Jinzanghuang Tibet (OTC BB:JZHG)

Despite our sizeable cash reserves, we borrowed $29,460 from a related party during the quarter ended September 30, 2011. The loans are taken in order to obtain U.S. Dollars to pay our expenses in the United States, including accounting and legal expenses and the expenses that attend the listing of our common stock on the U.S. markets. The procedure required in order to obtain government approval of a conversion of Renminbi into Dollars is time-consuming and laborious. For that reason, until we complete a financing in U.S. Dollars or obtain some other source of U.S. Dollars, we will continue to borrow Dollars from related parties as needed.

Over the long term, our expectation is that we will utilize our capital resources as well as any additional investments that we secure in order to expand our presence in the market for Tibetan medicine. At the present time, however, we are able to operate profitably without significant additional investment. Moreover, our observation of the equity markets indicates that we would be unlikely to obtain financing on favorable terms at this time. Accordingly, our near term plan is to continue the program that we initiated during the past year, utilizing the resources available to us.

To date our operations have been funded by the contributions to capital by our founders and the net cash provided by our operations. As a result, at September 30, 2011 we had no bank debt and only a $65,370 obligation to a related party. At the same time, we had $3,632,284 in cash at September 30, 2011 as well as working capital totaling $4,292,377, an increase of $1,679,480 since our last fiscal year ended on June 30, 2011. So our capital resources are more than sufficient to fund our operations for the coming year as they are currently structured.

Over the long term, our expectation is that we will utilize our capital resources as well as any additional investments that we secure in order to expand our presence in the market for Tibetan medicine. At the present time, however, we are able to operate profitably without significant additional investment. Moreover, our observation of the equity markets indicates that we would be unlikely to obtain financing on favorable terms at this time. Accordingly, our near term plan is to continue the program that we initiated during the past year, utilizing the resources available to us.

Our business plan contemplates that we will obtain $5 million to $10 million in additional capital during 2010 and 2011.  The funds are needed in order to:
 
  ● Relocate our headquarters from Shandong to Beijing, where we will have greater access to marketing channels;

 
  ● Implement our direct marketing program, including development of an online presence;

 
  ● Acquire the rights to pharmaceuticals and nutraceuticals that will complement our existing product line;

 
  ● Carry on clinical trials of pharmaceuticals required to obtain SFDA approval;

 
  ● Establish franchisees throughout China; and

 
  ● Implement an advertising and marketing program adequate to assure us of substantial market presence.

 
Our plan is to sell a portion of our equity in order to obtain the necessary funds, which will reduce the equity share of our existing shareholders.  To date, however, we have received no commitment from any source for funds.

Our business plan contemplates that we will obtain $5 million to $10 million in additional capital during 2009 and 2010.

Source: SEC Form 8K (January 12, 2009. Page 12)