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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008

Or

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

For the transition period from ___________________________
to ___________________________

Commission File Number 333-127016

CHINA HEALTH CARE
CORPORATION(Exact name of registrant as specified in
its charter)

|Wyoming                                                                 | 98-0463119                       
|----------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization)    | (IRS Employer Identification No.)
|                                                                        |                                  
|T Plaza Center, Suite 400,
      15950 North Dallas Parkway, Dallas, TX | 75249                            
|(Address of principal executive offices)                                | (Zip Code)                       

972.361.8033(Registrants telephone number,
including area code)

N/A(Former name, former address and
former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] YES  
 [   ] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a small
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act

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


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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a
court.[   ] YES    [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
50,148,000 common shares issued and outstanding as of November 13, 2008

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PART I  FINANCIAL INFORMATION

ITEM 1. Financial Statements



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F-1

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China Health Care Corp 
  Consolidated Balance SheetsAt September 30, 2008, and December 31, 2007 
  (Stated in US
Dollars)

|                                                                |          |   | At            |  |   | At           |  |   | At            | 
|--------------------------------------------------------------- | -------- | - | ------------- |  | - | ------------ |  | - | ------------- | 
|                                                                |          |   | September 30, |  |   | December 31, |  |   | September 30, | 
|Assets                                                          | Note     |   | 2008          |  |   | 2007         |  |   | 2007          | 
|                                                                |          |   | (Unaudited)   |  |   | (Unaudited)  |  |   |               | 
|Current assets                                                  |          |   |               |  |   |              |  |   |               | 
|Cash                                                            | 2*(d)*   | $ | 229,567       |  | $ | 84,369       |  | $ | 406,396       | 
|Accounts receivable                                             | 2*(e)*,3 |   | 113,106       |  |   | 344,740      |  |   | 54,250        | 
|Related party receivables                                       | 4        |   | -             |  |   | 614,792      |  |   | 68,427        | 
|Prepaid expenses                                                | 5        |   | 378,264       |  |   | 519,627      |  |   | 237,981       | 
|Total current assets                                            |          |   | 720,937       |  |   | 1,563,528    |  |   | 767,054       | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Non-current assets                                              |          |   |               |  |   |              |  |   |               | 
|Property and equipment                                          | 2*(f),*6 |   | 855,810       |  |   | 1,053,186    |  |   | 1,123,317     | 
|Goodwill                                                        | 7        |   | 154,809       |  |   | 154,881      |  |   | 154,881       | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Discontinued operations                                         |          |   |               |  |   |              |  |   |               | 
|Accounts receivable                                             | 15       |   | 10,939        |  |   | 10,922       |  |   | 45,594        | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Total assets                                                    |          | $ | 1,742,495     |  | $ | 2,782,517    |  | $ | 2,090,846     | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Liabilities, Minority Interest, and
      Stockholders Deficit |          |   |               |  |   |              |  |   |               | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Current liabilities                                             |          |   |               |  |   |              |  |   |               | 
|Accounts payable                                                |          |   | 1,410,111     |  |   | 1,471,115    |  |   | 1,853,896     | 
|Dividends payable                                               |          |   | 24,884        |  |   | -            |  |   | -             | 
|Related party payables                                          | 8        |   | 2,510,978     |  |   | 1,823,061    |  |   | 470,377       | 
|Accrued liabilities                                             | 9        |   | 749,116       |  |   | 1,696,932    |  |   | 621,125       | 
|Convertible preferred stock - $0 par value, 10,000 shares       |          |   |               |  |   |              |  |   |               | 
|authorized; 600, 4,605, and 4,605 shares
      issued and       |          |   |               |  |   |              |  |   |               | 
|outstanding at September 30, 2008, December 31,2007,            |          |   |               |  |   |              |  |   |               | 
|and September 30, 2007, respectively                            | 10       |   | 1,503,198     |  |   | -            |  |   | -             | 
|Total current liabilities                                       |          |   | 6,198,287     |  |   | 4,991,108    |  |   | 2,945,398     | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Non-current liabilities                                         |          |   |               |  |   |              |  |   |               | 
|Dividends payable                                               |          |   | -             |  |   | 286,717      |  |   | 1,385,573     | 
|Related party payables - long term                              | 8        |   | -             |  |   |              |  |   | 772,777       | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Liabilities of discontinued operations                          |          |   |               |  |   |              |  |   |               | 
|Accrued liabilities                                             | 9,15     |   | 4,198         |  |   | 4,200        |  |   | 4,200         | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Total liabilities                                               |          | $ | 6,202,485     |  | $ | 5,282,025    |  | $ | 5,107,948     | 
|                                                                |          |   |               |  |   |              |  |   |               | 
|Minority interest                                               |          | $ | 223,275       |  | $ | 101,457      |  | $ | 99,625        | 

See Accompanying Notes to the Financial Statements and
Accountants Report.

F-2

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China Health Care Corp Consolidated Balance SheetsAt September 30, 2008, and December 31, 2007 (Stated in US
Dollars)

|                                                                      |      |   | At            |   |   | At           |   |   | At            |  
|--------------------------------------------------------------------- | ---- | - | ------------- | - | - | ------------ | - | - | ------------- | -
|                                                                      |      |   | September 30, |   |   | December, 31 |   |   | September 30, |  
|                                                                      | Note |   | 2008          |   |   | 2007         |   |   | 2007          |  
|                                                                      |      |   | (unaudited)   |   |   | (unaudited)  |   |   |               |  
|Stockholders deficit                                                 |      |   |               |   |   |              |   |   |               |  
|Convertible preferred stock - $0 par value, 10,000 shares             |      |   |               |   |   |              |   |   |               |  
|authorized; 600 shares (reclassified to
      liabilities), 4,605 and |      |   |               |   |   |              |   |   |               |  
|4,605 shares issued and outstanding at September 30, 2008,            |      |   |               |   |   |              |   |   |               |  
|December 31, 2007, and September 30, 2007,
      respectively         | 10   | $ | -             |   |   | 11,332,794   |   | $ | 10,225,269    |  
|Common stock - $0.001 par value, 200,000,000 shares                   |      |   |               |   |   |              |   |   |               |  
|authorized; 50,148,000 and 39,314,000
      shares issued and         |      |   |               |   |   |              |   |   |               |  
|outstanding at September 30, 2008, and September 30,                  |      |   |               |   |   |              |   |   |               |  
|2007, respectively                                                    |      |   | 50,148        |   |   | 39,314       |   |   | 39,314        |  
|Additional paid in capital                                            |      |   | 21,571,145    |   |   | 10,470,678   |   |   | 10,416,271    |  
|Accumulated deficits                                                  |      |   | (26,546,771   | ) |   | (24,282,847  | ) |   | (23,644,911   | )
|Accumulated other comprehensive income (loss)                         |      |   | 242,213       |   |   | (160,904     | ) |   | (152,670      | )
|Total stockholders' deficit                                           |      |   | (4,683,265    | ) |   | (2,600,965   | ) |   | (3,116,727    | )
|                                                                      |      |   |               |   |   |              |   |   |               |  
|Total liabilities, minority interest, and
      stockholders' deficit |      | $ | 1,742,495     |   | $ | 2,782,517    |   | $ | 2,090,846     |  

See Accompanying Notes to the Financial Statements and
Accountants Report.

F-3

---

China Health Care Corp Consolidated Statement of
Operations for the three and nine months ended September 30, 2008, and 2007
(Stated in US Dollars)

|                                                   |           |   | 3 months      |   |   | 3 months      |   |   | 9 months      |   |   | 9 months      |  
|-------------------------------------------------- | --------- | - | ------------- | - | - | ------------- | - | - | ------------- | - | - | ------------- | -
|                                                   |           |   | ended         |   |   | ended         |   |   | ended         |   |   | ended         |  
|                                                   |           |   | September 30, |   |   | September 30, |   |   | September 30, |   |   | September 30, |  
|                                                   |           |   | 2008          |   |   | 2007          |   |   | 2008          |   |   | 2007          |  
|Revenue                                            | 2*(g),*16 | $ | 177,813       |   | $ | 108,854       |   | $ | 389,325       |   | $ | 462,284       |  
|Cost of revenue                                    | 2*(h)*    |   | 21,158        |   |   | 33,782        |   |   | 122,075       |   |   | 131,239       |  
|Gross
      profit                                 |           |   | 156,655       |   |   | 75,072        |   |   | 267,250       |   |   | 331,045       |  
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Selling expenses                                   | *2(i)*    |   | -             |   |   | 26,866        |   |   | 79,623        |   |   | 123,704       |  
|General and administrative expenses                | 2(j)      |   | 618,057       |   |   | 452,013       |   |   | 2,429,637     |   |   | 993,767       |  
|Total
      operating expenses                     |           |   | 618,057       |   |   | 478,879       |   |   | 2,509,260     |   |   | 1,117,471     |  
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Other income
      (expenses)                      |           |   |               |   |   |               |   |   |               |   |   |               |  
|Other income                                       |           |   | 79,668        |   |   | 56,636        |   |   | 85,281        |   |   | 358,022       |  
|Interest
      income                              |           |   | 82            |   |   | 301,229       |   |   | 82            |   |   | -             |  
|Interest expense                                   |           |   | (655          | ) |   | -             |   |   | (84,168       | ) |   | (20,575       | )
|Other
      expenses                               |           |   | (9,536        | ) |   | -             |   |   | (129          | ) |   | -             |  
|Total
      other income (expenses)                |           |   | 69,559        |   |   | 357,865       |   |   | 1,066         |   |   | 337,447       |  
|Loss before income tax and
      minority          |           |   |               |   |   |               |   |   |               |   |   |               |  
|interest                                           |           |   | (391,843      | ) |   | (45,942       | ) |   | (2,240,944    | ) |   | (448,979      | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Provision for income tax (tax benefit)             | 2*(k)*    |   | 4,901         |   |   | (20,341       | ) |   | (20,303       | ) |   | (20,516       | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Loss before minority interest                      |           |   | (386,942      | ) |   | (66,283       | ) |   | (2,261,247    | ) |   | (469,495      | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|less: Minority interest in net income
      (loss) |           |   | (17,649       | ) |   | (2,031        | ) |   | -             |   |   | (25,620       | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Loss from continuing operations                    |           |   | (404,591      | ) |   | (68,314       | ) |   | (2,261,247    | ) |   | (495,115      | )
|Gain (loss) from discontinued
      operations,    |           |   |               |   |   |               |   |   |               |   |   |               |  
|net of taxes                                       | 15        |   | (2,677        | ) |   | (1,441        | ) |   | (2,677        | ) |   | 311,944       |  
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Net income (loss)                                  |           |   | (407,268      | ) |   | (69,755       | ) |   | (2,263,924    | ) |   | (183,171      | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Preferred dividends                                |           |   | -             |   |   | (125,890      | ) |   | -             |   |   | (682,982      | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Loss attributable to common stockholders           |           |   | (407,268      | ) |   | (195,645      | ) |   | (2,263,924    | ) |   | (866,153      | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Earnings (loss) per share                          | 2*(l),*14 |   |               |   |   |               |   |   |               |   |   |               |  
|Basic and
      diluted                            |           | $ | (0.0085       | ) | $ | (0.0050       | ) | $ | (0.0478       | ) | $ | (0.0220       | )
|                                                   |           |   |               |   |   |               |   |   |               |   |   |               |  
|Weighted average shares
      outstanding          |           |   |               |   |   |               |   |   |               |   |   |               |  
|Basic and diluted                                  |           |   | 48,005,217    |   |   | 39,314,000    |   |   | 47,357,146    |   |   | 39,314,000    |  

See Accompanying Notes to the Financial Statements and
Accountants Report.

F-4

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China Health Care CorpConsolidatedStatementsofChangesinStockholdersDeficit for the ninemonthsendedSeptember30,
2008 and year endDecember31, 2007(Statedin USDollars)

|                                               |      |   | 3 months          |   |   | 3 months      |   |   | 9 months      |   |   | 9 months      |  
|---------------------------------------------- | ---- | - | ----------------- | - | - | ------------- | - | - | ------------- | - | - | ------------- | -
|                                               |      |   | ended             |   |   | ended         |   |   | ended         |   |   | ended         |  
|                                               |      |   | **September 30,** |   |   | September 30, |   |   | September 30, |   |   | September 30, |  
|Statement of Comprehensive Income
      (Loss) |      |   | 2008              |   |   | 2007          |   |   | 2008          |   |   | 2007          |  
|Net income (loss)                              |      | $ | (407,268          | ) | $ | (195,645      | ) | $ | (2,263,924    | ) | $ | (866,153      | )
|Other comprehensive income (loss)              | 2(m) |   |                   |   |   |               |   |   |               |   |   |               |  
|Foreign currency
      translation adjustment  | 2(n) |   | 392,256           |   |   | 5,067         |   |   | 233,979       |   |   | (32,846       | )
|Total comprehensive income                     |      | $ | (15,012           | ) | $ | (190,578      | ) | $ | (2,029,945    | ) | $ | (898,999      | )

|                                            | Convertible
    Preferred Stock |   | Common
    Stock |            |   | Additional  |  |   |        |       |   | Accumulated |  |   |             |  
|------------------------------------------- | ------------------------------- | - | ---------------- | ---------- | - | ----------- |  | - | ------ | ----- | - | ----------- |  | - | ----------- | -
|                                            |                                 |   |                  | Paid       |   |             |  |   |        | Other |   |             |  |  
|                                            | Shares                          |   |                  | Par        |   | Shares      |  |   | Par    |       |   | in          |  |   | Accumulated |  
|                                            | Outstanding                     |   |                  | Amount     |   | Outstanding |  |   | Amount |       |   | Capital     |  |   | Deficit     |  
|Balance, October 1, 2006                    | 4,545                           |   | $                | 10,075,320 |   | 38,856,000  |  | $ | 38,856 |       | $ | 10,172,370  |  | $ | (22,376,133 | )
|Issuance of common stock for cash           |                                 |   |                  |            |   | 418,000     |  |   | 418    |       |   | 215,322     |  |   |             |  
|Issuance of common stock as                 |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   |             |  
|compensation                                |                                 |   |                  |            |   | 40,000      |  |   | 40     |       |   | 28,579      |  |   |             |  
|Issuance of preferred stock for cash        | 60                              |   |                  | 149,949    |   |             |  |   |        |       |   |             |  |   |             |  
|Net loss                                    |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   | (355,078    | )
|Preferred dividends declared                |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   | (913,700    | )
|Foreign currency translation adjustment     |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   |             |  
|Balance, September 30, 2007                 | 4,605                           |   | $                | 10,225,269 |   | 39,314,000  |  | $ | 39,314 |       | $ | 10,416,271  |  | $ | (23,644,911 | )
|                                            |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   |             |  
|Balance, October 1, 2007                    | 4,605                           |   | $                | 10,225,269 |   | 39,314,000  |  | $ | 39,314 |       | $ | 10,416,271  |  | $ | (23,644,911 | )
|Convertible preferred stock issued to       |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   |             |  
|settle previously accrued cash dividends    | 459                             |   |                  | 1,060,086  |   |             |  |   |        |       |   |             |  |   |             |  
|Conversion of preferred stock               | (4,464                          | ) |                  | (9,782,157 | ) | 8,928,000   |  |   | 8,928  |       |   | 9,787,640   |  |   |             |  
|Preferred stock reclassified to liabilities | (600                            | ) |                  | (1,503,198 | ) |             |  |   |        |       |   |             |  |   |             |  
|Issuance of common stock                    |                                 |   |                  |            |   | 1,906,000   |  |   | 1,906  |       |   | 1,367,234   |  |   |             |  
|Net loss                                    |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   | (2,753,536  | )
|Preferred dividends declared                |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   | (148,324    | )
|Foreign currency translation adjustment     |                                 |   |                  |            |   |             |  |   |        |       |   |             |  |   |             |  
|Balance, September 30, 2008                 | -                               |   | $                | -          |   | 50,148,000  |  | $ | 50,148 |       | $ | 21,571,145  |  | $ | (26,546,771 | )

SeeAccompanyingNotes to theFinancialStatementsandAccountantsReport.

