1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

In these consolidated financial statements, unless the context requires otherwise, the terms “we”, “our”, “us” and the “Company” refer to Tanke Biosciences Corporation, a Nevada corporation formerly known as Greyhound Commissary, Inc. (“Greyhound”), as well as our direct and indirect subsidiaries, and our principal operating business, Guangzhou Tanke Industry Co., Ltd. (“Guangzhou Tanke”), a company organized under the laws of the People’s Republic of China (“China” or the “PRC”), which we control via a series of variable interest entity contractual agreements (the “VIE Agreements”) more fully described below.

We conduct our business through our subsidiaries, principally our wholly-owned subsidiary China Flying Development Limited (“China Flying”), a Hong Kong incorporated company, and its wholly-owned subsidiary Guangzhou Kanghui Agricultural Technology Co., Ltd. (“Kanghui Agricultural” or the “WFOE”), a wholly foreign owned enterprise incorporated as a limited liability company under the laws of the PRC. The Company operates and controls Guangzhou Tanke through Kanghui Agricultural and China Flying and in connection with the VIE Agreements.

On January 3, 2011, Guangzhou Tanke entered into a series of agreements with Kanghui Agricultural, pursuant to which Kanghui Agricultural effectively assumed management of the business activities of Guangzhou Tanke. Kanghui Agricultural is entitled to 100% of the net income of Guangzhou Tanke and is able to direct Guangzhou Tanke’s actions.

Also on January 3, 2011, our board of directors unanimously approved a resolution to enter into a Share Exchange Agreement with China Flying, and Golden Genesis Limited, a British Virgin Islands company ("Golden Genesis"), the sole stockholder of China Flying. Under the terms of the Share Exchange, Golden Genesis exchanged 100% of its capital stock in China Flying for 10,758,000 shares of authorized, but previously unissued Greyhound common stock, post-split as described below. Also, at the closing, we issued an aggregate of 1,840,000 shares (post split) of our authorized, but previously unissued common stock to a U.S. advisor. Following the closing of the agreement on February 9, 2011, China Flying became our wholly owned subsidiary.

Our board of directors further approved unanimously on January 3, 2011, a one share for 8.512 shares reverse split of our issued and outstanding common stock. The effective date of the split was established by our board on a date prior to the closing of the acquisition of China Flying.

The acquisition of China Flying was contingent upon the completion of our planned private placement in which we sold 6,669,627 units (the “Units”), with net proceeds of $6,522,563. Each Unit consisted of a $1.15 principal amount convertible note and a three year warrant to purchase one share of Greyhound common stock. On February 9, 2011, the Company entered into a Securities Purchase Agreement with individual investors relating to the private placement and completed the private placement transaction (see Note 9 below). The proceeds from such sale have been transferred to Guangzhou Tanke and will be used to finance the operations and growth of Guangzhou Tanke.

At the time of the Share Exchange Agreement, Greyhound had 3,397,787 shares of common stock issued and outstanding. Following the reverse split, but prior to the issuance of shares pursuant to the acquisition of China Flying, the outstanding shares will be reduced to approximately 399,316 shares, without giving effect to the rounding up of fractional shares. Split shares issued in connection with the reverse stock split will be fully paid and non-assessable. The number of stockholders will remain unchanged as a result of the reverse split. The par value of our common stock remained unchanged.

As management of Guangzhou Tanke obtained control of the Company, the Share Exchange was treated as a reverse merger. Accordingly, for accounting purposes Guangzhou Tanke was the acquirer so historical financial information presented herewith is that of Guangzhou Tanke.

Pursuant to the VIE Agreements, Kanghui Agricultural has the right to advise, consult, manage and operate Guangzhou Tanke for a quarterly fee equal to Guangzhou Tanke’s net income. Additionally, the Tanke Shareholders pledged their rights, titles and equity interest in Guangzhou Tanke as security for Kanghui Agricultural to collect consulting and services fees provided to Guangzhou Tanke through an Equity Pledge Agreement. In order to further reinforce Kanghui Agricultural’s rights to control and operate Guangzhou Tanke, the Tanke Shareholders granted Kanghui Agricultural an exclusive right and option to acquire all of their equity interests in Guangzhou Tanke through an Option Agreement. Neither Tanke Biosciences nor Kangui Agricultural own the assets or are responsible for the liabilities of Guangzhou Tanke.

