         186,452
Net income                             3,799,550
Basic and diluted earnings
per common share                            0.34

The consolidated  financial statements of the Company for the period January 12,
2005 (Date of Inception)  through December 31, 2005 is principally  comprised of
the activities of Helpson,  which is the Company's  Chinese  subsidiary of, from
June 16, 2005 through December 31, 2005,the date we acquired Helpson.


                                       36


Revenues
--------

Revenues were  $8,657,813 for the period  January 12 through  December 31, 2005.
The revenues  mainly come from five  products of Helpson,  which are  Buflomedil
Hydrochloride,  Cefaclor dispersible tablets, Roxithromycin dispersible tablets,
AFGF, and cerebroprotein hydrolysate injection.

During this period, the sales network and the manufacturing  capacity of Helpson
have been expanded.  Moreover, reduced selling price increased the demand of our
products.  The  revenues  for the  company  are  expected  to grow in 2006 since
Helpson will launch Ozagrel sodium and  Hepatocyte  growth-promoting  factor for
injection on the market.

Cost of Revenues
----------------

The cost of revenues was $4,166,965, which is 48% of the revenues.

Helpson's  two new  products,  Pusen OK and  Gastrodin,  which have higher gross
profit margins,  were introduced into the market. Thus, the cost of revenues was
reduced in 2005. The cost is expected to be further  reduced due to economies of
scale caused by the expected  rapid growth of the company,  the  effective  cost
control and the improvement of the manufacturing process in the year 2006.

Operating expenses
------------------

The operating  expenses for the period January 12 through December 31, 2005 were
$247,032, which is 5.82% of income from operations.

The selling  expenses  include the welfare and  salaries of the sales person and
related transportation  expenses. The selling expenses compared with revenue are
lower than the industry  average level,  the main reasons for that are its major
customers  are  hospitals  and the  selling  network  of the  company is through
agents. There are no advertising fees incurred to the date. However, the company
will incur some advertising  expenses to promote its new product PuSen OK, which
might  increase the percentage of selling  expenses  compared to the revenues in
2006.


                                       37


The general and administrative expenses include R&D, the welfare and salaries of
the administrative  staff. Helpson incurred  approximately  $50,020 R&D in 2005,
which amounts to .58% of the total  revenues.  R&D expenditure is lower compared
to the average industry level in China because the researchers come from company
personnel. The low costs of R&D can provide Helpson with a sustained competitive
edge.

Because of the improving  management  methodology  and  economies of scale,  the
percentage  of  administrative  expenses  should  be less when  compared  to the
revenue in 2006.

Income from operations was $4,243,816, which is 49% of the total revenues.

Interest expenses
-----------------

Interest expense for December 31, 2005 is $186,452 and net income is $3,799,550.
The company just paid off two long-term loans and the Company plans to apply for
new loans, of approximately $3,130,000. The expected annual interest rate is 6%.

Helpson is now  applying  for a special  tax  policy,  which is for the  foreign
companies in China.  The policy is that the qualified  foreign  companies do not
have to pay income  taxes in the first two years of their  operations  in China.
From the third to the fifth  year,  the  companies  only need to pay half of the
income tax rate 15%, which is 7.5%.  Since the Company is a new foreign company,
if it can be approved as a qualified company,  Helpson,  which is the subsidiary
of TS in China will be tax exempted in the year 2006. The effect of the possible
favorable tax policy from Chinese  government  could  increase the net profit of
Helpson in the year 2006.

Liquidity and capital resource for the period ended
January 12, 2005 (date of inception) through December 31, 2005

The  following  table  presents  selected  items from the  balance  sheets as of
December 31, 2005


                                       38


                                                   As of December 31, 2005

                                                             2005
     Cash and cash equivalents                           $   461,220
                                                           5,709,762
     Trade accounts receivable
                                                           5,785,196
     Inventory
     Total current assets                                 14,465,864
     Property and equipment, net                           2,808,342
     Total assets                                         17,501,070
      Total current liabilities
                                                           5,770,926
     Long-term liabilities                                    30,966
     Total shareholder's equity                           11,699,178

Analysis of financial position
------------------------------

At December 31, 2005,  cash and cash  equivalents  of $461,220 were 31.9% of the
total current  assets.  The net value of property and equipment was $ 2,808,342,
16.1% of the total assets.

The trade accounts receivables were $5,709,762 and the valuation of inventory is
$5,785,196  at December  31,  2005.  Trade  accounts  receivable  and  inventory
amounted  to 32.6% and 33.1%  respectively  of the total  assets.  The  dramatic
increase of sales revenues from the subsidiary of TS in China,  Helpson,  caused
the increase of the value of trade  receivables  and inventory.  Thus,  both the
accounts receivables and the inventory turnovers have been decreased as well. In
general, one of the main  characteristics of the pharmaceutical  industry is the
long collection period of accounts  receivable,  which causes a high requirement
of working capital.

Long-term  liabilities  were $30,996 at December 31, 2005.  Two long-term  loans
were repaid by using cash during the period.  The company is applying  for a new


                                       39


loan, which is expected to be approximately  $3,130,000 to satisfy the demand of
working capital.

The total  liabilities of $5,801,892  compared with total assets of $17,501,070,
results in a liability  ratio of 33.2%.  If the value of  inventory  is excluded
from total current assets of $14,465,864  compared with the current  liabilities
of $5,770,926,  result in a quick ratio of 1.50. This shows that the Company has
ability to pay its debts.

The  shareholder's  equity of  $11,699,178  is primarily  due to the increase of
issuance of common shares, and the increase of the accumulated  profits which is
caused by the increased sales revenue.

Operating  activities
---------------------

As of  December  31,  2005 we had cash and cash  equivalents  in the  amount  of
$461,220.  Net cash flow used in  operating  activities  during  the  period was
$449,095.  The main reason for the amount in cash used in  operating  activities
was an increase of trade accounts receivable in the amount of $1,198,199, and an
increase  of  inventory  in the  amount of  $2,395,393  during the  period.  The
utilization of net cash in operating  activities was also a result of a decrease
of  $588,748  in other  accounts  payable and a decrease of $226,863 in advances
from customers.

Investing activities
--------------------

Net cash utilized in investing  activities was $341,522  during the period.  The
use of net cash was due to the purchase of property and equipment and intangible
assets which amounted to $433,524 and $50,611, respectively. Conversely, the net
cash received in the purchase of Helpson of $131,336 and the proceeds from notes
receivable of $11,277 offset these expenditures.

The Company's  subsidiary has forecasted $10 million in capital  expenditure for
the coming year,  which it expects to finance from internal sources and issuance
of shares. The financed cash is intended to be used in the following projects:
(1) $5 million of the amount will be invested in  establishment  of product line
for new medicine and investment in support of research and development.
(2) $3 million of the amount  will be used to  increase  working  capital due to
expansion of manufacturing capacity.


                                       40


(3) $2 million of the amount will be used to expand  marketing  and promotion of
products.

Financing activities
--------------------

Net cash provided by financing  activities was $1,248,727 during the period. The
cash generated  during the period was primarily due to issuance of shares in the
amount of $7,804,175.

The  repayment  of the note  payable  of  $6,317,849  offset  the cash  from the
issuance of shares.