F-5

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China Health Care Corp 
Consolidated Statements of Cash Flows 
for the three and nine months ended September 30, 2008 and 2007
(Stated in US Dollars)

|                                                         |   | 3 months      |   |   | 3 months      |   |   | 9 months      |   |   | 9 months      |  
|-------------------------------------------------------- | - | ------------- | - | - | ------------- | - | - | ------------- | - | - | ------------- | -
|                                                         |   | ended         |   |   | ended         |   |   | ended         |   |   | ended         |  
|                                                         |   | September 30, |   |   | September 30, |   |   | September 30, |   |   | September 30, |  
|                                                         |   | 2008          |   |   | 2007          |   |   | 2008          |   |   | 2007          |  
|Cash Flow from Operating Activities                      |   |               |   |   |               |   |   |               |   |   |               |  
|Net income (loss)                                        | $ | (407,268      | ) | $ | (195,645      | ) | $ | (2,263,924    | ) | $ | (866,153      | )
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Adjustments to reconcile net loss to net
      cash used |   |               |   |   |               |   |   |               |   |   |               |  
|in operating activities:                                 |   |               |   |   |               |   |   |               |   |   |               |  
|Non-cash effect                                          |   | 7,867         |   |   | (485,790      | ) |   | (226,924      | ) |   | (400,103      | )
|Minority interest                                        |   | 139,467       |   |   | 2,031         |   |   | 72            |   |   | 24,327        |  
|Depreciation                                             |   | 71,070        |   |   | 94,400        |   |   | 211,283       |   |   | 283,201       |  
|Decrease/(Increase) in accounts
      receivable         |   | (36,016       | ) |   | 267,237       |   |   | (24,201       | ) |   | 3,120         |  
|Decrease/(Increase) in related party receivable          |   | -             |   |   | (6,092        | ) |   | 68,427        |   |   | 47,818        |  
|Decrease/(Increase) in prepaid
      expenses            |   | (287,474      | ) |   | (117,205      | ) |   | (217,716      | ) |   | (177,130      | )
|(Decrease)/Increase in accounts payables                 |   | 76,622        |   |   | 929,941       |   |   | 587,374       |   |   | 229,947       |  
|(Decrease)/Increase in accrued
      liabilities         |   | 85,252        |   |   | (1,445,941    | ) |   | (903,168      | ) |   | (1,059,594    | )
|(Decrease)/Increase in related party payable             |   | 427,938       |   |   | (369,895      | ) |   | 384,515       |   |   | 49,356        |  
|Cash provided by operating
      activities              |   | 77,458        |   |   | (1,326,959    | ) |   | (2,384,262    | ) |   | (1,865,211    | )
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Cash Flows from Investing Activities                     |   |               |   |   |               |   |   |               |   |   |               |  
|Deposits refund                                          |   | -             |   |   | -             |   |   | 77,432        |   |   | -             |  
|Purchase of intangible assets                            |   | -             |   |   | (1,004        | ) |   | -             |   |   | (418          | )
|Purchases of
      equipment                             |   | (2,819        | ) |   | 538,767       |   |   | (13,907       | ) |   | 795,717       |  
|Cash used in investing
      activities                  |   | (2,819        | ) |   | 537,763       |   |   | 63,525        |   |   | 795,299       |  
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Cash Flows from Financing Activities                     |   |               |   |   |               |   |   |               |   |   |               |  
|Proceeds from
      issuance of common stock             |   | -             |   |   | 68,899        |   |   | 940,439       |   |   | 99,839        |  
|Loan proceeds from related
      parties                 |   | -             |   |   | 5,239         |   |   | 2,510,157     |   |   | 772,777       |  
|Dividends paid                                           |   | -             |   |   | 564,753       |   |   | (1,360,689    | ) |   | 560,245       |  
|Cash Sourced/(Used) in Financing
      Activities        |   | -             |   |   | 638,891       |   |   | 2,089,907     |   |   | 1,432,861     |  
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Net Increase/(Decrease) in Cash & Cash                   |   |               |   |   |               |   |   |               |   |   |               |  
|Equivalents for the Period                               |   | 74,639        |   |   | (150,305      | ) |   | (230,830      | ) |   | 362,949       |  
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Effect of Currency Translation                           |   | 145,524       |   |   |               |   |   | 54,001        |   |   |               |  
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Cash & Cash Equivalents at Beginning of
      Period     |   | 9,404         |   |   | 556,702       |   |   | 406,396       |   |   | 43,448        |  
|                                                         |   |               |   |   |               |   |   |               |   |   |               |  
|Cash & Cash Equivalents at End of
      Period           | $ | 229,567       |   | $ | 406,396       |   | $ | 229,567       |   | $ | 406,396       |  

SeeAccompanyingNotes to theFinancialStatementsandAccountantsReport.

F-6

---

|1. | ORGANIZATION AND PRINCIPAL ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | History                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | China Health Care Corporation (the Company) was
      incorporated in the state of Wyoming on February 11, 2005 under the name
      of The Cavalier Group. On May 13, 2008, the Secretary of State of Wyoming
      effected a change of the Company to China Health Care Corporation, as
      approved by our shareholders. On January 20, 2008, the Company entered
      into a share exchange agreement with United Premier Medical Group Limited
      (UPMG) and its shareholders to acquire all of the outstanding common
      shares of UPMG. The transaction closed on July 24, 2008.                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The share exchange transaction has been accounted for as
      a recapitalization of UPMG where the Company (the legal acquirer) is
      considered the accounting acquiree and UPMG (the legal acquiree) is
      considered the accounting acquirer. As a result of this transaction, the
      Company is deemed to be a continuation of the business of UPMG.                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Accordingly, the financial data included in the
      accompanying consolidated financial statements for all periods prior to
      July 24, 2008 is that of the accounting acquirer (UPMG). The historical
      stockholders equity of the accounting acquirer prior to the share
      exchange has been retroactively restated as if the share exchange
      transaction occurred as of the beginning of the first period
    presented.                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | United Premier Medical Group Limited (UPMG) is a
      medical consultancy service provider in the Peoples Republic of China
      (PRC) providing services in the areas of hospital management and
      specialty medical consultancy. UPMGs primary focus is the health care
      needs of women and children.                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The business was founded in 2001, with UPMG as the
      ultimate holding company. UPMG was organized under the laws of Cayman
      Island on March 28, 2003, whereas UPMG International Limited (UPMGI) was
      incorporated in the British Virgin Islands on September 15, 2003. The
      intention is to build the Company using a holding company structure, with
      a top-level entity owing interests in operating entities. Separate
      operating entities are established in each geographic region. At times,
      the company owns less than 100% of an operating entity because this
      enables the use of resources and expertise of local partners.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | There were a number of restructuring events, which
      occurred over the past several years. These events would
include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | •                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-7

---

| | • | On May 7, 2004, PHL transferred 100% of its ownership in
      UPMG (Hong Kong) Limited (UPMG-HK) and UPMG (US) Limited (UPMG-US) to
      UPMGI and hence UPMG-HK and UPMG-US became the wholly-owned subsidiaries
      of UPMGI.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                        
| | • | In April 2007, UPMG-HK disposed of its 100% interest in Broad Prosper
      Limited.                                                                                                                                                   

Current Structure & Basis of
Presentation

The Company owned the following
subsidiaries at September 30, 2008:

No.
      **Company** Code
      Company Name
      Place of Incorporation
      Date of Incorporation
      Remark1
    UPMG
    United Premier Medical Group Limited
    Cayman Islands
    March 28, 2003
    Ultimate Holding Company2
    UPMGI
    UPMG International Limited
    British Virgin Islands
    September 15, 2003
    Subsidiary of UPMG3
    PME-HK
    Proactive Medicare Enterprise (Hong Kong)
      Limited
    Hong Kong
    March 17, 2000
    Wholly-owned subsidiary of UPMGI4
    PME-SZ
    Proactive Medicare (Shenzhen) Company Limited
    Hong Kong
    September 24, 2004
    Wholly-owned subsidiary of UPMGI5
    PME-CS
    Proactive Medicare (Changsha) Company Limited
    Hong Kong
    July 2, 2004
    Wholly-owned subsidiary of UPMGI6
    PME-XIA
    Proactive Medicare (Xiamen) Company Limited
    Hong Kong
    December 22, 2004
    Wholly-owned subsidiary of UPMGI7
    PME-NAN
    Proactive Medicare (Nanjing) Company Limited
    Hong Kong
    September 24, 2005
    Wholly-owned subsidiary of UPMGI8
    PME-HZ
    Proactive Medicare (Hangzhou) Company Limited
    Hong Kong
    August 25, 2005
    Wholly-owned subsidiary of UPMGI9
    PME-WX
    Proactive Medicare (Wuxi) Company Limited
    Hong Kong
    April 19, 2004
    Wholly-owned subsidiary of UPMGI10
    UPMG-SHA
    United Premier Medical Group (Shanghai) Limited
    Hong Kong
    February 25, 2004
    Wholly-owned subsidiary of UPMGI11
    PMS-HK
    Proactive Medicare Services (Hong Kong) Limited
    Hong Kong
    January 30, 2004
    Wholly-owned subsidiary of UPMGI12
    PME-BJ
    Proactive Medicare (Beijing) Company Limited
    Hong Kong
    March 27, 2000
    Wholly-owned subsidiary of UPMGI13
    UPMG-HK
    UPMG (Hong Kong) Limited
    British Virgin Islands
    August 8, 2003
    Wholly-owned subsidiary of UPMGI14
    UPMG-US
    UPMG (US) Limited
    British Virgin Islands
    November 23, 1993
    Wholly-owned subsidiary of UPMGI15
    HB-GZ
    Guangzhou Inno-Proactive Medicare Consultancy
      Ltd.
    PRC
    October 26, 2004
    Wholly-owned subsidiary of PMEHK16
    BK-SH
    Shanghai Proactive Medicare Health Education
      Center Limited
    PRC
    February 5, 2002
    90% of common shareholding held by PMEHK17
    UBK-SZ
    UPMG (Shenzhen) Limited
    PRC
    January 5, 2006
    Wholly-owned subsidiary of UPMG-US


F-8

---

No.
      Company Code
      Company Name
      Place of Incorporation
      Date of Incorporation
      Remark18
    UPMG-MU
    UPMG (Macau) Company Limited
    Macau
    September 29, 2006
    50% of common shareholding held by UPMG-HK19
    PHL
    Pro-Innovative Holdings Limited
    British Virgin Islands
    January 22, 2004
    51% of common shareholding held by UPMG20
    PML
    Pro-Innovative Medical Limited
    Hong Kong
    December 8, 2003
    Wholly-owned subsidiary of PHL21
    Ideamart
    Ideamart Holdings Limited
    British Virgin Islands
    May 28, 2003
    Wholly-owned subsidiary of PHL22
    UPMGIG
    UPMG International (Guangdong) Limited
    British Virgin Islands
    August 29, 2003
    62% of common shareholding held by PHL23
    UPMGGC
    UPMG (Guangdong) Company Limited
    Hong Kong
    August 14, 2002
    Wholly-owned subsidiary of UPMGIG


The consolidated financial statements
include the accounts of UPMG and its consolidated subsidiaries. UPMG wholly owns
UPMGI, which in turn directly holds 12 wholly-owned subsidiaries and indirectly
holds 4 subsidiaries including HB-GZ (100% in equity interest), BK-SH (90% in
equity interest), UBK-SZ (100% in equity interest) and UPMG-MU (50% in equity
interest). Besides, UPMG holds 51% in equity interest of PHL, which in turn,
wholly owns two direct subsidiaries and holds 62% in equity interest of UPMGIG,
which in turn wholly owns UPMGGC

F-9

---

Business

The Company provides consultancy
services to the VIP Maternity & Gynecological Centers (the VIP Birthing
Centers) in the PRC. These services are provided in conjunction with Johns
Hopkins International, LLC, a U.S. based healthcare provider, and based upon a
Consultancy Agreement with JHI. (The Company and JHI are currently disputing
certain material terms of the consultancy agreement  see below, and note 17).
The first VIP Birthing Center commenced operations in October 2002 at the
International Peace Maternity & Child Health Hospital in Shanghai. Over the
past six years, the Company has signed co-operative agreements with a number of
hospitals in Obstetrics / Gynecology (OB/GYN) across the PRC in cities
including Beijing, Shanghai, Guangzhou, Foshan, Wuxi, Xiamen, Changsha and
Hangzhou. In 2006, the Company signed a management agreement with the University
Hospital at Macau University of Science and Technology (UH-MUST) whereby the
Company provides general hospital management consultancy service.