The VIE Agreements were necessary because without them, the shareholders of Tanke Biosciences would not have control of Guangzhou Tanke. With these in place, however, Guangzhou Tanke is contractually equivalent to a subsidiary of Tanke Biosciences.

Guangzhou Tanke has historically self financed, and has been a profitable enterprise. However, on February 9, 2011, Tanke Biosciences sold convertible notes payable (see Note 9 below) with net proceeds of $6,522,563. Such proceeds have been transferred to Guangzhou Tanke and will be used to finance the operations and growth of Guangzhou Tanke.

“RMB” and “Renminbi” refer to the legal currency of China and “$”, “US dollar” and “US$” refer to the legal currency of the United States.

Restatement

Management has determined to restate its financial statements for the period ended June 30, 2011, in order to provide a presentation that is more meaningful to investors. Specifically, management has determined that Guangzhou Tanke should be considered the predecessor of the Company for accounting purposes. As a result of this change, we are presenting comparative financial information for Guangzhou Tanke, our sole operating entity.

Our basis for changing the presentation is recognition that while there was a change in control when Kanghui Agricultural entered into the VIE Agreements with Guangzhou Tanke, there was also a call option agreement (the "Call Option Agreement") between the Guangzhou Tanke shareholders, Golden Genesis and Ms. Wong Kwai Ho, the sole shareholder of Golden Genesis. The Call Option Agreement granted the Guangzhou Tanke shareholders the ability to acquire control over Tanke Biosciences, which has control of China Flying and Kanghui Agricultural, following the exercise of certain stock options. Therefore, by viewing the VIE Agreements and the Call Option Agreement as a single arrangement, Guangzhou Tanke obtained control and is the accounting acquirer in accordance with FASB ASC 805-10.

The impact of this restatement on the June 30, 2011 balances is as follows.

	June 30			June 30			June 30
	2011			2011			2011
	As Restated			Original			Change

Balance Sheet:
Stockholders' Equity
Additional paid in capital		12,220,193			16,293,036			(4,072,843	)
Retained earnings		2,420,083			(1,652,760	)		4,072,843

Statement of Operations:
Six Months Ended June 30, 2011
Gain on bargain purchase of Tanke Bio-Tech		-			248,073			(248,073	)
Net loss		(3,678,470	)		(3,430,397	)		(248,073	)
Net loss per share
Basic		(0.29	)		(0.27	)		(0.02	)
Diluted		(0.29	)		(0.27	)		(0.02	)

Statement of Cash Flows
Net cash provided by operating activities
Net loss		(3,678,470	)		(3,430,397	)		(248,073	)
Gain on bargain purchase of Tanke Bio-Tech		-			248,073			(248,073	)
Accounts receivable		98,710			70,537			28,173
Inventories		172,608			143,178			29,430
Other receivables					(44,836	)		44,836
Other current assets		(564,838	)		(1,096,667	)		531,829
Accounts payable		(3,281	)		69,443			(72,724	)
Other payable and accrued liabilities		22,023			26,742			(4,719	)
Income tax payable		297,978			317,675			(19,697	)
Deferred tax assets		15,822			15,591			231
Government grant		(63,425	)		(62,455	)		(970	)
Advance from Customer		(3,213	)		(3,176	)		(37	)
Net cash provided by investing activities
Increase in other receivables		(740,433	)		-			(740,433	)
Purchase of plant and equipment		(100,179	)		(119,132	)		18,953
Change in restricted cash		(698,646	)		(706,754	)		8,108
Change in cash due to VIE agreement with China Flying		76,075			-			76,075
Construction in progress		-			2,145,950			(2,145,950	)
Net cash provided by financing activities
Due from (to) a related party		1,288,062			1,233,191			54,871
Proceeds from issue of convertible notes		6,522,563			5,825,360			697,203
Increase/ (decrease) in bank borrowing		458,215			495,074			(36,859	)
Effects of foreign currency conversion on cash		(116,250	)		(873	)		(115,377	)

Overview of Our Business

Through Guangzhou Tanke, our principal operating business, we are one of the leading animal nutrition and innovative feed additive providers in China. Our products are distinguished from traditional artificial feed additives in that they are environmentally-friendly and are designed to optimize the growth and health of livestock such as pigs and cattle, as well as farmed fish.