In conclusion, cash provided for the period amounted to $461,220,  primarily due
to the decrease in operating cash flows, the decrease in capital expenditure and
the repayment of a substantial  portion of notes  payable,  as described  above,
added to net cash generated by issuance of common shares.


Item 7 - Index to Financial Statements

The Financial Statements required by this Item begins at page F-1 hereof.

Item 8 -  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosures

On  August  15,  2005,  we were  notified  that our  auditors,  Evans  Gaither &
Associates,  PLLC ("Evans") of Oklahoma City,  Oklahoma had resigned,  effective
that  date,  for  reasons  related  to the firm's  decision  to cease  providing
auditing  services to public  companies.  Our Board of  Directors  accepted  the
resignation of Evans upon receipt of the notification.  On August 17, 2005, as a
result of the  resignation  of Evans  Gaither & Associates,  PLLC,  the Board of
Directors  authorized  the engagement of Hansen,  Barnett & Maxwell,  PC of Salt
Lake  City,  Utah  ("HB&M")  as its  new  independent  auditors.  There  were no
disagreements or events as described in Item  304(a)(1)(iv) of Regulation S-B in
connection with the change in accountants described above.

Item 8A - Controls and Procedures

As of December  31,  2005,  evaluation  of the  effectiveness  of the design and
operation of our  disclosure  controls and  procedures was carried out under the
supervision  and with the  participation  of  management,  including  our  Chief
Executive and Financial Officer. Based upon that evaluation, our Chief Executive


                                       41


and Financial Officer concluded that our disclosure  controls and procedures are
effective. There have been no significant changes in our internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date we carried out the evaluation.

Item 8B - Other Information

None.

                                    PART III

Item  9  -  Directors,   Executive  Officers,  Promoters  and  Control  Persons;
Compliance with Section 16(a) of the Exchange Act

The  following  table sets forth the names of all of our current  directors  and
executive  officers to be  appointed.  The  directors  will serve until the next
annual  meeting of the  stockholders  or until their  successors  are elected or
appointed  and  qualified.   Executive   officers  will  serve  at  the  board's
discretion.

--------------------------------------------------------------------------------
Name and Address                  Age   Position
--------------------------------------------------------------------------------
Heung Mei TSUI                    48    Director
--------------------------------------------------------------------------------
Zhilin LI                         48    President and Chief Executive Officer
--------------------------------------------------------------------------------
Xinhua WU                         38    Chief Financial Officer
--------------------------------------------------------------------------------
Jian YANG                         45    Secretary
--------------------------------------------------------------------------------

Ms. Heung Mei TSUI.  Ms. TSUI is director of the Company since October 20, 2005.
She  is a  self-employed  business  woman  engaged  in the  re-export  business,
including chemical products trade and  electromechanical  products trade. She is
also the Toyota automobile's agent in Hainan province.  She graduated from Huhan
Financial & Economic College in 1982.

Ms.  Zhilin LI: Ms. Li is President and Chief  Executive  Officer of the Company
since October 20, 2005. she is a founder of Helpson,  and has served as chairman
and CEO of Helpson  since 1993.  Ms. Li was  formerly  the  president  of Haikou
Bio-engineering  institute,  and the vice president of the Sichuan  Institute of
Biology . She graduated from Sichuan  University,  where she majored in biology,
and later became an instructor.

Mr.  Xinhua WU: Mr. Wu is Chief  Financial  Officer of the Company since October
20, 2005. He has acted as CFO of Helpson since his hiring in 1999. Mr. Wu served
as CFO and assistant to the CEO at Hainan Guobang Enterprises Inc., where he was


                                       42


employed from 1992 to 1999.  Mr. Wu graduated  from the University of Wales with
an MBA degree and Jiangxi Financial college with a Bachelor of Science degree in
Finance.

Ms. Jian YANG:  Ms. Yang is Secretary of the Company since October 20, 2005. She
is a founder and director of Helpson.  Ms. Yang was a technician  at the Sichuan
Institute  of  Biology  in  1990  and  vice  president  of  Haikou   Biomedicine
Enginerring  Co.,  Ltd.  in 1991 Ms. Yang  earned her MBA at the  University  of
Wales, England.

Board Composition and Committees

The board of directors is currently composed solely of Heung Mei Tsui. All board
actions  require the approval of a majority of the  directors in attendance at a
meeting at which a quorum is present.

We currently have no committees of Audit, Compensation, or any other committees;
therefore, the board will act in the capacity of the absent committees.

Disclosure  of  Commission   Position  of  Indemnification  for  Securities  and
Liabilities

Our Amended and Restated Certificate of Incorporation,  with certain exceptions,
eliminates  any  personal  liability  of  directors  or  officers  to us or  our
stockholders for monetary damages for the breach of such person's fiduciary duty
to the extent  permitted by law. We have also adopted  by-laws which provide for
indemnification  to the full extent  permitted  under the law which includes all
liability,  damages,  costs,  or expenses  arising  from or in  connection  with
service for,  employment by, or other  affiliation with us to the maximum extent
and under all circumstances permitted by law.

There are presently no material  pending  legal  proceeding to which a director,
officer, or employee of ours is a party. There is no pending litigation or legal
proceeding involving one of our directors,  officers,  employees or other agents
as to which indemnification is being sought, and we are not aware of any pending
or threatened  litigation that may result in claims for  indemnification  by any
director, officer, employee or other agent.

To  the  extent   provisions  of  our  Amended  and  Restated   Certificate   of
Incorporation  provide for  indemnification of directors for liabilities arising
under the  Securities  Act or the Exchange  Act,  those  provisions  are, in the
opinion of the  Securities  and Exchange  Commission,  against public policy and
therefore are unenforceable.


                                       43


Code of Ethics

We do not  yet  have a Code  of  Ethics.  Due to the  recent  completion  of the
Reorganization with Tailong,  the board of directors had decided to postpone the
adoption of a code of ethics  until we are able to focus our  business  plan and
develop a greater infrastructure.  Once we have adopted a Code of Ethics, a copy
may be obtained by sending a written request to our corporate Secretary.

Director Compensation

No cash  compensation was paid to our director for services as a director during
the  fiscal  year ended  December  31,  2005.  We have no  standard  arrangement
pursuant to which our board of directors are  compensated  for their services in
their  capacity  as  directors.   The  board  of  directors  may  award  special
remuneration to any director  undertaking any special  services on behalf of our
company other than services  ordinarily  required of a director.  All authorized
out-of-pocket  expenses  incurred by a director on our behalf will be subject to
reimbursement upon our receipt of required supporting document of such expenses.
No director  received  and/or  accrued any  compensation  for his  services as a
director, including committee participation and/or special assignments.

Section 16(a) Beneficial Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires our
officers and directors,  and persons who own more than ten percent of a class of
our capital stock,  to file reports of ownership and changes in their  ownership
with the  Securities  and  Exchange  Commission.  These  persons are required to
furnish us with copies of all Section  16(a) forms they file.  Based solely on a
review of the copies of such forms  received  by us, we believe  that during the
year ended  December  31,  2005,  all persons  subject to Section  16(a)  filing
requirements  have  filed  on a timely  basis  reports  required  to be filed by
Section 16(a) of the Exchange Act.