The Company is currently under
contracts to provide consultancy services to a total of five VIP Birthing
Centers in the PRC and to manage a private hospital in Macau. These centers are
located in Wuxi (the Wuxi Center), Xiamen (the Xiamen Center), Changsha
(the Changsha Center), Foshan (the Foshan Center) and Hangzhou (the
Hangzhou Center). The Wuxi Center, the Xiamen Center and the hospital in Macau
are operated under our service contracts, and the Company receives a monthly fee
for our services. The Company has had difficulty enforcing these contracts, and
three of the VIP Birthing Centers have ceased complying with our payment terms
(the Changsha Center, the Foshan Center, and the Hangzhou Center). The Company
engaged lawyers to negotiate with the host hospitals for settlement. The Company
also had a VIP Birthing Center in Shanghai (the Shanghai Center). The Company
has not been paid by the Shanghai Center since January 2006 and it has taken
legal action against the host hospital for breach of contract.

The Company had an additional VIP
Birthing Center in Guangzhou (the Guangzhou Center) which ceased its operation
in March 2007. Our invested assets were sold back to its host hospital. Our net
receipt on this asset sale amounted to $1,296,944. For the abovementioned
centers that the Company has difficulty enforcing our contracts, it has not
accrued any revenue for the years ended September 30, 2007 and 2006.

Going Concern

The accompanying consolidated
financial statements have been prepared assuming that the Company will continue
as a going concern. The Company had a net loss of $2,263,924 and a negative cash
flow from operations of $2,384,262 for the period ended September 30, 2008 and a
working capital deficiency of $5,466,411 and a shareholders deficit of
$4,683,265 at September 30, 2008. These matters raise substantial doubt about
the Companys ability to continue as a going concern if the Company does not
secure new outside financing. The Company is currently and continues to make
efforts to procure outside financing to strengthen its financial position.

F-10

---

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
|-- | --------------------------------------------
|   |                                             
|   | (a)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (b)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (c)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (d)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (e)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (f)                                         
|   |                                             
|   |                                             

Software
    5 yearsCenter equipment
    5 yearsOffice equipment
    5 yearsFurniture and fixtures
    5 yearsLeasehold improvement
    5 - 10 yearsMachinery
    5 years


The cost and related accumulated
depreciation of assets sold or otherwise retired are eliminated from the
accounts and any gain or loss is included in the statement of income. The cost
of maintenance and repairs is charged to the statement of operations as
incurred, whereas significant renewals and betterments are

F-11

---

| |     | capitalized. See Note 6 Equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (g) | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Companys revenues are derived from its share of
      operating profit from VIP Birthing Centers at hospitals where it has
      invested in capital equipment, leasehold improvements, and human capital
      in the form of technical training for hospital staff. The Companys share
      of operating profit from the VIP Birthing Centers depends upon the
      contractual terms with each hospital. The typical share of operating
      profit ranges between 70% and 80% of the total operating profit of the VIP
      Birthing Center. Financial statements are provided by the hospitals each
      month to the Company for review, verification, and approval. When the
      financial statements of the VIP Birthing Centers have been approved, the
      Company recognizes revenue by recording its portion of the total operating
      profit to its financial statements. Revenues that have been both
      recognized in accordance to their respective contracts and financial
      statements provided by the hospitals can be reasonably expected to be
      collectible.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (h) | Cost of Revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Cost of revenue is primarily comprised of depreciation,
      wages, and licensing fees that must be paid to JHI for facilities with
      continuing operation. The Company believes that the depreciation of
      property and equipment matches the substantial initial investment
      equipment and leasehold improvements with revenues that are earned
      overtime. The Company charges wages paid to doctors and medical personnel
      who provide the initial training and hospital management expertise to the
      hospital when the VIP Birthing centers are initially setup and on a
      non-fixed on-going basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (i) | Selling Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Selling expenses are comprised of client entertainment,
      commissions and salaries for sales personnel, marketing, and travel and
      lodging expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (j) | General & Administrative Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | General and administrative expenses include outside
      consulting services, research & development, executive compensation,
      quality control, and general overhead such as finance and administrative
      staff, and depreciation expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (k) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company uses the accrual method of accounting to
      determine and report its taxable income for the year. The Company has
      implemented Statement of Financial Accounting Standards (SFAS) No. 109,
      Accounting for Income Taxes. The Company also adopted FIN 48, Accounting
      for Uncertainty in Tax Positions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Income tax liabilities computed according to the United
      States, Peoples Republic of China (PRC), Hong Kong SAR and Macau SAR laws
      are provided for the tax effects of transactions reported in the financial
      statements and consists of taxes currently due plus deferred taxes related
      primarily to differences between the basis of fixed assets and intangible
      assets for financial and tax reporting. The deferred tax assets and
      liabilities represent the future tax return consequences of those
      differences, which will be taxable or deductible when the assets and
      liabilities are recovered of settled. Deferred taxes also are recognized
      for operating losses that are available to offset future income taxes. A
      valuation allowance is created to evaluate deferred tax assets if it is
      more likely than not that these items will either expire before the
      Company is able to realize that tax benefit, or that future realization is
      uncertain.                                                                

F-12

---

| | (l) | Earnings (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company computers earnings per share (EPS) in
      accordance with Statement of Financial Accounting Standards No. 128,
      Earnings per Share (SFAS NO. 128), and SEC Staff Accounting Bulletin
      No. 98 (SAB 98). SFAS No. 128 requires companies with complex capital
      structures to present basic and diluted EPS. Basic EPS is measured as the
      income or loss available to common shareholders divided by the weighted
      average common shares outstanding for the period. Diluted EPS is similar
      to basic EPS but presents the dilutive effect on a per share basis of
      potential common shares (e.g., convertible securities, options, and
      warrants) as if they had been converted at the beginning of the periods
      presented, or issuance date, if later. Potential common shares that have
      an anti-dilutive effect (i.e., those that increase income per share or
      decrease loss per share) are excluded from the calculation of diluted
      EPS.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (m) | Other Comprehensive Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Comprehensive income is defined to include all changes in
      equity except those resulting from investments by owners and distributions
      to owners. Among other disclosures, all items that are required to be
      recognized under current accounting standards as components of
      comprehensive income are required to be reported in a financial statement
      that is presented with the same prominence as other financial statements.
      The Companys current component of other comprehensive income is the
      foreign currency translation adjustment.                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (n) | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company maintains its financial statements in the
      functional currency, which is the Renminbi (RMB). Monetary assets and
      liabilities denominated in currencies other than the functional currency
      are translated into the functional currency at rates of exchange
      prevailing at the balance sheet dates. Transactions denominated in
      currencies other than the functional currency are translated into the
      functional currency at the exchanges rates prevailing at the dates of the
      transaction. Exchange gains or losses arising from foreign currency
      transactions are included in the determination of net income for the
      respective periods.                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | For financial reporting purposes, the financial
      statements of the Company, which are prepared using the functional
      currency, have been translated into United States dollars. Assets and
      liabilities are translated at the exchange rates at the balance sheet
      dates and revenue and expenses are translated at the average exchange
      rates and stockholders equity is translated at historical exchange rates.
      Translation adjustments are not included in determining net income but are
      included in foreign exchange adjustment to other comprehensive income, a
      component of stockholders equity.                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The accompanying consolidated financial statements are
      presented in United States dollars. The functional currency of the Company
      is Hong Kong dollars (HK$). Equity accounts of the consolidated
      financial statements are translated into United States dollars from HK$ at
      their historical exchange rates when the capital transactions occurred.
      Assets and liabilities are translated at the exchange rates as of balance
      sheet date. Income and expenditures are translated at the average exchange
      rate of the year. Translation adjustments are not included in determining
      net income but are included in foreign currency translation adjustment in
      other comprehensive income, a component of stockholders
  equity.                                                                                                                                                                                                                                       

September 30,
    
    
      December 31,
    
    
      September 30,2008
    
    
      2007
    
    
      2007HKD-USD Year End Rate
    
      7.77010
    
    
      7.8049
    
    
      7.8172HKD-USD Average Rate
    
      7.79838
    
    
      7.7769
    
    
      7.8022RMB-USD Year End Rate
    
      6.85510
    
    
      7.3141
    
    
      7.5176RMB-USD Average Rate
    
      6.99886
    
    
      7.4435
    
    
      7.6758


F-13

---

| | (o) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | In March 2008, the FASB issued SFAS No. 161, "Disclosures
      about Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative
      instruments and related hedged items accounted for under SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133"). SFAS 161 requires entities to provide greater transparency about
      (a) how and why an entity uses derivative instruments, (b) how derivative
      instruments and related hedged items are accounted for under SFAS 133 and
      its related interpretations, and (c) how derivative instruments and
      related hedged items affect an entity's financial position, results of
      operations and cash flows. SFAS 161 is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15,
      2008.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | In May 2008, the FASB issued SFAS No. 162, "The Hierarchy
      of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162
      identifies the sources of accounting principles and the framework for
      selecting the principles used in the preparation of financial statements
      of nongovernmental entities that are presented in conformity with
      generally accepted accounting principles (the GAAP hierarchy). Statement
      162 will become effective 60 days following the SEC's approval of the
      Public Company Accounting Oversight Board amendments to AU Section 411,
      "The Meaning of Present Fairly in Conformity With Generally Accepted
      Accounting Principles."                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | In May 2008, the FASB issued FSP Accounting Principles
      Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May
      Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"
      ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible
      debt instruments that may be settled in cash (or other assets) on
      conversion to separately account for the liability (debt) and equity
      (conversion option) components of the instrument in a manner that reflects
      the issuer's non- convertible debt borrowing rate. FSP APB 14-1 is
      effective for fiscal years beginning after December 15, 2008 on a
      retroactive basis.                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | In September 2008, FASB issued FSP No. 133-1 and FIN
      45-4, Disclosures about Credit Derivatives and Certain Guarantees, an
      amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and
      Clarification of the Effective Date of FASB Statement No. 161. This FSP is
      intended to improve disclosures about credit derivatives by requiring more
      information about the potential adverse effects of changes in credit risk
      on the financial position, financial performance, and cash flows of the
      sellers of credit derivatives. The provisions of the FSP that amend
      Statement 133 and FIN 45 are effective for reporting periods (annual or
      interim) ending after November 15, 2008.                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The Company is currently evaluating the potential impact,
      if any, of the adoption of the above recent accounting pronouncements on
      its consolidated results of operations and financial
  condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-14

---

|3. | ACCOUNTS RECEIVABLE
|-- | -------------------

At
    
    
    AtSeptember 30,
    
    
    September 30,2008
    
    
    2007Total Accounts
      Receivable-Trade
    $
    113,106
    
    $
    54,250Less: Allowance for Bad Debt
    
    -
    
    
    -113,106
    
    
    54,250Allowance for Bad
      DebtsBeginning Balance
    
    -
    
    
    -Allowance Provided
    
    -
    
    
    -Less:Bad Debt Written
      Off
    
    -
    
    
    -Ending Balance
    $
    -
    
    $
    -


|4. | RELATED PARTY RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Amounts due from directors and shareholders had both been
      repaid in their entirety before September 30, 2008. The balances at
      September 30, 2007, of $32,214, and $36,213, owed by the directors and
      shareholders, respectively, were set-off against payables owed to related
      parties via duly endorsed netting agreement. The balances that were
      previously owed to Company by the Directors and Shareholders did not
      affect the Companys result of operations. See Note 8  Related Party
      Payables.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5. | PREPAID EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The prepaid expenses at September 30, 2008 and 2007 are
      shown in the following table: -                                                                                                                                                                                                                                                                                                                                                                                                                                                    

At
    
    
    AtSeptember 30,
    
    
    September 30,2008
    
    
    2007Professional and legal
      expenses
    $
    229,675
    
    $
    151,217Purchases of baby beds
    
    74,689
    
    
    65,924Various miscellaneous
    
    15,461
    
    
    20,840Hospital capital injection
    
    58,439
    
    
    -$
    378,264
    
    $
    237,981


F-15

---

|6. | PROPERTY AND EQUIPMENT                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------
|   |                                                                                                             
|   | Property and equipment, which are stated at cost less
      depreciation, were comprised of the following:
-

At
    
    
    AtSeptember 30,
    
    
    September 30,2008
    
    
    2007Category of AssetFurniture & fixtures
    $
    492,631
    
    $
    59,011Office equipment
    
    8,738
    
    
    505,172Computer software
    
    42,471
    
    
    42,490Leasehold improvement
    
    260,513
    
    
    260,634Center equipment
    
    925,468
    
    
    -Machinery
    
    -
    
    
    848,6061,729,821
    
    
    1,715,913Less:Accumulated DepreciationFurniture & fixtures
    
    (214,668
    )
    
    (10,853
    )Office equipment
    
    (1,503
    )
    
    (181,270
    )Computer software
    
    (18,663
    )
    
    (10,266
    )Leasehold improvement
    
    (100,678
    )
    
    (74,215
    )Center equipment
    
    (538,499
    )
    
    -Machinery
    
    -
    
    
    (315,992
    )(874,011
    )
    
    (592,596
    )Equipment, net
    $
    855,810
    
    $
    1,123,317


|7. | GOODWILL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Goodwill amounting to $154,809 and $154,881 as of
      September 30, 2008 and 2007 is related to the acquisition of the minority
      interest of PME-WX, for which the companys subsidiary, UMPGI, purchased
      the remaining 20% of interest from other stockholder in 2004. Management
      annually reviews the carry value of goodwill using the sum of the
      undiscounted cash flows generated by PME-WX to determine if an impairment
      charge is necessary. The Company has determined no impairment to the
      goodwill as of date.