Item 10 - Executive Compensation

No cash  compensation was paid to our director for services as a director during
the  fiscal  year ended  December  31,  2005.  We have no  standard  arrangement
pursuant to which our board of directors is  compensated  for their  services in
their  capacity  as  directors.   The  board  of  directors  may  award  special
remuneration to any director  undertaking any special  services on behalf of our
Company  other  than those  services  ordinarily  required  of a  director.  All
authorized  out-of-pocket  expenses incurred by a director on our behalf will be
subject to  reimbursement  upon our receipt of required  supporting  document of
such expenses.  No director  received  and/or accrued any  compensation  for his
services  as  a  director,  including  committee  participation  and/or  special
assignments.


                                       44




The following table provides  compensation  information for the period indicated
with respect to the person who served as our  President for the years ended June
30, 2005, 2004 and 2003, and all other of our executive officers receiving total
salary and bonus in excess of $100,000 during the years ended December 31, 2005,
2004 and 2003 (collectively, the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

---------------------------------------------------------------- ---------------------------------- ---------
                                                                      Long Term Compensation
---------------------------------------------------------------- ---------------------------------- ---------
                                       Annual Compensation                 Awards           Payouts
------------------------- -------- ----------------------------- -------------------------- ------- ---------
                                                                                     
           (a)              (b)        (c)     (d)      (e)          (f)          (g)         (h)      (i)
Name and Principal          Year   Salary ($) Bonus    Other     Restricted    Securities    LTIP   All Other
    Position                                   ($)     Annual       Stock     Under-lying   Payouts  Compen-
                                                     Compensa-   Awards ($)   Options/SARs    ($)   sation ($)
                                                        tion                      (#)
------------------------- -------- ---------- ----- ------------ ---------- --------------- ------- ---------
  (1) Zhilin LI             2005      18,007    0         0           0            0           0        0
CEO and President
------------------------- -------- ---------- ----- ------------ ---------- --------------- ------- ---------
(2)  Keith  P.  Boyd        2005        0       0         0           0            0           0        0
CEO, CFO & President        2004        0       0         0           0            0           0        0
                            2003     36,000     0         0           0            0           0        0
------------------------- -------- ---------- ----- ------------ ---------- --------------- ------- ---------
(2) Tim Halter President,   2005        0       0         0           0            0           0        0
    CAO and Secretary
------------------------- -------- ---------- ----- ------------ ---------- --------------- ------- ---------
(2) Heung Mei TSUI          2005        0       0        6,002        0            0           0        0
     Director
------------------------- -------- ---------- ----- ------------ ---------- --------------- ------- ---------


(1) Zhilin LI has been our CEO and  president  since  October  20,  2005 and her
salary was paid in RMB.

(2) Prior to October  20,  2005,  Keith P. Boyd and Tim Halter did not spend any
material time working since we had no material  business then.  Accordingly,  we
did not compensate any officer or director during this time period.

Stock Option Grants and Exercises

We currently have no option, retirement,  pension or profit sharing programs for
the  benefit of the  directors,  officers or other  employees,  but the board of
directors may recommend adoption of one or more such programs in the future.

Employment, Severance and Change of Control Agreements

Ms.  Zhilin Li, Mr.  Xinhua Wu and Ms.  Jian Yang  receive no  compensation  for
acting as  officers  of the  Company.  However,  Ms.  Zhilin Li entered  into an


                                       45


Employment  Agreement  with Helpson,  which  provides that Ms. Li is employed by
Helpson to perform executive management. The term of her employment is from July
1,  2005  to  June  30,  2010.  Her  annual  salary  is  approximately  $100,000
(RMB800,000).  Mr. Xinhua Wu was employed by Helpson to act as its CFO. The term
of his  employment  is from July 1, 2005 to June 30, 2010.  His annual salary is
approximately $62,500 (RMB500,000). Ms. Jian Yang was employed by Helpson to act
as its Deputy General  Manager.  The term of her employment is from July 1, 2005
to June 30, 2010. Her annual salary is approximately $62,500 (RMB500,000).


Item 11 - Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain  information  known to us with respect to
the  beneficial  ownership  of our common stock as of March 27, 2006 and (i) all
persons who are known to us to be  beneficial  owners of five percent or more of
the common stock,  (ii) each of our Directors,  and (iii) all current  Directors
and executive officers as a group.


NAME AND ADDRESS OF BENEFICIAL        SHARES BENEFICIALLY       % OF CLASS OWNED
          OWNER (1)                           OWNED
Heung Mei TSUI (2)                         20,555,329                 68.5

(1) Unless otherwise stated, the address of all persons in the table is c/o Unit
8, D Area, Office Hall, Haikou Bonded Zone, Haikou, Hainan Province, China.

(2) Upon the  effectiveness  of an amendment  to the  Company's  Certificate  of
Incorporation  to increase its common capital stock,  the Company shall issue to
Heung Mei Tsui,  the principal  stockholder  of Onny,  an  additional  4,723,056
shares of Post Closing Shares. Upon the issuance of the Post Closing Shares, Ms.
Tsui will  hold  25,278,385  shares or  approximately  72.8% of the  issued  and
outstanding common capital stock of the Company. Ms. Heung Mei Tsui has escrowed
6,944,611  shares  of  common  stock  for the  participants  in  Onny's  private
placement and 277,785 shares for HFG International, Limited .

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Unless otherwise indicated, the address for each of
the individuals listed in the table is care of Hainan Helpson Bio-Pharmaceutical
Co. Ltd, Unit 8, D Area, Office Hall, Haikou Bonded Zone, Haikou, Hainan
Province, China.

Unless otherwise indicated by footnote, the persons named in the table have sole
voting  and sole  investment  power with  respect to all shares of common  stock


                                       46


shown as beneficially  owned by them,  subject to applicable  community property
laws.  Percentage of beneficial  ownership is based on 30,000,000  shares of our
common stock outstanding as of March 24, 2006.

Item 12 - Certain Relationships and Related Transactions

None.

Item 13 - Exhibits

(1) Our audited financial  statements are included in this Annual Report on Form
10-KSB.

(2) EXHIBITS

-------------- -----------------------------------------------------------------
Exhibit No.    Description
-------------- -----------------------------------------------------------------
2.1            Securities  Exchange  Agreement  by  and  among  Onny  Investment
               Limited dated October 19, 2005 filed on October 20, 2005. (3)
-------------- -----------------------------------------------------------------
3.1            Memorandum and Articles of  Association  filed December 23, 2005.
               (5)
-------------- -----------------------------------------------------------------
3.2            Articles of Association  of Helpson  Medical  Biotechnology  Co.,
               filed on October 20, 2005. (3)
-------------- -----------------------------------------------------------------
10.1           Stock Purchase Agreement by and among Halter Financial Group Inc.
               dated May 11, 2005 filed on May 11, 2005. (1)
-------------- -----------------------------------------------------------------
10.2           Subscription  Agreement  by and  among  Onny  Investment  Limited
               stockholders  dated  October 19, 2005 filed on October 20,  2005.
               (4)
-------------- -----------------------------------------------------------------
10.3           Employment  Contract  by and among  Zhilin LI dated  July 1, 2005
               filed on December 23, 2005. (5)
-------------- -----------------------------------------------------------------
10.4           Employment  Contract  by and among  Xinhua WU dated  July 1, 2005
               filed on December 23, 2005. (5)
-------------- -----------------------------------------------------------------
10.5           Employment  Contract  by and among  Jian YANG  dated July 1, 2005
               filed on December 23, 2005. (5)
-------------- -----------------------------------------------------------------
16.1           Letter regarding Change in certifying Accountant dated August 15,
               2005 filed on August 18, 2005. (3)
-------------- -----------------------------------------------------------------
21             Subsidiaries of TS  Electronics,  Inc. filed on October 20, 2005.
               (4)
-------------- -----------------------------------------------------------------

-------------- -----------------------------------------------------------------

(1)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 0-29523) filed with the Commission on May 11, 2005.
(2)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 0-29523) filed with the Commission on August 18, 2005.
(3)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 0-29523) filed with the Commission on August 18, 2005.
(4)  Previously  filed as an exhibit to our report on Form SB-2 (Commission File


                                       47


     Number: 333-129161) filed with the Commission on August 18, 2005.
(5)  Previously  filed as an exhibit to our report on Form SB-2 (Commission File
     Number: 333-129161) filed with the Commission on December 23, 2005.


Item 14. Principal Accountant Fees and Services

Kabani & Company  Inc. was our auditor  during  September 5, 2002 to February 4,
2004.  On  February 4 2004,  we engaged  Evans,  Gaither &  Associates,  PLLC of
Oklahoma  City,   Oklahoma  as  its  new  principal   accountant  to  audit  its
consolidated  financial  statements  and then  changed  our  auditor  from Evans
Gaither & Associates,  PLLC ("Evans") to Hansen, Barnett & Maxwell ("HB&M"), PC,
as indicated in Item 8 of this 10-KSB, in August 2005. HB&M is currently our new
independent auditors.


                                              FISCAL 2004          FISCAL 2005
                                          -------------------    ---------------

--------------------------------------------------------------------------------
Audit Fees                                    $   142,005          $  108,000
--------------------------------------------------------------------------------

Audit-Related Fees                            $    0               $    0
--------------------------------------------------------------------------------

Tax Fees                                      $    0               $    0
--------------------------------------------------------------------------------

All Other Fees                                $    0               $    0
--------------------------------------------------------------------------------

Total                                         $   142,005          $  108,000
--------------------------------------------------------------------------------

Audit Fees.  This category  includes the aggregate fees billed for  professional
services  rendered for the audits of our consolidated  financial  statements for
fiscal years 2004 and 2005.

Audit-Related  Fees. This category includes the aggregate fees billed in each of
the last two fiscal years for assurance and related  services by the independent
auditors that are reasonably related to the performance of the audits or reviews
of the financial  statements  and are not reported above under "Audit Fees," and
generally  consist  of fees for  other  attest  engagements  under  professional
auditing   standards,   accounting   and   reporting   consultations,   internal
control-related matters, and audits of employee benefit plans.

Tax Fees.  This category  includes the aggregate fees billed in each of the last
two fiscal years for professional  services rendered by the independent auditors
for tax compliance, tax planning and tax advice.

All Other Fees. This category  includes the aggregate fees billed in each of the
last two fiscal  years for products  and  services  provided by the  independent


                                       48


auditors that are not reported above under "Audit Fees,"  "Audit-Related  Fees,"
or "Tax Fees."




                                   SIGNATURES

In accord with Section 13 or 15(d) of the  Securities  Act of 1933,  as amended,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereto duly authorized.

                                               TS Electronics Inc.

Dated: March 27, 2006                                By: /s/  Zhilin Li
       --------------                                   ------------------------
                                                        Zhilin Li,
                                                        Chief Executive Officer,
                                                        President and Director



Dated: March 27, 2006                                By: /s/ Xinhua Wu
       --------------                                   ------------------------
                                                        Xinhua Wu
                                                        Chief Financial Officer,


In accordance with the Securities Exchange Act of 1934, as amended,  this report
has been signed below by the following  persons on behalf of  registrant  and in
the capacities and on the date as indicated.


Dated: March 27, 2006                                By: /s/  Zhilin Li
       --------------                                   ------------------------
                                                        Zhilin Li,
                                                        Chief Executive Officer,
                                                        President and Director




Dated: March 27, 2006                                By: /s/ Xinhua Wu
       --------------                                   ------------------------
                                                        Xinhua Wu,
                                                        Chief Financial Officer,


                                       49


                              TS ELECTRONICS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS











Report of Independent Registered Public Accounting Firm......................F-2

Consolidated Balance Sheet...................................................F-3

Consolidated Statement of Operations.........................................F-4

Consolidated Statements of Stockholder' Equity...............................F-5

Consolidated Statement of Cash Flows.........................................F-6

Notes to Financial Statements................................................F-7












                                       F-1


HANSEN, BARNETT & MAXWELLHIC
 A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
 5 Triad Center, Suite 750
Salt Lake City, UT 84180-1128
   Phone: (801) 532-2200
    Fax: (801) 532-7944
      www.hbmcpas.com



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders
TS Electronics, Inc.

We have audited the accompanying  consolidated  balance sheet of TS Electronics,
Inc.,  as of December  31,  2005,  and the related  consolidated  statements  of
operations, stockholders' equity, and cash flows for the period from January 12,
2005 (date of inception) to December 31, 2005.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the 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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of TS Electronics,
Inc.,  and the results of their  operations  and their cash flows for the period
from January 12, 2005 (date of  inception)  to December 31, 2005,  in conformity
with accounting principles generally accepted in the United States of America.


                                                       HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
March 3, 2006





                                       F-2


                              TS ELECTRONICS, INC.
                           CONSOLIDATED BALANCE SHEET


                                                               December 31, 2005
--------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents                                      $         461,220
Trade accounts receivables, less allowance for doubtful
  accounts of  $1,412,353                                              5,709,762
Other non-trade receivables, less allowance for doubtful
  accounts of $111,029                                                   385,957
Advances to suppliers                                                  2,123,729
Inventory                                                              5,785,196
--------------------------------------------------------------------------------
 Total current assets                                                 14,465,864
--------------------------------------------------------------------------------

Non-current assets
Property and equipment, net                                            2,808,342
Intangible assets, net                                                    96,406
Deferred tax assets                                                      130,458
--------------------------------------------------------------------------------
Total non-current assets                                               3,035,206
--------------------------------------------------------------------------------
Total assets                                                   $      17,501,070
--------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable                                         $         679,104
Accrued expenses                                                          15,625
Taxes payable                                                            565,236
Other accounts payable                                                   250,317
Advances from customers                                                   50,755
Dividends payable                                                      4,209,889
--------------------------------------------------------------------------------
Total current liabilities                                              5,770,926
--------------------------------------------------------------------------------

Long-term liabilities
Research and development commitment                                       30,966
--------------------------------------------------------------------------------
Total long-term liabilities                                               30,966
--------------------------------------------------------------------------------

Shareholders' equity
Common shares - $0.001 par value; 60,000,000 shares
authorized; 34,723,056 shares issued and outstanding                      34,723
Additional paid-in capital                                             7,764,979
Accumulated other comprehensive income                                    99,926
Retained earnings                                                      3,799,550
--------------------------------------------------------------------------------
Total shareholders' equity                                            11,699,178
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity                     $      17,501,070
--------------------------------------------------------------------------------