F-16

---

|8. | RELATED PARTY PAYABLES                                                              
|-- | ------------------------------------------------------------------------------------
|   |                                                                                     
|   | The following table presents the balances the Company
      owed to related parties.

| |                                                                  |   | At            |  |   | At            | 
| | ---------------------------------------------------------------- | - | ------------- |  | - | ------------- | 
| |                                                                  |   | September 30, |  |   | September 30, | 
| |                                                                  |   | 2008          |  |   | 2007          | 
| | Due to former Chief Executive Officer:
      Henry J. Macfarland | $ | -             |  | $ | -             | 
| | Due to Director: Robert Yao Wing Wong                            |   | 854,892       |  |   | -             | 
| | Due to Director: Yuen Yee Wong                                   |   | -             |  |   | 470,377       | 
| | Loan from Innotech                                               |   | 1,656,086     |  |   | -             | 
| |                                                                  | $ | 2,510,978     |  | $ | 470,377       | 

Due to Director

Payables owed to the Companys
directors are non- interest- bearing and, payable on demand. There is no impact
to the statement of operations as result of the payables to the directors.

Loan from Innotech

On June 20, 2007, Inno-Tech Holdings
Limited (Innotech), a shareholder of United Premier Medical Group Limited
(UPMG), loaned $772,777 (equivalent to HK$6,000,000) to UPMG for use as
working capital. The repayment date was originally June 22, 2008, but was
subsequently extended to December 22, 2008.

On January 10, 2008, Innotech loaned
$384,615 (HK$3,000,000) to UPMG with the original repayment date on January 9,
2009. On January 25, 2008, Innotech loaned another $512,820 (HK$4,000,000) to
UPMG with the original repayment date on January 24, 2009.These loan
repayment dates have been extended. During the period ended September 30, 2008
and 2007, the Company incurred interest expense of $46,237 and $21,439
respectively.

The following table summarizes the loan
from related party: -

AtSeptember 30,2008Loan principal amount
    $
    1,670,212Accrued interest payable
    
    65,713Repayment, net
    
    (93,360
    )Translation difference
    
    13,521Balance at September 30, 2008
    $
    1,656,086


On April 29, 2008, the loan from
related party was extended as below:

Date of Loan
    
    Loan Principal
    
    Loan Principal
    
    Original
    
    NewAgreement
    
    Amount (USD)
    
    Amount (HKFD)
    
    Repayment Date
    
    Repayment DateJune 20, 2007
    
    $ 772,777
    
    (HK$6,000,000)
    
    June 22, 2008
    
    December 22, 2008January 10, 2008
    
    384,615
    
    (HK$3,000,000)
    
    January 9, 2009
    
    July 9, 2009January 25, 2008
    
    512,820
    
    (HK$4,000,000)
    
    January 24, 2009
    
    July 24, 2009$
      1,670,212


F-17

---

|9. | ACCRUED LIABILITIES
|-- | -------------------

| |                                    |   | At            |  |   | At            | 
| | ---------------------------------- | - | ------------- |  | - | ------------- | 
| |                                    |   | September 30, |  |   | September 30, | 
| |                                    |   | 2008          |  |   | 2007          | 
| | Regular operating expenses         | $ | 467,708       |  | $ | 75,325        | 
| | JHI                                |   | -             |  |   | 550,000       | 
| | Aliceb Kramer                      |   | 200,059       |  |   | -             | 
| | Accrued interest for redemption of |   |               |  |   |               | 
| | Convertible Preferred Stock        |   | 30,064        |  |   | -             | 
| | Income taxes                       |   | 40,799        |  |   | -             | 
| | Business taxes                     |   | 14,684        |  |   | -             | 
| |                                    | $ | 753,314       |  | $ | 625,325       | 

PMEI was once in negotiation with JHI concerning the amount owed to JHI for services and the use of the JHI trademarks for the period June 2005 through March 2006.  JHI has invoiced a total of $550,000 for these services. As PMEI was dissolved in November 2007, the amount to be paid to JHI will ultimately be a liability of the Company, and the Company has accrued the amount of $550,000 as of September 30, 2007, and will subsequently be paid entirely  by the end of 2008.

The accrued interest of $30,064
reflects the cost of the redemption premium of the convertible preferred stock.
The premium which is 2% of the original purchase price of the shares, is based
on the 600 shares outstanding at September 30, 2008.

F-18

---

|10. | CONVERTIBLE PREFERRED STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | From June 30, 2005 to September 30, 2007, the UPMG
      entered into a continuous securities subscription agreement with private
      investors for the sale of UPMG Convertible Preferred Stock. UPMG issued a
      total of 4,605 shares of Convertible Preferred Stock at a subscription
      price of $2,500 per shares for aggregate net proceeds of $10,225,269,
      after accounting for issuance costs and professional fees. The shares bear
      an 8% per annum preferred dividend payable semi-annually. The terms of the
      subscription agreement call for a conversion ratio of one Convertible
      Preferred Stock to one common share of UPMG, which in turn can be
      exchanged for 2,000 shares of the Company. The shares of Convertible
      Preferred Stock have no voting rights. Under the subscription agreement,
      mandatory conversion of the shares would be triggered by UPMG listing its
      shares in a public market. Should no public listing occur within three
      years (subject to extension under certain conditions), the Convertible
      Preferred Stock would be mandatorily redeemable at a price of $2,500 per
      share plus a premium of 2%. The Company believes the conversion feature of
      the Convertible Preferred Stock is not a beneficial conversion feature. At
      the time of their issuance, the UPMG was not a publicly traded
      corporation.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | On December 4, 2007, the Board of Directors of the UPMG
      resolved and notified the holders of the Convertible Preferred Stock that
      UPMG intended to force conversion of all the shares into common shares
      because the Company was to subsequently undertake a reverse merger
      transaction, which would transform the company into a public
    company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | In December 2007, UPMG agreed to issue an additional 459
      of Convertible Preferred Stock in lieu of paying out dividends in cash,
      which UPMG had accrued under dividends payable. The additional 459 shares
      of Convertible Preferred Stock were equivalent to $1,060,086 of
      dividends.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | From February to September 30, 2008, 4,464 shares of
      Convertible Preferred Stock were converted to 4,464 shares of UPMG common
      stock. The outstanding number of shares of Convertible Preferred Stock at
      September 30, 2008 was 600. The converted shares were subsequently
      exchanged for shares in the Company pursuant to the share exchange
      agreement detailed Note 12. Since the Company accounted for the share
      exchange transaction as a recapitalization transaction, the equity of the
      Company has been retroactively restated to the first period presented. The
      shares that had been converted at September 30, 2008 have been included in
      the Companys common stock. The remaining 600 shares of convertible
      preferred stock at September 30, 2008 have been accounted for as a current
      liability because during the three months ended September 30, 2008, the
      Company re-examined the characteristics of the Convertible Preferred
      Stock. The Company concluded the mandatory redemption feature, liquidation
      preference to common stockholders, and cumulative dividends were
      characteristics akin to liabilities. The Company has booked the redemption
      premium as interest expenses for the period.                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The Company is currently in arbitration with the holders
      of the remaining 600 shares of Convertible Preferred Stock over the
      Companys intension to force conversion of their shares into common
      shares. The Company has retained counsel to represent it in
      arbitration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | The related outstanding dividends payable for the
      Convertible Preferred Stock at September 30, 2008, and September 30, 2007
      were $24,884 and $1,385,573, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-19

---

|11. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | In accordance with the relevant tax laws and regulations of Hong Kong, the corporate income tax rate applicable to the subsidiaries of the Company in Hong Kong is 17.5% of taxable income.  On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”), effective from January 1, 2008.  Under the New CIT Law, the corporate income tax rate applicable to the subsidiaries of the Company in the PRC starting from January 1, 2008 is 25%, replacing the previously applicable tax rate of 33%.  The New CIT Law has an impact on the deferred tax assets and liabilities of the Company.  Effects arising from the enforcement of New CIT law have been reflected into the accounts by applying the new tax rate.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|12. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | China Health Care Corporation appointed Mr. Siew Man Pang
      as Chief Executive Officer effective October 1, 2008. He replaced Mr. Jay
      Macfarland who will stay on as Senior Group Advisor. See the Form 8-K
      filed by the Company on October 10, 2008 for further details.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|13. | STOCK COMPENSATION EXPENSE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | During the nine months ended September 30, 2007, the UPMG
      issued 20 shares of its common stock as compensation. The 20 shares of
      UPMG were equivalent to 40,000 shares of the Companys common stock. The
      value of the common stock was $28,619, or $1,428 on per share basis of
      UPMG common stock or equivalent to $0.7155 per share of the Companys
      common stock. The valuation of these shares was determined by using the
      same price that other UPMG stockholders bought their common stock. As
      result of the lack of secondary market at time of issuance of UPMGs
      common stock as compensation, the Company believes that the use of a price
      that other investors had paid was a reasonable fair market
value.                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The company including any of its subsidiaries did not
      grant options or rights at any time to create any of such outstanding as
      of September 30, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-20

---

|14. | EARNINGS PER SHARE                                                       
|--- | -------------------------------------------------------------------------
|    |                                                                          
|    | Components of basic and diluted earnings per share were
      as follows:

| |                                           |   | 3 months      |   |   | 3 months      |   |   | 9 months      |   |   | 9 months      |  
| | ----------------------------------------- | - | ------------- | - | - | ------------- | - | - | ------------- | - | - | ------------- | -
| |                                           |   | ended         |   |   | ended         |   |   | ended         |   |   | ended         |  
| |                                           |   | September 30, |   |   | September 30, |   |   | September 30, |   |   | September 30, |  
| |                                           |   | 2008          |   |   | 2007          |   |   | 2008          |   |   | 2007          |  
| | Loss from continuing operations           | $ | (407,268      | ) | $ | (69,755       | ) | $ | (2,263,924    | ) | $ | (1,424,132    | )
| |                                           |   |               |   |   |               |   |   |               |   |   |               |  
| | Net income                                |   | (407,268      | ) |   | (69,755       | ) |   | (2,263,924    | ) |   | (183,171      | )
| | Preferred dividends                       |   | -             |   |   | (125,890      | ) |   | -             |   |   | (682,982      | )
| | Loss attributable to common stockholders  | $ | (407,268      | ) | $ | (195,645      | ) | $ | (2,263,924    | ) | $ | (866,153      | )
| |                                           |   |               |   |   |               |   |   |               |   |   |               |  
| | Original shares                           |   | 47,720,000    |   |   | 39,314,000    |   |   | 39,390,000    |   |   | 39,314,000    |  
| |  Addition to common stock from issuances |   | 285,217       |   |   | -             |   |   | 7,967,146     |   |   | -             |  
| | Basic weighted average shares outstanding |   | 48,005,217    |   |   | 39,314,000    |   |   | 47,357,146    |   |   | 39,314,000    |  
| |                                           |   |               |   |   |               |   |   |               |   |   |               |  
| | Dilutive Shares:                          |   |               |   |   |               |   |   |               |   |   |               |  
| |  Addition to common stock if preferred   |   |               |   |   |               |   |   |               |   |   |               |  
| | stock had been converted *                |   | -             |   |   | -             |   |   | -             |   |   | -             |  
| | Diluted Weighted Average Shares           |   |               |   |   |               |   |   |               |   |   |               |  
| | Outstanding:                              |   | 48,005,217    |   |   | 39,314,000    |   |   | 47,357,146    |   |   | 39,314,000    |  
| |                                           |   |               |   |   |               |   |   |               |   |   |               |  
| | Earnings (Loss) Per
      Share           |   |               |   |   |               |   |   |               |   |   |               |  
| |  basic                                   | $ | (0.0085       | ) | $ | (0.0050       | ) | $ | (0.0478       | ) | $ | (0.0220       | )
| |  diluted                                 | $ | (0.0085       | ) | $ | (0.0050       | ) | $ | (0.0478       | ) | $ | (0.0220       | )
| | Weighted average shares outstanding       |   |               |   |   |               |   |   |               |   |   |               |  
| |  basic                                   |   | 48,005,217    |   |   | 39,314,000    |   |   | 47,357,146    |   |   | 39,314,000    |  
| |  diluted                                 |   | 48,005,217    |   |   | 39,314,000    |   |   | 47,357,146    |   |   | 39,314,000    |  
| |                                           |   |               |   |   |               |   |   |               |   |   |               |  
| | Supplemental Data                         |   |               |   |   |               |   |   |               |   |   |               |  
| | Earnings (loss) per share from continuing |   |               |   |   |               |   |   |               |   |   |               |  
| | operations                                | $ | (0.0085       | ) | $ | (0.0050       | ) | $ | (0.0478       | ) | $ | (0.0536       | )

* If the preferred stock had been
converted it would have been antidilutive, accordingly there was no potentially
dilutive effect from them.