   The accompanying notes are an integral part of these financial statements

                                       F-3


                              TS ELECTRONICS, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS



                                                             For the period from
                                                              January 12, 2005
                                                             (Date of Inception)
                                                                   through
                                                             December 31, 2005
--------------------------------------------------------------------------------

Revenues                                                     $        8,657,813
Cost of revenues                                                      4,166,965
--------------------------------------------------------------------------------
Gross profit                                                          4,490,848
--------------------------------------------------------------------------------
Operating expenses
Selling expenses                                                        106,129
General and administrative                                              140,903
--------------------------------------------------------------------------------
Total operating expenses                                                247,032
--------------------------------------------------------------------------------
Income from operations                                                4,243,816
--------------------------------------------------------------------------------

Non-operating income (expenses)
Interest income                                                             769
Interest expense                                                       (186,452)
Other income(expenses)                                                   (6,482)
--------------------------------------------------------------------------------
Non-operating income (expenses)                                        (192,165)
--------------------------------------------------------------------------------
Income before taxes                                                   4,051,651
Income tax expense                                                      252,101
--------------------------------------------------------------------------------
Net income                                                   $        3,799,550
--------------------------------------------------------------------------------

Basic and diluted earnings per common share                  $             0.34
--------------------------------------------------------------------------------

Weighted-average common shares outstanding                           11,289,480
--------------------------------------------------------------------------------










   The accompanying notes are an integral part of these financial statements

                                       F-4




                              TS ELECTRONICS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM JANUARY 12, 2005 (DATE OF INCEPTION)
                            THROUGH DECEMBER 31, 2005



                                                                                       Accumulated
                                                                         Additional       Other                         Total
                             Comprehensive         Common Stock           Paid-in     Comprehensive    Retained     Stockholders'
                                 Income        Shares        Amount       Capital         Income       Earnings         Equity
---------------------------------------------------------------------------------------------------------------------------------
                                                                                               
Balance - January 12, 2005
  (Date of Inception)                 --            --   $        --   $        --    $        --   $        --     $        --
Issuance for cash
  April 12, 2005                      --          85,112            85           (84)          --            --                 1
Issuance for cash
  Auguest 16, 2005                    --      25,193,273        25,193     3,465,981           --            --         3,491,174
Issuance for cash, net
  October 20, 2005                    --       6,944,611         6,945     4,306,055           --            --         4,313,000
Issuance in exchange for
  the liabilities of TS               --
  Electronics, Inc.                   --       2,500,060         2,500        (6,973)          --            --            (4,473)
Net income                       3,799,550          --            --            --             --       3,799,550       3,799,550
Currency translation
  adjustment                        99,926          --            --            --           99,926          --            99,926
---------------------------------------------------------------------------------------------------------------------------------
Comprehensive Income         $   3,898,476          --
------------------------------------------
Balance - December 31, 2005           --      34,723,056 $      34,723 $   7,764,979  $      99,926 $   3,799,550   $  11,699,178
---------------------------------------------------------------------------------------------------------------------------------











   The accompanying notes are an integral part of these financial statements

                                       F-5


                              TS ELECTRONICS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS



                                                             For the period from
                                                              January 12, 2005
                                                             (Date of Inception)
                                                                   through
                                                              December 31, 2005
--------------------------------------------------------------------------------
Cash flows from operating activities
Net income                                                   $        3,799,550
Depreciation and amortization                                           250,184
Accretion of discount on notes payable                                   86,060
Changes in assets and liabilities:
Accounts receivable                                                  (1,198,199)
Other receivable                                                         80,164
Advances to suppliers                                                  (916,792)
Inventory                                                            (2,395,393)
Deferred tax asset                                                      (89,763)
Accounts payable                                                        383,188
Other accounts payable                                                 (588,748)
Accrued expenses                                                         11,330
Advances from customers                                                (226,863)
Accrued taxes payable                                                   356,187
--------------------------------------------------------------------------------
Net cash used in operating activities                                  (449,095)
--------------------------------------------------------------------------------

Cash Flows from Investing Activities
Purchase of property and equipment                                     (433,524)
Purchase of intangible assets                                           (50,611)
Notes receivable                                                         11,277
Net cash received in purchase of Helpson                                131,336
--------------------------------------------------------------------------------
Net cash used by investing activities                                  (341,522)
--------------------------------------------------------------------------------

Cash Flows from Financing Activities
Payment of dividend payable                                            (237,599)
Payment of note payable                                              (6,317,849)
Proceeds from issuance of common shares                               7,804,175
--------------------------------------------------------------------------------
Net cash provided by financing activities                             1,248,727
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
Effect of exchange rate changes in cash                                   3,110
--------------------------------------------------------------------------------

Net increase in cash                                                    461,220
Cash and cash equivalents at beginning of period                              -
--------------------------------------------------------------------------------

Cash and cash equivalents at end of period                   $          461,220
--------------------------------------------------------------------------------

   The accompanying notes are an integral part of these financial statements

                                       F-6


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization - Onny Investment  Limited ("Onny") was incorporated in the British
Virgin  Islands  on  January  12,  2005.  Through  June  15,  2005,  Onny  was a
development  stage  enterprise with no activities  except for the acquisition of
Hainan Helpson Medical & Biotechnology Co., Ltd ("Helpson"), as discussed below.
Upon the  acquisition  of Helpson  and its  operations,  Onny  emerged  from the
development stage.

On April 12, 2005, Onny issued 100 (85,112 post-split) shares of common stock to
Tsui Hueng Mei ("Ms.  Tsui") in exchange  for $1 in cash.  Ms. Tsui then elected
herself as Onny's sole director.

On June 16, 2005, the Company acquired all the outstanding shares of Helpson See
Note 2.

On October 20, 2005,  Onny was  reorganized as a  wholly-owned  subsidiary of TS
Electronics, Inc. The reorganization was accomplished by Ms. Tsui exchanging her
29,700 Onny common shares for 20,555,329  common shares of TS Electronics,  Inc.
and for the  commitment  of TS  Electronics,  Inc. to issue Ms.  Tsui  4,723,056
common shares  following an amendment of the TS  Electronics,  Inc.  articles of
incorporation  increasing  the number of common shares  authorized to 60,000,000
shares, the exchange of shares was a 851-for-1 exchange ratio. In addition,  the
prior Onny preferred  shareholders exchanged their 10,000 Onny common shares for
6,944,611 common shares of TS Electronics,  Inc. which was a 694-for-1  exchange
ratio.  (The  issuance  of the  preferred  shares  to the prior  Onny  preferred
shareholders,  conversion  into  Onny  common  shares  and the  exchange  for TS
Electronics, Inc. common shares are not presented herein). The reorganization of
Onny into TS  Electronics,  Inc. was  recognized  as a stock split of the common
stock of Onny and the  effective  issuance  by Onny of the  2,500,060  shares of
common stock of TS Electronics,  Inc. that remained  outstanding in exchange for
the  assumption  of  $4,473  of  liabilities.  The  reverse  acquisition  of  TS
Electronics, Inc. was recognized as a non-monetary exchange.

Nature of  Operations - Helpson  manufactures  and markets  several  Western and
Chinese medicines sold mainly to hospitals and private retailers in The People's
Republic of China (PRC).  The  Marketing  Department  is in Hainan  Province and
there are also nine offices with sales  representatives  in other  provinces and
cities  throughout   China.   Helpson's  other  operating   activities   include
biochemical products, health products, and cosmetics.