F-21

---

|15. | DISCONTINUED OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | The Company had a VIP Birthing Center in Guangzhou (the
      Guangzhou Center). The Company ceased operation of the Center in March
      2007. The invested assets were sold back to the hospital where the center
      had been located. The proceeds from the sale of this operation were
      $1,296,944. The Company has accounted for the disposition of the assets of
      discontinued operation in accordance with SFAS 144, Accounting for the
      Impairment or Disposal of Long-Lived Assets. A gain of $311,944 was
      recorded to the Companys statement of operations during the nine months
      ended September 30, 2007. See the following for a summary of its financial
      positions and results of operations.

| | Guangzhou VIP Birthing Center                 |   |               |  |   |               | 
| | --------------------------------------------- | - | ------------- |  | - | ------------- | 
| | Financial Position                            |   | At            |  |   | At            | 
| | At September 30, 2008, and September 30, 2007 |   | September 30, |  |   | September 30, | 
| | (Stated in US Dollars)                        |   | 2008          |  |   | 2007          | 
| |                                               |   | (unaudited)   |  |   |               | 
| | Current assets                                |   |               |  |   |               | 
| | Cash                                          | $ | -             |  | $ | -             | 
| | Account receivables                           |   | 10,939        |  |   | 45,594        | 
| | Total current assets                          |   | -             |  |   | 45,594        | 
| |                                               |   |               |  |   |               | 
| | Non-current assets                            |   |               |  |   |               | 
| | Property and equipment                        |   | -             |  |   | -             | 
| |                                               |   |               |  |   |               | 
| | Total assets                                  |   | 10,939        |  |   | 45,594        | 
| |                                               |   |               |  |   |               | 
| | Current liabilities                           |   |               |  |   |               | 
| | Accrued liabilities                           |   | 4,198         |  |   | 4,200         | 
| | Total current liabilities                     |   | 4,198         |  |   | 4,200         | 
| |                                               |   |               |  |   |               | 
| | Total liabilities                             |   | 4,198         |  |   | 4,200         | 
| |                                               |   |               |  |   |               | 
| |                                               |   |               |  |   |               | 
| | Net assets                                    |   | 6,741         |  |   | 41,394        | 

| | Guangzhou VIP Birthing Center                |   | 9 months      |   |   | 9 months      |  
| | -------------------------------------------- | - | ------------- | - | - | ------------- | -
| | Results of Operations                        |   | ended         |   |   | ended         |  
| | for the nine months ended September 30, 2008 |   | September 30, |   |   | September 30, |  
| | (Stated in US Dollars)                       |   | 2008          |   |   | 2007          |  
| |                                              |   |               |   |   |               |  
| | Revenue                                      | $ | -             |   | $ | -             |  
| | Cost of revenue                              |   | -             |   |   | 18,980        |  
| | Gross profit                                 |   | -             |   |   | (18,980       | )
| |                                              |   |               |   |   |               |  
| | Selling expenses                             |   | -             |   |   | -             |  
| | General and administrative expenses          |   | 2,677         |   |   | 888           |  
| | Total operating expenses                     |   | 2,677         |   |   | 888           |  
| |                                              |   |               |   |   |               |  
| | Gain on sale of assets                       |   | -             |   |   | 331,812       |  
| |                                              |   |               |   |   |               |  
| | Taxes                                        |   | -             |   |   | -             |  
| |                                              |   |               |   |   |               |  
| | Net income (loss)                            | $ | (2,677        | ) | $ | 311,944       |  

F-22

---

|16. | RISKS                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Doing Business in the PRC                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Companys operations are conducted in the Peoples
      Republic of China (the PRC). Accordingly, the Companys business,
      financial condition and results of operations may be influenced by the
      political, economic and legal environment in the PRC, and by the general
      state of the PRC economy.                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Concentrations                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | For the nine months ended September 30, 2008, the Company
      derived its revenue from three VIP Birthing Centers. Each VIP Birthing
      Center unto itself can be considered single customers, and, as such, by
      virtue of there were only three centers, there was a concentration of risk
      in the Companys revenues. The following provides a table of each centers
      contribution by amount and percentage for the nine months
  presented.

Percentage ContributionCenter
    
    
      Amount
    
    
      to
        Total RevenueXiamen
    
    $
      56,048
    
    
      14.23%Wuxi
    
    
      276,435
    
    
      70.15%Macau
    
    
      61,551
    
    
      15.62%$
      394,034
    
    
      100.00%


|17. | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | A. Legal proceeding against IPMCHH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Proactive Medicare Enterprise (HK) Limited, a subsidiary
      of UPMG, is a plaintiff of a legal proceeding regarding a civil claim
      against a hospital in the PRC namely, International Peace Maternity &
      Child Health Hospital of the China Welfare Institute (IPMCHH or the
      defendant) who refused to pay consultancy fees to PME-HK since April
      2005 which may aggregate to $2,890,000                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | On April 10, 2007, Proactive Medicare Enterprise (HK)
      Limited (PME-HK) brought a civil action to the Shanghai No. 1
      Intermediate Peoples Court (the Shanghai Court) in the PRC against
      IPMCCH for breach of contract. A statement of claim from PME-HK was sent
      to the Shanghai Court for acceptance of review. The proposed claims
      regarding this civil action included: (i) To order IPMCHH to honor the
      co-operative agreement signed between PME-HK and IPMCHH on February 2,
      2004; (ii) To order IPMCHH to pay the consultant fee amounted $2,890,000
      (equivalent to RMB22,677,123) in arrears owed to PME-HK, and (iii) IPMCHH
      shall bear the cost of this action.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | On April 12, 2007, the statement of claim was legally
      accepted and filed by the Shanghai Court (Notification of Acceptance:
      (2007) Hu Yi Zhong Min Wu (Shang) Chu Zi No. 93). On May 29, 2007, the
      first instance of the case was held to establish the case. On January 23,
      2008, the second instance of the case was held to further negotiate a
      mutually accepted settlement plan. Through the mediation of the Shanghai
      Court, PME-HK and IPMCHH, so far, have gone through several rounds of
      negotiation for a mutually agreed settlement amount in recent months but a
      final settlement amount has yet to be confirmed.                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The result of this claim cannot be predicted, and it is
      possible that the ultimate resolution of the matters, individually or in
      the aggregate, may have a material adverse effect on the Companys
      business (either in the near-term or in the long-term), financial
      position, results of operations, or cash flows. Though the management of
      the Company believes a portion of this claim may be recovered, the Company
      has reasonably estimated the uncertain portion and has eliminated their
      revenue contribution in 2007.                                                                                                                                                          

F-23

---

B. Contingent claims against other
three hospitals in the PRC

The Company has also engaged a law firm
in the PRC to negotiate with another two hospitals in the PRC, which are under
contract to pay the Company for the consultancy services provided to their
affiliated VIP Birthing Centers in Foshan and Changsha in the PRC. The proposed
claim in each case is about one million US dollars. The Company has gone through
several rounds of negotiation for an agreed settlement amount in recent months
and a final settlement amount has yet to be confirmed.

For the Hangzhou Center, the Company is
identifying a suitable PRC lawyer to negotiate with its host hospital for a
mutually accepted settlement plan.

C. Contingent relationship with JHI

The Company is currently in dispute
with JHI mainly on the fee structure, outstanding fee owing to JHI and use of
JHI brand in future, and we are actively negotiating with JHI for settlement.
As indicated in an email from JHI dated April 22, 2008, the Company believes
that JHI is willing to provide limited support depending on JHIs receiving
advance payment for any services requested. The Company also believes that JHI
is willing to proceed with settlement negotiations with the Company as long as
the Company commits to pay a lump sum of $300,000 as the settlement of
consulting services provided before. Given the positive attitude of JHI, the
Company believes the negotiation outcome would be positive and constructive. The
amount to be paid to JHI will ultimately be a liability of the Company, and the
Company has accrued the amount of $550,000 during the year ended September 30,
2006. This amount appears as Accrued Liabilities on the Companys balance sheet
at September 30, 2007 and 2006.

F-24

---

ITEM 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking
Statements

This quarterly report contains forward-looking statements as
that term is defined in section 27A of the United States Securities Act of 1933,
as amended, and section 21E of the United States Securities Exchange Act of
1934, as amended. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may", "should", "intends", "expects",
"plans", "anticipates", "believes", "estimates", "predicts", "potential", or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors" commencing on page 3 of this current report, which may cause our
or our industry's actual results, levels of activity or performance to be
materially different from any future results, levels of activity or performance
expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. Unless otherwise specified, all dollar amounts are
expressed in United States dollars.

As used in this quarterly report, the terms "we", "us" and
"our" refer to China Health Care Corporation and our subsidiaries, unless
otherwise indicated. All references to "common shares" refer to the common
shares in our capital stock.

Overview

The following discussion should be read in conjunction with our
financial statements and the related notes included herein. The following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this report, particularly in the section entitled Risk Factors.

Our financial statements are stated in United States Dollars
and are prepared in accordance with United States generally accepted accounting
principles.

We were incorporated in the State of Wyoming on February 11,
2005 as The Cavalier Group with a fiscal year end of May 31. Since our
incorporation, we had been in the business of the exploration and development of
a mineral property approximately 1,320 acres in size in north-eastern Ontario.
Because we were not successful in implementing our business plan, we considered
various alternatives to ensure the viability and solvency of our company.

On January 20, 2008, we entered into a share exchange agreement
with United Premier Medical Group Limited, a Cayman corporation, and the
shareholders of United Premier Medical Group Limited, a company engaged in the
provision of premium medical services in the Peoples Republic of China. The
share exchange agreement contemplated our company acquiring all of the issued
and outstanding common shares in the capital of United Premier Medical Group
Limited in exchange for the issuance by our company of 42,658,000 shares of our
common stock.

On July 24, 2008, we changed our fiscal year end from May 31 to
September 30.

On September 15, 2008, we change our fiscal year end from
September 30 to December 31. We intend to file a Form 10-K for our new fiscal
year ended December 31, 2008 on or before March 31, 2009.

1

---

On September 15, 2008, we engaged Samuel H. Wong & Co., LLP
as our principal independent accountant with the approval of our companys board
of directors. Accordingly we dismissed Cordovano and Honeck LLP on September 15,
2008.

On October 1, 2008, Mr. Henry J. Macfarland resigned as our
Chief Executive Officer. Mr. Macfarland will continue to act as our Senior Group
Advisor. As a result of Mr. Macfarlands resignation on October 1, 2008, we
appointed Mr. Siew Man Pang as our Chief Executive Officer.

As of the closing date of the share exchange agreement on July
24, 2008, we have contracts to provide consultancy services to a total of five
VIP Birthing Centers in the PRC and to manage a private hospital in Macau. These
centers are located in Wuxi (the Wuxi Center), Xiamen (the Xiamen Center),
Changsha (the Changsha Center), Foshan (the Foshan Center) and Hangzhou
(the Hangzhou Center).

Our future business will typically consist of three major
revenue drivers, namely, VIP Birthing Center, Satellite Health Center and
Specialty Hospital.

VIP Birthing Center is typically a hotel-style
integrated healthcare center consisting of 11 to 30 bedrooms. These centers are
specialized in providing premium obstetric and gynecologic services to
high-income locals and expatriates in the PRC. We emphasize home-feel facilities
and environment, professional clinical services, sophisticated clinical
indicators and reviews, high-end customer services, effective pain management
and infection control - all of them have attained the stringent U.S. quality
standards. More importantly, our customized and personalized services provide
much flexibility and allow our patients to choose their own specialty medical
services and surgery experts. To ensure service quality, safety and patient
privacy, our one-stop services is a continuous flow ranging from ultrasound
diagnosis, laboratory analysis to dispensary.

Satellite Health Centerprovides full scope of premium
outpatient services. Strategically, it is better than the VIP Birthing Centers
in the sense that we own the operating license of the clinic and hence has full
control of revenue received. Such business model can substantially increase the
flexibility in utilizing our resources in outpatient services. Besides, it will
play an important role in the overall network development of our specialty
hospitals by referring patients to specialty hospitals. At the initial stage, we
will target a ratio of 1 specialty hospital associated with 3 satellite health
centers.

Specialty Hospital Chain refers to a chain of medium
size hospitals in the PRC providing specialty healthcare services primarily for
women and children. For the coming years, we target to acquire a number of
hospitals, each having 30 to 40 bedrooms in size, and convert them into
specialty hospitals with outpatient services, inpatient services and minor
surgery services principally in the categories of Obstetrics, Gynecology,
Pediatrics, Urology and Infertility.

2

---

Results of Operations

Results of Operations for the Three-Month Periods Ended
September 30, 2008 as compared to the Three-Month Periods Ended September 30,
2007.

|                                                              |  | Three months ended |   |  | Increase (decrease) |  
|------------------------------------------------------------- |  | ------------------ | - |  | ------------------- | -
|                                                              |  | September 30,      |   |  |                     |  
|                                                              |  | 2008               |   |  | 2007                |  
|                                                              |  | ($)                |   |  | ($)                 |  
|                                                              |  |                    |   |  |                     |  
|Revenue                                                       |  | 177,813            |   |  | 108,854             |  
|                                                              |  |                    |   |  |                     |  
|Cost of revenue                                               |  | 21,158             |   |  | 33,782              |  
|                                                              |  |                    |   |  |                     |  
|Gross profit                                                  |  | 156,655            |   |  | 75,072              |  
|                                                              |  |                    |   |  |                     |  
|Other income (expenses)                                       |  | 69,559             |   |  | 357,865             |  
|                                                              |  |                    |   |  |                     |  
|Operating expenses                                            |  | 583,609            |   |  | 420,486             |  
|                                                              |  |                    |   |  |                     |  
|Depreciation                                                  |  | 34,448             |   |  | 58,393              |  
|                                                              |  |                    |   |  |                     |  
|Dividend for convertible preference shares                    |  | 0                  |   |  | 125,890             |  
|                                                              |  |                    |   |  |                     |  
|Provision for income tax                                      |  | (4,901             | ) |  | 20,341              |  
|                                                              |  |                    |   |  |                     |  
|Minority interests in net income (loss) of
      subsidiaries |  | (17,649            | ) |  | (2,031              | )
|                                                              |  |                    |   |  |                     |  
|Gain from discontinued operations                             |  | (2,677             | ) |  | (1,441              | )
|                                                              |  |                    |   |  |                     |  
|Net loss attributable to common shareholders                  |  | (407,268           | ) |  | (195,645            | )

Revenue

The Companys revenues are derived from its share of operating
profit from VIP Birthing Centers at hospitals where it has invested in capital
equipment, leasehold improvements, and human capital in the form of technical
training for hospital staff. The Companys share of operating profit from the
VIP Birthing Centers depends upon the contractual terms with each hospital. The
typical share of operating profit ranges between 70% and 80% of the total
operating profit of the VIP Birthing Center. Financial statements are provided
by the hospitals each month to the Company for review, verification, and
approval. When the financial statements of the VIP Birthing Centers have been
approved, the Company recognizes revenue by recording its portion of the total
operating profit to its financial statements. Revenues that have been both
recognized in accordance to their respective contracts and financial statements
provided by the hospitals can be reasonably expected to be collectible.