Accounting  Estimates - 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 the disclosures of contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those estimates.


                                       F-7


Consolidation  and  Basis  of  Presentation  -  The  accompanying   consolidated
financial  statements  include the accounts and operations of Onny from the date
of its inception on January 12, 2005 and the accounts and  operations of Helpson
from the date of its acquisition on June 16, 2005. The accompanying consolidated
financial  statements have been restated on a retroactive  basis for the effects
of  the  stock  split  resulting  from  the   reorganization  of  Onny  into  TS
Electronics,  Inc. All significant  inter-company balances and transactions have
been eliminated in consolidation.

The  accompanying  financial  statements  have been prepared in accordance  with
accounting principles generally accepted in the United States of America.

Fair Values of Financial  Instruments - Based on the borrowing  rates  currently
available  to the  Company  for  bank  loans  with  similar  terms  and  average
maturities,  the carrying amounts of notes payable that were outstanding  during
the current  period  approximated  fair value because of either the immediate or
short-term  maturity of these  financial  instruments  or because the underlying
instruments are at interest rates which approximated current market rates.

Cash and cash equivalents - Cash and cash  equivalents  include interest bearing
and non-interest  bearing bank deposits,  money market accounts,  and short-term
certificates of deposit with original maturities of three months or less.

Trade  receivables and allowance for doubtful  accounts - Trade  receivables are
carried at original invoiced amounts less an allowance for doubtful accounts.

The Company presents trade receivables net of allowances for doubtful  accounts,
to ensure trade  receivables  are not  overstated due to  uncollectibility.  The
allowances  are  calculated  based on  detailed  review  of  certain  individual
customer accounts and an estimation of the overall economic conditions affecting
the Company's  customer  base. The Company  reviews a customer's  credit history
before  extending  credit.  If the financial  condition of its customers were to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional allowances may be required.

Provision is made against accounts  receivable to the extent they are considered
unlikely to be  collected.  It is common  practice in China for  receivables  to
extend beyond one year. Included in trade receivables is approximately  $189,758
that  occurred  more than one year from  December 31, 2005,  but is estimated to
still be collectable.

Inventory - Inventories are stated at weighted  average  costing.  The method of
determining  inventory costs is used consistently  from year to year.  Allowance
for  inventory  obsolescence  is  provided  when the  market  value  of  certain
inventory items are lower than the cost.


                                       F-8


Valuation of Long-lived Assets - The carrying values of the Company's long-lived
assets are reviewed for impairment  whenever events or changes in  circumstances
indicate  that they may not be  recoverable.  Should  such an event  occur,  the
Company would project  undiscounted  cash flows to be generated  from the use of
the asset and its eventual  disposition over the remaining life of the asset. If
projections indicate that the carrying value of the long-lived asset will not be
recovered, the carrying value is reduced by the estimated excess of the carrying
value over the projected discounted cash flows.

Property and Equipment - Property and equipment are stated at cost.  Maintenance
and  repairs  are  charged to expense as  incurred  and major  improvements  are
capitalized.  Gains or  losses  on  sales or  retirements  are  included  in the
statement of operations in the period of disposition.

Intangible  Assets  -  Acquisition  costs  on  patents,  trademarks,   licenses,
techniques,  formulas and other  intangibles are capitalized and amortized using
the straight-line  method over their useful lives. For those intangible  assets,
such as patents,  with legal protection over a period,  their useful life is the
protected period. Others that do not have legal protection periods are amortized
generally  over 5 to 10  years.  The  Company  does  not  capitalize  internally
generated intangible assets.

Intangible  assets are  techniques  for  medicines.  Amortization  on intangible
assets was $36,488 for the period from  January 12, 2005  through  December  31,
2005.

Advances to Suppliers  and  Advances  from  Customers - The  Company,  as is the
common  practice in the PRC,  will often pay advanced  payments to suppliers for
materials  and receive from  customers  advances for  finished  products.  As of
December 31, 2005,  the advances to suppliers  were  $2,123,729 and the advances
from customers were $50,755 respectively.

Revenue  Recognition  - The Company  recognizes  revenue when it is realized and
earned. The Company considers revenue realized or realizable and earned when (1)
it has persuasive evidence of an arrangement, (2) delivery has occurred, (3) the
sales  price is fixed or  determinable,  and (4)  collectability  is  reasonably
assured. Delivery does not occur until products have been shipped to the client,
risk of loss has  transferred  to the  client  and  client  acceptance  has been
obtained, client acceptance provisions have lapsed, or the Company has objective
evidence that the criteria  specified in client acceptance  provisions have been
satisfied.  The sales price is not considered to be fixed or determinable  until
all contingencies related to the sale have been resolved.

Cost of Revenues - Cost of revenues include wages, materials,  handling charges,
and other expenses associated with the manufacture and delivery of product.

Research and Development - Research and development expenditures are recorded as
expenses in the period in which they occur.


                                       F-9


Retirement  Benefit  Plans  -  The  Company   contributes  to  various  employee
retirement  benefit plans organized by provincial  governments under which it is
required to make monthly contributions to these plans at rates prescribed by the
related provincial  governments.  The provincial governments undertake to assume
the retirement benefit  obligations of all existing and future retired employees
of the Company. Contributions to these plans are charged to expense as incurred.

Advertising Costs - Advertising costs are expensed when incurred.

Basic and Diluted Earnings per Common Share - Basic earnings per common share is
computed by dividing net income by the weighted-average  number of common shares
outstanding.  Diluted  earnings per common share is calculated to give effect to
potentially  issuable dilutive common shares. There were no potentially issuable
common shares outstanding at December 31, 2005.

Credit  risk - The  carrying  amounts of  accounts  receivable  included  in the
balance sheet represent the Company's exposure to credit risk in relation to its
financial  assets.  No other  financial  assets carry a significant  exposure to
credit risk.

The Company  performs  ongoing credit  evaluations of each customer's  financial
condition.  It maintains allowances for doubtful accounts and such allowances in
the aggregate have not exceeded management's estimations.

Interest  rate risk - The Company is exposed to the risk arising  from  changing
interest rates,  which may affect the ability of repayment of existing debts and
viability of securing future debt instruments within the PRC.

Recently  Enacted  Accounting  Standards  -  In  December  2004,  the  Financial
Accounting  Standards  Board ("FASB") issued  Statement of Financial  Accounting
Standard ("SFAS") No. 123R, Share-Based Payment, which is a revision to SFAS No.
123. SFAS No. 123R establishes  standards for the accounting for transactions in
which an  entity  exchanges  its  equity  instruments  for  goods  or  services.
Primarily,  SFAS No. 123R focuses on  accounting  for  transactions  in which an
entity obtains employee services in share-based  payment  transactions.  It also
addresses  transactions  in which an entity incurs  liabilities  in exchange for
goods or  services  that are  based on the  fair  value of the  entity's  equity
instruments or that may be settled by the issuance of those equity instruments.

SFAS No. 123R  requires  the  Company to measure  the cost of employee  services
received in exchange for an award of equity  instruments based on the grant-date
fair value of the award.  That cost will be  recognized  over the period  during
which an  employee is  required  to provide  service in exchange  for the award,
which is usually the vesting  period.  No  compensation  cost is recognized  for
equity instruments for which employees do not render the requisite service.


                                      F-10


In accordance with the Securities and Exchanges  Commission's  Staff  Accounting
Bulletin  107,  SFAS No. 123R is  effective  as of the  beginning  of the annual
reporting  period that begins after June 15, 2005. Under these  guidelines,  the
Company  will adopt SFAS No. 123R as of January 1, 2006.  The  Company  does not
expect the  implementation  of this  standard  to have a material  impact on the
company.

In November 2004, the FASB issued SFAS No. 151,  Inventory Costs. This Statement
clarifies the accounting for abnormal amounts of idle facility expense, freight,
handling costs,  and wasted material  (spoilage).  This Statement  requires that
those items be recognized as current-period  charges  regardless of whether they
meet the criterion of "so abnormal." In addition,  this Statement  requires that
allocation of fixed production  overheads to the costs of conversion be based on
the normal  capacity of the  production  facilities.  SFAS 151 is effective  for
fiscal  years  beginning  after June 15,  2005.  The adoption of SFAS 151 is not
expected to have a material impact on the operations of the Company.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets.
This Statement  amends APB Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar  productive assets and replaces it with a general exception
for exchanges of nonmonetary  assets that do not have  commercial  substance.  A
nonmonetary  exchange has  commercial  substance if the future cash flows of the
entity are expected to change  significantly  as a result of the exchange.  SFAS
153 is effective for fiscal years beginning after June 15, 2005. The adoption of
SFAS 153 is not  expected  to have a material  impact on the  operations  of the
Company.

In May  2005,  the FASB  issued  SFAS  No.  154  Accounting  Changes  and  Error
Corrections.  This Statement  replaces APB Opinion 20 and SFAS No. 3. Opinion 20
previously  required  that most  voluntary  changes in  accounting  principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new  accounting  principle.  This  Statement  requires
retrospective  application to prior periods' financial  statements of changes in
accounting  principle,  unless  it is  impracticable  to  determine  either  the
period-specific  effects or the cumulative effect of the change.  This Statement
requires that the new accounting  principle be applied to the balances of assets
and   liabilities  as  of  the  beginning  of  the  earliest  period  for  which
retrospective  application is practicable and that a corresponding adjustment be
made to the opening  balance of retained  earnings  for that period  rather than
being reported in an income statement.  The adoption of SFAS 154 is not expected
to have a material impact on the Company.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial  Instruments -- an amendment of FASB  Statements No. 133 and 140. SFAS
No. 155 resolves issues addressed in SFAS No. 133  Implementation  Issue No. D1,
Application of Statement 133 to Beneficial  Interests in  Securitized  Financial
Assets.  SFAS No. 155 will become  effective for the Company's fiscal year after


                                      F-11


September  15,  2006.  The impact of SFAS No. 155 will  depend on the nature and
extent of any new derivative instruments entered into after the effective date.

NOTE 2 - ACQUISITION

On May 25, 2005, the Company entered into an agreement with the  shareholders of
Helpson, a privately held Chinese joint venture,  in which the Company agreed to
acquire and the  shareholders  of Helpson agreed to sell, all of the outstanding
common shares of Helpson in exchange for the  assumption of  obligations to make
cash payments to the Helpson  shareholders in the form of common stock dividends
from Helpson of $4,154,041 the assumption of $4,646,409 of other liabilities and
the  issuance of  non-interest  bearing  promissory  notes  totaling  $3,413,265
payable  three months after Helpson  obtains a business  license in the People's
Republic  of China as a wholly  foreign  owned  entity.  Helpson  obtained  such
license  on June 16,  2005 and the  shares of Helpson  were  transferred  to the
Company on that  date.  Since June 16,  2005 was  recognized  as the date of the
acquisition, the promissory notes became due September 16, 2005.

Helpson  manufactures  and markets  several  Western and Chinese  medicines sold
mainly to  hospitals  and  private  sellers in the  Peoples  Republic  of China,
through  its  marketing  department  in  Hainan  Province  and from  nine  sales
representative offices in other provinces and cities.  Helpson's other operating
activities include biochemical products, health products, and cosmetics.

Since  Helpson is an operating  company and control of Helpson  changed upon the
closing of the acquisition agreement, the Company is the accounting acquirer and
has  recognized  the  acquisition  of  Helpson  as  a  business  combination  in
accordance with Statements of Financial  Accounting  Standards No. 141, Business
Combinations.  On April 25,  2005,  Helpson  declared a dividend  to the selling
shareholders of $4,154,041 which equaled  Helpson's  retained  earnings at March
31, 2005 less deferred income tax assets of $86,985 that are not considered part
of distributable  profits under Chinese law. The fair value of the net assets of
Helpson was  determined  by  appraisal  and  exceeded the cost of the net assets
acquired.  That excess was allocated as a pro rata reduction of the amounts that
otherwise would have been assigned to the non-current assets acquired.

At June 16, 2005,  the purchase  price was allocated to the assets  acquired and
liabilities assumed as follows:


                                       12


Current Assets                                                       $ 9,570,918
Property and equipment                                                 2,555,565
Intangible assets                                                         71,210

--------------------------------------------------------------------------------
Total assets acquired                                                 12,197,692
--------------------------------------------------------------------------------
Current liabilities                                                    7,864,066
Long-term liabilities                                                  1,005,694

--------------------------------------------------------------------------------
Total liabilities assumed                                              8,869,760
--------------------------------------------------------------------------------

Net assets acquired                                                  $ 3,327,933
--------------------------------------------------------------------------------

Intangible  assets  consist  of  registered   patents,   trademarks,   licenses,
techniques  and  formulas  related to several  Western  and  Chinese  medicines,
biochemical products,  health products,  and cosmetics.  These intangible assets
have a weighted-average useful life of approximately 10 years.

The following pro forma  information  is presented to reflect the  operations of
the Company and Helpson on a combined basis as if the acquisition of Helpson had
been completed as of January 1, 2005, respectively. The pro forma information is
only  illustrative  of the effects of the  acquisition  and does not necessarily
reflect the results of operations  that would have resulted had the  acquisition
actually occurred on those dates.


                                                              For the Year Ended
                                                               December 31, 2005
                                                                  (Pro Forma)
--------------------------------------------------------------------------------
Revenues                                                      $       14,075,521
Net income                                                             5,778,901
Basic and diluted earnings per common share                                 0.51
--------------------------------------------------------------------------------


Pro forma net income for the twelve  months  ended  December  31,  2005  include
nonrecurring  interest expense of $85,332 resulting from the amortization of the
discount  on the  $3,413,265  promissory  notes  payable to the  former  Helpson
shareholders, which discount was computed based upon an imputed interest rate of
10% per annum.

The  reorganization  was recognized as a stock split of the common stock of Onny
and the effective issuance by Onny of the 2,500,060 shares of common stock of TS
Electronics,  Inc. that remained  outstanding  in exchange for the assumption of
$4,513 of liabilities. The acquisition of TS Electronics, Inc. was recognized as
a non-monetary exchange.