Revenue for the three-month period ended September 30, 2008 was
$177,183. Revenue for the three-month period ended September 30, 2007 was
$108,854. The increase in revenue of $68,959 for the three-month period ended
September 30, 2008 was primarily due to the over provision of revenue
contribution from the Changsha Center and the Wuxi Center in previous quarters
in 2007.

Cost of Revenue

Cost of revenue is primarily comprised of depreciation, wages,
and licensing fees that must be paid to JHI for facilities with continuing
operation. The Company believes that the depreciation of property and equipment

3

---

matches the substantial initial investment equipment and
leasehold improvements with revenues that are earned overtime. The Company
charges wages paid to doctors and medical personnel who provide the initial
training and hospital management expertise to the hospital when the VIP Birthing
centers are initially setup and on a non-fixed on-going basis. Cost of revenue
for the three-month period ended September 30, 2008 was $21,158 whilst cost of
revenue for the three-month period ended September 30, 2007 was $33,782.

Selling Expenses

Selling expenses are comprised of client entertainment,
commissions and salaries for sales personnel, marketing, and travel and lodging
expenses. There was no selling and marketing expenses for the three-month period
ended September 30, 2008. Selling and marketing expenses for the three-month
period ended September 30, 2007 was $26,866. The decrease in selling expenses of
$26,866 for the three-month period ended September 30, 2008 as compared to 2007
was primarily due to the reclassification of selling expenses to general and
administrative expenses in 2008.

General and Administrative Expenses

General and administrative expenses include outside consulting
services, research & development, executive compensation, quality control,
and general overhead such as finance and administrative staff, and depreciation
expense. General and administrative expenses for the three-month period ended
September 30, 2008 was $618,057. Administrative expenses for the three-month
period ended September 30, 2007 was $452,013. The increase in administrative
expenses of $166,044 for the three-month period ended September 30, 2008 as
compared to 2007 was primarily due to the increase in consultancy fees and
professional fees.

Depreciation

|             |   | 3-month
      Periods Ended Sep 30 |  |  | Increase
      / (Decrease) | 
|------------ | - | ---------------------------------- |  |  | --------------------------- | 
|             |   | 2008                               |  |  | 2007                        | 
|             |   |                                    |  |  |                             | 
|Depreciation | $ | 34,448                             |  |  | 58,393                      | 
|             |   |                                    |  |  |                             | 
|Total        | $ | 34,448                             |  |  | 58,393                      | 

Depreciation mainly represents the depreciation of center
medical equipment, office equipment, furniture and fixture, and leasehold
improvement. Depreciation for the three-month period ended September 30, 2008
was $34,448. Depreciation expenses for the three-month period ended September
30, 2007 was $58,393. The decrease in depreciation expense of $23,945 for the
three-month ended September 30, 2008 as compared to 2007 was primarily due to
the written off of equipment in some VIP Birthing Centers.

Dividend for Convertible Preference Shares

During the period from June 30, 2005 to March 10, 2007, we
issued a total of 4,605 Convertible Preference Shares (CPS) at a subscription
price of $2,500 per share to a number of investors. The CPS bear an annual
coupon rate of 8%, semi-annually in terms of either cash or the common shares of
UPMG, with a maturity period of 3 years, allowing for an extension of 1 year.
The CPS bear no voting right and each CPS will be converted to one common share
of UPMG upon its public listing. Subject to the public listing of UPMG, the
conversion is mandatory and must be completed 14 days before the public listing
of UPMG. The redemption price will be the subscription price plus a 2% premium.
We incurred dividend expense of $125,890 for the three-month period ended
September 30, 2007 and we did not incurred any dividend expenses for the
three-month period ended September 30, 2008. The decrease in dividend expense of
$125,890 for the three-month period ended September 30, 2008 was primarily due
to the conversion of some CPS to ordinary shares and we have stopped paying
dividends to CPS holders since December 2007.

4

---

Income Tax

The Company accounts for income tax using an asset and
liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either, expire before the Company
is able to realize their benefits, or future realization is uncertain. In
accordance with the relevant tax laws and regulations of Hong Kong, the
Corporate Income Tax (CIT) rate applicable to our subsidiaries in Hong Kong is
17.5% of taxable income. On March 16, 2007, the National Peoples Congress of
China approved the Corporate Income Tax Law of the Peoples Republic of China
(the new CIT Law), effective from January 1, 2008. Under the new CIT Law, the
corporate income tax rate applicable to our subsidiaries in the PRC starting
from January 1, 2008 will be 25%, replacing the currently applicable tax rate of
33%. We recorded income tax benefit amounted to $4,901 for the three-month
periods ended September 30, 2008 and income tax expense of $20,341 for the
three-month periods ended September 30, 2007. The increase in income tax expense
of $25,242 for the three-month period ended September 30, 2008 was primarily due
to over provision in previous quarters.

Minority Interest

Minority interest for the three-month period ended September
30, 2008 recorded a loss of $17,649 whereas minority interest for the
three-month period ended September 30, 2007 recorded a loss of $2,031. The
increase in minority interest of $15,618 for the three-month period ended
September 30, 2008 was primarily due to the absence of shared loss in the
Guangzhou Center

Net Loss Attributable to Common Shareholders

For the three-month period ended September 30, 2008, the
Company incurred a net loss attributable to common shareholders of $407,268. The
loss was primarily due to the increase in general and administrative expenses
incurred in the public listing process of the Company. For the three-month
period ended September 30, 2007, the Company incurred a loss of $195,645. The
loss was primarily due to the dividends paid to the convertible preference
shareholders.

Results of Operations for the Nine-Month Periods Ended
September 30, 2008 as compared to the Nine-Month Periods Ended September 30,
2007.

|                                           |  | Nine months ended September |  |  | Increase (decrease) | 
|------------------------------------------ |  | --------------------------- |  |  | ------------------- | 
|                                           |  | 2008                        |  |  | 2007                | 
|                                           |  | ($)                         |  |  | ($)                 | 
|                                           |  |                             |  |  |                     | 
|Revenue                                    |  | 389,325                     |  |  | 462,284             | 
|                                           |  |                             |  |  |                     | 
|Cost of revenue                            |  | 122,075                     |  |  | 131,239             | 
|                                           |  |                             |  |  |                     | 
|Gross profit                               |  | 267,250                     |  |  | 331,045             | 
|                                           |  |                             |  |  |                     | 
|Other income (expenses)                    |  | 1,066                       |  |  | 337,447             | 
|                                           |  |                             |  |  |                     | 
|Operating expenses                         |  | 2,407,839                   |  |  | 942,291             | 
|                                           |  |                             |  |  |                     | 
|Depreciation                               |  | 101,421                     |  |  | 175,180             | 
|                                           |  |                             |  |  |                     | 
|Dividend for convertible preference shares |  | -                           |  |  | 682,982             | 
|                                           |  |                             |  |  |                     | 
|Provision for income tax                   |  | 20,303                      |  |  | 20,516              | 

5

---

|Minority interests in net income (loss) of         subsidiaries |  | -          |   |  | (25,620  | ) |  | 25,620     |   |  | 100.00%  | 
|--------------------------------------------------------------- |  | ---------- | - |  | -------- | - |  | ---------- | - |  | -------- | 
|                                                                |  |            |   |  |          |   |  |            |   |  |          | 
|Gain from discontinued operations                               |  | (2,677     | ) |  | 311,944  |   |  | (314,621   | ) |  | -100.86% | 
|                                                                |  |            |   |  |          |   |  |            |   |  |          | 
|Net loss attributable to common
      shareholders              |  | (2,263,924 | ) |  | (866,153 | ) |  | (1,397,771 | ) |  | -161.38% | 

Revenue

The Companys revenues are derived from its share of operating
profit from VIP Birthing Centers at hospitals where it has invested in capital
equipment, leasehold improvements, and human capital in the form of technical
training for hospital staff. The Companys share of operating profit from the
VIP Birthing Centers depends upon the contractual terms with each hospital. The
typical share of operating profit ranges between 70% and 80% of the total
operating profit of the VIP Birthing Center. Financial statements are provided
by the hospitals each month to the Company for review, verification, and
approval. When the financial statements of the VIP Birthing Centers have been
approved, the Company recognizes revenue by recording its portion of the total
operating profit to its financial statements. Revenues that have been both
recognized in accordance to their respective contracts and financial statements
provided by the hospitals can be reasonably expected to be collectible.

Revenue for the nine-month period ended September 30, 2008 was
$389,325. Revenue for the nine-month period ended September 30, 2007 was
$462,325. The decrease in revenue of $72,959 for the nine-month period ended
September 30, 2008 was primarily due to the (i) absence of revenue contribution
from the Changsha Center, (ii) revised management fee of the Macau Center, and
(iii) absence of a non-recurrent income from trading of baby beds as incurred in
2007. The Changsha Center had ceased paying us service fee since June 2007 and
we agreed to revise the monthly service fee of the Macau Center from about
$12,820 (equivalent to HK$100,000) to about $5,128 (equivalent to HK$40,000)
effective from June 2007.

Cost of Revenue

Cost of revenue is primarily comprised of depreciation, wages,
and licensing fees that must be paid to JHI for facilities with continuing
operation. The Company believes that the depreciation of property and equipment
matches the substantial initial investment equipment and leasehold improvements
with revenues that are earned overtime. The Company charges wages paid to
doctors and medical personnel who provide the initial training and hospital
management expertise to the hospital when the VIP Birthing centers are initially
setup and on a non-fixed on-going basis. Cost of revenue for the nine-month
period ended September 30, 2008 was $122,075 whilst cost of revenue for the
nine-month period ended September 30, 2007 was $131,239.

Selling Expenses

Selling expenses are comprised of client entertainment,
commissions and salaries for sales personnel, marketing, and travel and lodging
expenses. Selling and marketing expenses for the nine-month period ended
September 30, 2008 was $79,623. Selling and marketing expenses for the
nine-month period ended September 30, 2007 was $123,704. The decrease in selling
expenses of $44,081 for the nine-month period ended September 30, 2008 as
compared to 2007 was primarily due to the decrease in travel expenses related to
business development.

General and Administrative Expenses

General and administrative expenses include outside consulting
services, research & development, executive compensation, quality control,
and general overhead such as finance and administrative staff, and depreciation
expense. General and administrative expenses for the nine-month period ended
September 30, 2008 was $2,429,637. Administrative expenses for the nine-month
period ended September 30, 2007 was $993,767. The increase in administrative
expenses of $1,435,870 for the nine-month period ended September 30, 2008 as
compared to 2007 was primarily due to the increase in consultancy fees and
professional fees incurred in the public listing process of the Company.

6

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|Depreciation |   |                                    |  |  |                             |  |  |         |   |  |                |  
|------------ | - | ---------------------------------- |  |  | --------------------------- |  |  | ------- | - |  | -------------- | -
|             |   | 9-month
      Periods Ended Sep 30 |  |  | Increase
      / (Decrease) | 
|             |   | 2008                               |  |  | 2007                        |  |  | Amount  |   |  | Percentage (%) |  
|             |   |                                    |  |  |                             |  |  |         |   |  |                |  
|Depreciation | $ | 101,421                            |  |  | 175,180                     |  |  | (73,759 | ) |  | (42.10%        | )
|             |   |                                    |  |  |                             |  |  |         |   |  |                |  
|Total        | $ | 101,421                            |  |  | 175,180                     |  |  | (73,759 | ) |  | (42.10%        | )

Depreciation mainly represents the depreciation of center
medical equipment, office equipment, furniture and fixture, and leasehold
improvement. Depreciation for the nine-month period ended September 30, 2008 was
$101,421. Depreciation expenses for the nine-month period ended September 30,
2007 was $175,180. The decrease in depreciation expense of $73,759 for the
nine-month ended September 30, 2008 as compared to 2007 was primarily due to the
written off of equipment in some VIP Birthing Centers.

Dividend for Convertible Preference Shares

During the period from June 30, 2005 to March 10, 2007, we
issued a total of 4,605 Convertible Preference Shares (CPS) at a subscription
price of $2,500 per share to a number of investors. The CPS bear an annual
coupon rate of 8%, semi-annually in terms of either cash or the common shares of
UPMG, with a maturity period of 3 years, allowing for an extension of 1 year.
The CPS bear no voting right and each CPS will be converted to one common share
of UPMG upon its public listing. Subject to the public listing of UPMG, the
conversion is mandatory and must be completed 14 days before the public listing
of UPMG. The redemption price will be the subscription price plus a 2% premium.
We incurred no dividend expense for the nine-month period ended September 30,
2008 and $682,982 for the nine-month period ended September 30, 2007. The
decrease in dividend expense of $682,982 for the nine-month period ended
September 30, 2008 was primarily due to the conversion of some CPS to ordinary
shares and we have stopped paying dividends to CPS holders since December 2007.

Income Tax

The Company accounts for income tax using an asset and
liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either, expire before the Company
is able to realize their benefits, or future realization is uncertain. In
accordance with the relevant tax laws and regulations of Hong Kong, the
Corporate Income Tax (CIT) rate applicable to our subsidiaries in Hong Kong is
17.5% of taxable income. On March 16, 2007, the National Peoples Congress of
China approved the Corporate Income Tax Law of the Peoples Republic of China
(the new CIT Law), effective from January 1, 2008. Under the new CIT Law, the
corporate income tax rate applicable to our subsidiaries in the PRC starting
from January 1, 2008 will be 25%, replacing the currently applicable tax rate of
33%. We recorded income tax expense amounted to $20,303 and $20,516 for the
nine-month periods ended September 30, 2008 and 2007 respectively. The decrease
in income tax expense of $213 for the nine-month period ended September 30, 2008
was primarily due to the decrease in business tax in 2008.

Minority Interest

There was no income or loss in minority interest for the
nine-month period ended September 30, 2008 whereas minority interest for the
nine-month period ended September 30, 2007 recorded a loss of $25,620. The
increase in minority interest of $25,620 for the nine-month period ended
September 30, 2008 was primarily due to the absence of shared loss in the
Guangzhou Center

Net Loss Attributable to Common Shareholders

For the nine-month period ended September 30, 2008, the Company
incurred a net loss attributable to common shareholders of $2,263,924. The loss
was primarily due to the decrease in revenue and the increase in general and
administrative expenses. For the nine-month period ended September 30, 2007, the
Company incurred a loss of $886,153. The loss was primarily due to the dividends
paid to the convertible preference shareholders.

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Liquidity and Capital Resources

As of September 30, 2008, our total assets were $1,742,495 and
our total liabilities were $6,202,485 and we had a working capital deficit of
$5,459,670. Our financial statements report a net loss of $407,268 for the
quarter ended September 30, 2008, and a net loss of $2,263,924 for the period
from inception to September 30, 2008.

During the nine-month period ended September 30, 2008, the
Company financed its operation mainly through cash generated from its operations
and the loans from directors of the Company. During the nine-month period ended
September 30, 2007, the Company funded its operations mainly through two aspects
1) cash generated from its operations, and 2) cash proceeds from issuance of
securities such as preferred stock. Cash from operations is only enough to fund
its onsite personnel. The sale of preferred stock has providing the funding for
the Companys investment in capital expenditures, and the cost of medical and
management expertise that are heavily involved in the early stages of building
out the VIP Birthing Centers and training of the personnel that staff those VIP
Birthing Centers.

The Company expects that with the expansion into new markets
and development of its business model, it can gain economies scale on its heavy
investment medical and hospital management experts. Related parties and
directors have also provided the working capital during the most recent
operating periods in order to maintain the business a going concern. The Company
is actively seeking external financing to strengthen its financial position.

As of the date of this report, the Company has not experienced
any difficulty in equity financing, and we have not experienced any liquidity
problems in settling our payables in the normal course of business.

The following table sets forth the summary of the Companys
cash flows for the periods indicated:

|                                                     |  | Three Months        |   |  | Nine Months         |  
|---------------------------------------------------- |  | ------------------- | - |  | ------------------- | -
|                                                     |  | Ended
      Sep 30, |   |  | Ended
      Sep 30, |  
|                                                     |  | 2008                |   |  | 2007                |  
|Net cash provided by (used in) operating activities  |  | 77,458              |   |  | (1,326,959          | )
|Net cash provided by (used in) investing activities  |  | (2,819              | ) |  | 537,763             |  
|Net cash provided by financing activities            |  | -                   |   |  | 638,891             |  
|Net increase (decrease) in cash and cash equivalents |  | 74,639              |   |  | (150,305            | )
|Cash and cash equivalents, beginning of year         |  | 9,404               |   |  | 556,702             |  
|Effect of exchange rate changes on cash and cash     |  |                     |   |  |                     |  
|equivalents                                          |  | 145,524             |   |  | -                   |  
|Cash and cash equivalents, at end of year            |  | 229,567             |   |  | 406,397             |  

Our cash requirement is mainly for daily working capital. As at
September 30, 2008, we had $229,567 in cash and cash equivalents and a working
capital deficiency of $5,459,670, compared to $406,397 in cash and cash
equivalents and a working capital deficiency of $2,136,950 as of September 30,
2007.

Cash Flows from Operating Activities

For the three months ended September 30, 2008, our operating
activities generated cash of $77,458. For the three months ended September,
2007, our operating activities used cash of $1,326,959. The increase in cash
generated in operating activities of $1,404,417 for the three months ended
September 30, 2008 was primarily due to the increase in accounts payable and
other payables.

For the nine months ended September 30, 2008, our operating
activities used cash of $2,384,262. For the nine months ended September 30,
2007, our operating activities used cash of $1,865,211. The increase in cash
used in operating activities of $519,051 for the nine months ended September 30,
2008 was primarily due to the absence of gain on disposal of assets and the
increase in accounts payable.

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Cash Flows from Investing Activities

For the three months ended September 30, 2008, our investing
activities used cash of $2,819. For the nine months ended September 30, 2007,
our investing activities generated cash of $537,763. The decrease in cash used
in investing activities of $541,586 for the nine months ended September, 2008
was primarily due to the absence of proceeds from disposal of assets.

For the nine months ended September 30, 2008, our investing
activities generated cash of $63,525. For the nine months ended September 30,
2007, our investing activities generated cash of $795,299. The decrease in cash
used in investing activities of $731,774 for the nine months ended September 30,
2008 was primarily due to the absence of proceeds from disposals of assets.

Cash Flows from Financing Activities

For the three months ended September 30, 2008, our financing
  activities did not generate any cash. For the three months ended September,
  2007, our financing activities used cash of $638,891. The decrease in cash generated
  in financing activities of $638,891 for the three months ended September, 2008
  was primarily due to the absence of financing activities.

For the nine months ended September 30, 2008, our financing activities
  generated cash of $2,089,907. For the nine months ended September 30, 2007,
  our financing activities used cash of $1,432,861. The increase in cash generated
  in financing activities of $657,046 for the nine months ended September 30,
  2008 was primarily due to the increase of proceeds from issuance of common stock
  and short-term loans. We do not expect any more cash payment or accrued payment
  for dividends in near term as the majority of the CPS has been converted. Innotech
  (a shareholder of UPMG) loaned $384,615 (equivalent to HK$3,000,000) and $512,820
  (equivalent to HK$4,000,000) to UPMG on January 10, 2008 and January 25, 2008
  respectively as the working capital of UPMG.

Capital Expenditures

During the nine months ended September 30, 2008, the Company
incurred capital expenditures of $13,907. The capital expenditure principally
consisted of medical equipment and facilities, office equipment and leasehold
improvement. During the nine months ended September 30, 2007, the Company did
not incur any capital expenditures. Depending the availability of equity
financing, over the next twelve months, we expect to spend about $5,000,000 on
capital expenditures, mainly for purchase of medical equipment, facilities and
operating licenses and center renovation in the future acquisition of specialty
hospitals, health centers and VIP birthing centers in the PRC.

Going Concern

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
has a net loss of $2,263,924 and a negative cash flow from operations of
$230,830 for the nine months period ended September 30, 2008 and a working
capital deficiency of $5,459,670, and a shareholders deficit of $4,683,265 at
September 30, 2008. These matters raise substantial doubt about the Companys
ability to continue as a going concern if the Company does not secure new
outside financing. The Company is currently and continues to make efforts to
procure outside financing to strengthen its financial position.

Off-Balance Sheet Arrangements

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

Contractual Obligations

As a smaller reporting company, we are not required to
provide tabular disclosure obligations.

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ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk

As a smaller reporting company, we are not required to
provide the information required by this Item.

ITEM 4T. Controls and Procedures

Managements Report on Disclosure Controls and
Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our chief executive
officer (who is acting as our principal executive officer) and our chief
financial officer (who is acting as our principal financial officer and
principle accounting officer) to allow for timely decisions regarding required
disclosure.

As of September 30, 2008, the end of our quarter covered by
this report, we carried out an evaluation, under the supervision and with the
participation of our chief executive officer (who is acting as our principal
executive officer) and our chief financial officer (who is acting as our
principal financial officer and principle accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer (who is acting
as our principal executive officer) and our chief financial officer (who is
acting as our principal financial officer and principle accounting officer)
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this quarterly report.

Managements Report on Internal Control over Financial
Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of control procedures. The objectives of internal control include
providing management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with managements authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over
financial reporting as of September 30, 2008. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Our management has concluded that, as of
September 30, 2008, our internal control over financial reporting is effective
in providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with US generally accepted accounting principles. Our management
reviewed the results of their assessment with our Board of Directors.

Inherent limitations on effectiveness of controls

Internal control over financial reporting has inherent
limitations which include but is not limited to the use of independent
professionals for advice and guidance, interpretation of existing and/or
changing rules and principles, segregation of management duties, scale of
organization, and personnel factors. Internal control over financial reporting
is a process which involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or
improper management override. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements on a
timely basis, however these inherent limitations are known features of the
financial reporting process and it is possible to design into the process
safeguards to reduce, though not eliminate, this risk. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

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Changes in Internal Control over Financial
Reporting

There have been no significant changes in our internal controls
over financial reporting that occurred during our quarter ended September 30,
2008 that have materially or are reasonably likely to materially affect, our
internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

Other than as disclosed below, we know of no material, existing
or pending legal proceedings against us, nor are we involved as a plaintiff in
any material proceeding or pending litigation. There are no proceedings in which
any of our directors, officers or affiliates, or any registered or beneficial
shareholder, is an adverse party or has a material interest adverse to our
company.

Proactive Medicare Enterprise (HK) Limited, a subsidiary of
UPMG, is a plaintiff of a legal proceeding regarding a civil claim against a
hospital in the PRC namely, International Peace Maternity & Child Health
Hospital of the China Welfare Institute (IPMCHH or the defendant) who
refused to pay consultancy fees to PME-HK since April 2005.

On April 10, 2007, Proactive Medicare Enterprise (HK) Limited
(PME-HK) brought a civil action to the Shanghai No. 1 Intermediate Peoples
Court (the Shanghai Court) in the PRC against IPMCCH for breach of contract. A
statement claim from PME-HK was sent to the Shanghai Court for acceptance of
review. The proposed claims regarding this civil action included: (i) To order
IPMCHH to honor the co-operative agreement signed between PME-HK and IPMCHH on
February 2, 2004; (ii) To order IPMCHH to pay the consultant fee amounted
$2,890,000 (equivalent to RMB22,677,123) in arrears owed to PME-HK, and (iii)
IPMCHH shall bear the cost of this action.

On April 12, 2007, the statement of claim was legally accepted
and filed by the Shanghai Court (Notification of Acceptance: (2007) Hu Yi Zhong
Min Wu (Shang) Chu Zi No. 93). On May 29, 2007, the first instance of the case
was held to establish the case. On January 23, 2008, the second instance of the
case was held to further negotiate a mutually accepted settlement plan. Through
the mediation of the Shanghai Court, PME-HK and IPMCHH, so far, have gone
through several rounds of negotiation for a mutually agreed settlement amount in
recent months but a final settlement amount has yet to be confirmed

We have also engaged a law firm in the PRC to negotiate with
another two hospitals in the PRC which are under contracts to pay us for the
consultancy services provided to their affiliated VIP Birthing Centers in Foshan
and Changsha in the PRC. The proposed claim in each case is about one million US
dollars. We have gone through several rounds of negotiation for an agreed
settlement amount in recent months and a final settlement amount has yet to be
confirmed. For the Hangzhou Center, we are identifying a suitable PRC lawyer to
negotiate with the host hospital for a mutually accepted settlement plan.

The results of these negotiations / claim cannot be predicted,
and it is possible that the ultimate resolution of these matters, individually
or in the aggregate, may have a material adverse effect on our business (either
in the near-term or in the long-term), financial position, results of
operations, or cash flows. Although our management believes a portion of our
investment in these affiliated VIP Birthing Centers may be recovered, we have
reasonably estimated the uncertain portion and have eliminated their revenue
contribution in 2007.

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ITEM 1A. Risk Factors

The following risk factors should be carefully considered in
evaluating our business because such factors may have a significant impact on
our business, operating results, liquidity and financial condition. As a result
of the risk factors set forth below, actual results could differ materially from
those projected in any forward-looking statements. Additional risks and
uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impact our business, operating results, liquidity and
financial condition. If any such risks occur, our business, operating results,
liquidity and financial condition could be materially affected in an adverse
manner. Under such circumstances, the trading price of our securities could
decline, and you may lose all or part of your investment.

Risks Related to our Business

We have a limited operating history, and it is difficult
to evaluate our financial performance and prospects. There is no assurance that
we will achieve profitability or that we will not discover problems with our
business model.

We have a limited operating history. As such, it is difficult
to evaluate our future prospects and performance, and therefore we cannot ensure
that we will operate profitably in the future.

We have limited funds available for operating expenses.
If we do not obtain funds when needed, we will have to cease our
operations.

Currently, we have limited operating capital. As of September
30, 2008, our cash available was approximately $229,567. In the foreseeable
future, we expect to incur significant expenses when developing our business. We
may be unable to locate sources of capital or may find that capital is not
available on terms that are acceptable to us to fund our additional expenses.
There is the possibility that we will run out of funds, and this may affect our
operations and thus our profitability. If we cannot obtain funds when needed, we
may have to cease our operations.

We depend on attracting and retaining qualified
employees, the failure of which could result in a material decline in our
revenues.

We are a provider of healthcare consultancy services. Our
revenues and future growth depend on our ability to attract and retain qualified
employees. This is especially crucial to our business, as these employees will
generate revenue by providing the services that are the staple product that we
offer. We may face difficulties in recruiting and retaining sufficient numbers
of qualified employees because the market may not have enough of such personnel.
In addition, we compete with other companies for qualified employees. If we are
unable to retain such employees, we could face a material decline in our
revenue.

We derive most of our revenue from treatment facilities
rested with our host hospitals that are located in the Peoples Republic of
China, which makes us particularly sensitive to regulatory and economic
conditions in those cities where our facilities are, or will be
located.

For the nine months period ended September 30, 2008, our
facilities rested with our host hospitals in the Peoples Republic of China, or
the PRC, accounted for most of our total revenue. If our treatment facilities
are adversely affected by changes in regulatory and economic conditions within
China, our revenue and profitability may decline.

We may have difficulty opening new medical facilities and
operating them profitably. We have limited experience in opening new treatment
facilities. If we are unable to execute our strategy, our growth may be
restrained and our operating results could be adversely affected.

Our growth strategy includes developing and opening new medical
facilities throughout the PRC, and, to date, we have limited experience in
opening new treatment facilities. Planning and opening new treatment facilities
can be complex and may be delayed, and, in some circumstances, prevented, by a
variety of forces, including local zoning and land use regulations, health
facility licensing, community opposition and other political issues. Healthcare
laws and other rules and regulations may also impede or increase the cost of
opening new facilities. If we are unable to open new treatment facilities on
time and on budget, our rate of growth and operating results may be adversely
affected.

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Even if we are able to open new treatment facilities, we may
not be able to staff them. In addition, there can be no assurance that, once
completed, new treatment facilities will be able to generate operating profits.
Developing new facilities involves significant upfront capital investment and
expense and, if we are unable to attract patients quickly and/or enter into
contracts or extend our existing contracts with third party payers for these
facilities, these facilities may not be profitable and our operating results
could be adversely affected.