NOTE 3 - INVENTORY

Inventory consisted of the following at December 31, 2005:


                                      F-13


--------------------------------------------------------------------------------
Raw materials                                                        $ 4,673,353
Work in progress                                                         819,146
Finished goods                                                           292,698
--------------------------------------------------------------------------------
Total Inventory                                                      $ 5,785,196
--------------------------------------------------------------------------------


NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2005:


--------------------------------------------------------------------------------
Permit of land use                                                  $   348,885
Building                                                              1,123,144
Plant, machinery and equipment                                        1,120,289
Motor vehicle                                                            14,295
Office equipment                                                         62,211
Construction in progress                                                389,703
--------------------------------------------------------------------------------
Total                                                                 3,058,526
Less: Accumulated depreciation                                         (250,184)
--------------------------------------------------------------------------------
Property and equipment, net                                         $ 2,808,342
--------------------------------------------------------------------------------


Depreciation  is computed on a  straight-line  basis over the  estimated  useful
lives of the assets as follows:


Asset                                                                     Life
--------------------------------------------------------------------------------
Permit of land use                                                       40 - 70
Building                                                                 20 - 35
Plant, machinery and equipment                                             10
Motor vehicle                                                             5 - 10
Office equipment                                                            5
--------------------------------------------------------------------------------


                                      F-14


Depreciation  expense was $213,696 for the period from January 12, 2005 (Date of
Inception) through December 31, 2005.

NOTE 5 - INTANGIBLE ASSETS

Intangible  assets  represent  the  costs  on  patents,  trademarks,   licenses,
techniques and formulas.  Intangible assets have a weighted-average  useful life
of approximately five years.

The estimated aggregate amortization expense for the succeeding four years is as
follows:


Year                                                                      Amount
--------------------------------------------------------------------------------
2006                                                                    $ 33,332
2007                                                                      25,599
2008                                                                      19,200
2009                                                                      18,275
--------------------------------------------------------------------------------
                                                                        $ 96,406
--------------------------------------------------------------------------------


NOTE 6 - INCOME TAXES

The Company  accounts  for its income  taxes in  accordance  with  Statement  of
Financial  Accounting  Standards ("SFAS") No. 109, which requires recognition of
deferred tax assets and liabilities for future tax consequences  attributable to
differences  between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and any tax credit carry forwards
available.  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 income in the
period that includes the enactment date.

Helpson enjoys the benefits of two tax breaks. One, a reduction of 15% from 30%,
for being in the first five years of operations and another 7.5% break for being
in a developing  economic area in China;  resulting in a rate of 7.5% enterprise
income  tax rate  which  when  applied  to the  pre-tax  income the result is as
follows:


                                      F-15


                                                          For the period from
                                                           January 12, 2005
                                                          (Date of Inception)
                                                       through December 31, 2005
--------------------------------------------------------------------------------
Tax at US Federal statutory rate (34%)                              $ 1,377,561
Non-deductible expenses                                                 137,458
Change in temporary differences                                        (114,254)
Effect of lower foreign tax rates                                    (1,035,261)
--------------------------------------------------------------------------------
Income tax provision                                                $   251,250
--------------------------------------------------------------------------------


The company has deferred tax asset based upon the temporary differences from the
allowance  for bad debt which  equals  130,458.  The Company  has also  incurred
various other taxes, primarily comprised of business tax, value-added tax, urban
construction tax, education surcharges and etc. Any unpaid amounts are reflected
on the balance sheets as other taxes payable.

NOTE 7 - STOCKHOLDERS' EQUITY

On  July  6,  2005,  the   shareholder  of  Onny  amended  Onny's   articles  of
incorporation  increasing  the number of authorized  common shares to 4,000,000,
reducing  the par value of the common  shares to $.02 per share and  authorizing
100  preferred  shares with a par value of $100 per share.  On August 18,  2005,
prior  to  the  reorganization  with  TS  Electronics,  Inc.,  the  articles  of
incorporation of Onny, were amended  changing the authorized  capital of Onny to
40,000 common shares,  $100 par value,  and 10,000  preferred  shares,  $100 par
value.

The Onny  preferred  shareholders  were entitled to receive  dividends  prior to
common  shareholders  at a rate of $.08  per  annum  for each  preferred  share.
Following the payment of preferred  dividends,  the preferred  shareholders were
entitled to  participate  equally with common  shareholders  in  dividends.  The
preferred dividends were  non-cumulative.  The preferred shares were convertible
into common shares on a  one-for-one  basis any time after the date of issuance,
at the option of the holder.

As described in Note 1, the reorganization of Onny into TS Electronics, Inc. was
recognized as an 851-for-1  stock exchange of the Onny common shares  previously
outstanding.  The  number of  common  shares  issued  and  outstanding  has been
restated in the accompanying  consolidated financial statements on a retroactive
basis for the effects of the stock split.

On August 16, 2005, the Onny  shareholder  made a capital  investment in Onny of
$3,491,174  in cash in exchange for the  issuance of  25,193,273  common  shares
(29,600 pre-split common shares).

On October 19, 2005, the Company issued  2,500,060 shares for the acquisition of
TS Electronics, Inc. and the assumption of $4,513 of liabilities. On October 20,


                                      F-16


2005 the Company issued  6,944,611  shares of common stock for $4,313,000 net of
offering costs of $687,000.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Economic  environment  -  Significantly  all of  the  Company's  operations  are
conducted  in the PRC,  the  Company is subject  to special  considerations  and
significant  risks not  typically  associated  with  companies  operating in the
United States of America.  These risks  include,  among others,  the  political,
economic and legal  environments  and foreign currency  exchange.  The Company's
results  may be  adversely  affected  by  changes  in the  political  and social
conditions in the PRC, and by changes in  governmental  policies with respect to
laws  and  regulations,  anti-inflationary  measures,  currency  conversion  and
remittance abroad, and rates and methods of taxation, among other things.

In addition,  all of the Company's  revenue is denominated in the PRC's currency
of Renminbi  ("RMB" or "(Y)"),  which must be  converted  into other  currencies
before  remittance  out of the PRC.  Both  the  conversion  of RMB into  foreign
currencies and the remittance of foreign  currencies  abroad require approval of
the PRC government.

NOTE 9 - SUBSEQUENT EVENT (UNAUDITED)

Dividend  payable on common  stock - According to the  shareholders'  meeting on
April 25, 2005,  Helpson  planned to  distribute a dividend of $4,154,041 to the
common shareholders.  However, the dividend had not been paid as of December 31,
2005. In terms of the provision of shareholder's  meeting, the dividend not paid
should be  transferred to the loan of Helpson if the dividend was not paid as of
December 31, 2005.

Administrative  changes  - During  March,  2006,  a  majority  of the  Company's
shareholders approved an amendment to the Company's Certificate of Incorporation
to make the following changes:

     o    Change the Corporate  name from TS  Electronics,  Inc. to China Pharma
          Holdings, Inc;
     o    Increase the number of  authorized  shares of common stock from thirty
          million (30,000,000) shares to sixty million (60,000,000) shares; and
     o    Set the number of directors constituting the entire Board of Directors
          at between three and nine,  with the specific  number to be fixed from
          time  to  time  by a vote  of the  majority  of the  entire  Board  of
          Directors.

The  change in the  Corporate  name has not been  reflected  in these  financial
statements.  The  change  in the  authorized  shares  of  common  stock has been
reflected in these financial statements.


                                      F-17