If we fail to cultivate new or maintain established
relationships with patient referral sources, our revenue may
decline.

Our ability to grow or maintain our existing level of business
depends significantly on our ability to establish and maintain close working
relationships with patient referral sources. We may not be able to maintain our
existing referral source relationships or develop and maintain new relationships
in existing or new markets. If we lose existing relationships with our referral
sources, the number of patients we treat may decline, which may adversely affect
our revenue. If we fail to develop new referral relationships, our growth may be
restrained.

If we fail to implement our business strategy, our
business, financial condition and results of operations could be materially and
adversely affected.

Our future financial performance and success are dependent in
large part upon our ability to implement our business strategy successfully. We
may not be able to implement our business strategy successfully or achieve the
anticipated benefits of our business plan. If we are unable to do so, our
long-term growth and profitability may be adversely affected. Even if we are
able to implement some or all of the initiatives of our business plan
successfully, our operating results may not improve to the extent we anticipate,
or at all.

If we fail to use the brand of Johns Hopkins
International, financial conditions results of operations could be materially
and adversely affected.

Our current performance and success are dependent in certain
extent upon the educational and consulting services provided by Johns Hopkins
International, LLC. If we are unable to receive such services, our profitability
may be adversely affected and our operating results may not improve to the
extent we anticipate.

Our success depends on our ability to manage growth
effectively. If we do not manage growth effectively, we may not be able to
maintain profitability.

Even if we are successful in obtaining new business, failure to
manage our growth could adversely affect our financial condition. We may
experience extended periods of very rapid growth. If we are not able to manage
our growth effectively, our business and financial condition could materially
suffer. Our growth may significantly strain our managerial, operational and
financial resources and systems. To manage our growth effectively, we will have
to continue to implement and improve our operational, financial and management
controls, reporting systems and procedures. In addition, we must effectively
expand, train and manage our employees. We will be unable to manage our
businesses effectively if we are unable to alleviate the strain on resources
caused by growth in a timely and successful manner. We may not be able to manage
our growth and a failure to do so could have a material adverse effect on our
business.

If the PRC government finds that the agreements that
establish the structure for operating our business operations within the PRC do
not comply with PRC governmental regulations on foreign investment in the
medical industry, we could be subject to penalties. Such penalties may impact
our ability to maintain profitability.

If we or our operating subsidiaries or affiliates are found to
be in violation of any existing or future PRC laws or regulations, we could be
subject to severe penalties, including but not limited to: (i) revocation of our
business and operating licenses; (ii) discontinuing or restricting our
operations; (iii) imposition of conditions or requirements with which we may not
be able to comply; (iv) requirement that we restructure the relevant ownership
structure or operation; and (v) restriction or prohibition on our use of the
proceeds of our business operations to further finance our operations in the
PRC.

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We rely on contractual arrangements with PRC obstetric
and gynecologic hospitals, which may not be as effective in providing
operational control as direct ownership. If we cannot maintain these
arrangements, we may have to cease operations.

We rely on contractual arrangements with PRC obstetric and
gynecologic hospitals to operate our business. These contractual arrangements
may not be as effective in providing us with control over our operations as
direct ownership. Under the current contractual arrangements, if the PRC
obstetric and gynecologic hospitals fail to perform their respective obligations
under these contractual arrangements, we may have to incur substantial costs to
enforce such arrangements and rely on legal remedies available under PRC law,
which may not be effective to allow us to maintain our business operations.
Additionally, many of these contractual arrangements are governed by PRC law
and, accordingly, will be interpreted in accordance with PRC law, and any
disputes would be resolved according to PRC legal procedures. The legal
environment in the PRC is not as developed as in other jurisdictions, such as
the United States. As a result, uncertainties in the PRC legal system could
limit our ability to enforce these contractual arrangements. In the event we are
unable to enforce these contractual arrangements, we may not be able to exert
effective control over our operations, and our ability to conduct our business
may be negatively affected.

Contractual arrangements we have entered into among our
subsidiaries and affiliated entities may be subject to scrutiny by the PRC tax
authorities. Such scrutiny may lead to additional tax liability and fines, which
would hinder our ability to achieve or maintain profitability.

Risks Relating to the Peoples Republic of China

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

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

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

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

The PRC legal system is a civil law system based on written
statutes. Unlike common law systems, it is a system in which decided legal cases
have little precedential value. In 1979, the PRC government began to promulgate
a comprehensive system of laws and regulations governing economic matters in
general. The overall effect of legislation has been significantly enhanced
protections afforded to various forms of foreign investment in the PRC. However,
these laws, regulations and legal requirements change frequently, and their
interpretation and enforcement involve uncertainties. For example, we may have
to resort to administrative and court proceedings to enforce the

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legal protection that we enjoy either by law or contract.
However, because PRC administrative and court authorities have significant
discretion in interpreting and implementing statutory and contractual terms, it
may be more difficult to evaluate the outcome of administrative and court
proceedings and the level of legal protection we enjoy than in more developed
legal systems. In addition, such uncertainties, including the inability to
enforce our contracts, could materially and adversely affect our business and
operation. Also, intellectual property rights and confidentiality protections in
the PRC may not be as effective as in the United States or other countries.
Accordingly, we cannot predict the effect of future developments in the PRC
legal system, particularly with regard to the medical industry, including the
promulgation of new laws, changes to existing laws or the interpretation or
enforcement thereof, or the preemption of local regulations by national laws.
These uncertainties could limit the legal protections available to us.

U.S. investors may experience difficulties in attempting
to enforce judgments based upon U.S. federal securities laws against us and our
non-U.S. resident directors.

All of our operations and our assets are located outside the
United States and some of our directors and officer are foreign citizens. As a
result, it may be difficult or impossible for U.S. investors to enforce
judgments of U.S. courts for civil liabilities against any of our individual
directors or officers.

Risks Relating to Our Common Shares

Trading on the OTC Bulletin Board may be volatile and
sporadic, which could depress the market price of our common shares and make it
difficult for our shareholders to resell their shares.

Our common shares are quoted on the OTC Bulletin Board service.
Trading in shares quoted on the OTC Bulletin Board is often thin and
characterized by wide fluctuations in trading prices, due to many factors that
may have little to do with our operations or business prospects. This volatility
could depress the market price of our common shares for reasons unrelated to
operating performance. Moreover, the OTC Bulletin Board is not a stock exchange,
and trading of securities on the OTC Bulletin Board is often more sporadic than
the trading of securities listed on a quotation system like Nasdaq or a stock
exchange like Amex. Accordingly, shareholders may have difficulty reselling any
of the shares.

Our share is a penny stock. Trading of our share may be
restricted by the SECs penny stock regulations which may limit a shareholders
ability to buy and sell our shares.

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

FINRA sales practice requirements may also limit a
shareholders ability to buy and sell our share.

16

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In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the Financial Industry Regulatory Authority,
or FINRA, has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the FINRA believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to
recommend that their customers buy our common shares, which may limit your
ability to buy and sell our share.

Trends, Risks and Uncertainties

We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our common shares.

ITEM 2. Unregistered Sales of Equity Securities

None.

ITEM 3. Default Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

ITEM 5. Other Information

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-K

|Exhibit |                                                                                                                                                                                                                                                                                                                             
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                             
|(2)     | Plan of Purchase, Sale, Reorganization, Arrangement,
      Liquidation or Succession                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                             
|2.1     | Share Exchange Agreement dated January 20, 2008, among
      our company, United Premier Medical Group and the selling shareholders of
      United Premier Medical Group as set forth in the share exchange agreement
      (incorporated by reference from our Current Report on Form 8-K filed on
      January 28, 2008)
|        |                                                                                                                                                                                                                                                                                                                             
|(3)     | Articles of Incorporation and By-laws                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                             
|3.1     | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on July 29, 2005)                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                             
|3.2     | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 29, 2005)                                                                                                                                                                                                                

17

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|Exhibit |                                                                                                                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                
|(10)    | Material Contracts                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                
|10.1    | Option To Purchase And Royalty Agreement between The
      Cavalier Group and Larry Gervais of Timmins, Ontario, dated April 25, 2005
      to acquire a 100% interest in the Casa Claim Block, Porcupine Mining
      Division, Ontario.( incorporated by reference from our Registration
      Statement on Form SB-2 filed on July 29, 2005)
|        |                                                                                                                                                                                                                                                                                                                                                
|10.2    | Code Of Business Conduct & Ethics and Compliance
      Program (incorporated by reference from our Annual Report on Form 10-KSB
      filed on August 28, 2008)                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                
|10.3    | Educational and Consulting Services Agreement between JHI
      and PMEHK dated June 15, 2002. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                
|10.4    | Licensing Agreement between JHI and PMEHK dated June 15,
      2002. (incorporated by reference from our Current Report on Form 8-K filed
      on July 31, 2008)                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                
|10.5    | Novation and Assignment Agreement for Education and
      Consulting Services Agreement between PMEHK, PMEUS and JHI. (incorporated
      by reference from our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                
|10.6    | Novation and Assignment for Licensing Agreement between
      PMEHK, PMEUS and JHI dated April 11, 2003. (incorporated by reference from
      our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                
|10.7    | Amendment to Licensing Agreement between JHI and PMEUS
      dated August 8, 2003. (incorporated by reference from our Current Report
      on Form 8-K filed on July 31, 2008)                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                
|10.8    | Second Amendment to Licensing Agreement between JHI and
      PME dated June 10, 2004. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                
|10.9    | First Amendment to Educational And Consulting Services
      Agreement between JHI and PME dated June 10, 2004. (incorporated by
      reference from our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                
|10.10   | Description of Co-operative Agreement between IPMCHH and
      UPMG (U.S.) Limited dated March 31, 2005. (incorporated by reference from
      our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                
|10.11   | Description of Co-operative Agreement between IPMCHH and
      PMEHK dated February 2, 2004. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                
|10.12   | Description of Co-operative Agreement between IPMCHH and
      PMEHK dated March 21, 2003. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                
|10.13   | Description of Technical Exchange and Cooperative
      Agreement between Xiamen Maternity and Child Health Care Hospital and
      Proactive Medicare (Xiamen) Company Limited dated March 6, 2005.
      (incorporated by reference from our Current Report on Form 8-K filed on
      July 31, 2008)                                        
|        |                                                                                                                                                                                                                                                                                                                                                
|10.14   | Description of Co-operative Agreement between Jinan
      Maternity and China Care Hospital and Proactive Medicare Enterprise
      (Jinan) Limited dated February 5, 2004. (incorporated by reference from
      our Current Report on Form 8-K filed on July 31, 2008)                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                
|10.15   | Description of Co-operative Agreement between Beijing
      Obstetrics & Gynecology Hospital and Proactive Medicare (Beijing)
      Company Limited dated April 25, 2004. (incorporated by reference from our
      Current Report on Form 8-K filed on July 31, 2008)                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                
|10.16   | Co-operative Agreement between Foshan Maternal and
      Childrens Hospital and Proactive Medicare Services (Hong Kong) Limited
      dated February 27, 2004 (incorporated by reference from our Current Report
      on Form 8-K filed on July 31, 2008)                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                
|10.17   | Description of Supplemental Agreement to the Co-operative
      Agreement between Foshan Maternal and Childrens Hospital and Proactive
      Medicare Services (Hong Kong) Limited dated February 27, 2004
      (incorporated by reference from our Current Report on Form 8-K filed on
      July 31, 2008)                                 

18

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|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Description                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.18   | Description of Co-operative Agreement betweenThe Second
      Affiliated Hospital of Guangzhou Medical College and UPMG (Guangdong)
      Company Limited dated November 18, 2003. (incorporated by reference from
      our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.19   | Description of Co-operative Agreement between Changsha
      Maternity and Child Hospital and Proactive Medicare (Changsha) Company
      Limited dated July 7, 2004. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.20   | Supplemental Agreement to the Co-operative Agreement
      between Changsha Maternity and Child Hospital and Proactive Medicare
      (Changsha) Company Limited dated July 7, 2004. (incorporated by reference
      from our Current Report on Form 8-K filed on July 31, 2008)                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.21   | Description of Co-operative Agreement between Wuxi
      Maternity and Children Hospital and Proactive Medicare (Wuxi) Company
      Limited dated April 19, 2004. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.22   | Description of Supplemental Agreement to the Co-operative
      Agreement between Wuxi Maternity and Children Hospital and Proactive
      Medicare (Wuxi) Company Limited dated April 19, 2004. (incorporated by
      reference from our Current Report on Form 8-K filed on July 31, 2008)                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.23   | Technical Exchange and Co-operative Agreement between
      Hangzhou Tin Mu Shan Hospital Limited and Proactive Medicare (Hangzhou)
      Company Limited dated August 20, 2005. (incorporated by reference from our
      Current Report on Form 8-K filed on July 31, 2008)                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.24   | Description of Technical Exchange and Co-operative
      Agreement between Proactive Medicare (Jiangsu) Company Limited and Jiangsu
      Province Women and Children Hygiene and Health Center/the Auxiliary Ward
      of the Jiangsu Province Peoples Hospital dated September 29, 2005.
      (incorporated by reference from our Current Report on Form 8-K filed on
      July 31, 2008)
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.25   | Agreement between Data Pacific Medical Group Limited and
      UPMG (Hong Kong) Limited dated June 28, 2006. (incorporated by reference
      from our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.26   | Hospital Management, Hospital Services Development and
      Related Consulting Services Agreement between The University Hospital of
      Macau University of Science and Technology Foundation and UPMG (Macau)
      Limited dated October 1, 2006. (incorporated by reference from our Current
      Report on Form 8-K filed on July 31, 2008)                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.27   | Amendment Agreement to the Hospital Management, Hospital
      Services Development and Related Consulting Services Agreement between The
      University Hospital of Macau University of Science and Technology
      Foundation and UPMG (Macau) Limited dated June 27, 2007. (incorporated by
      reference from our Current Report on Form 8-K filed on July 31, 2008)                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.28   | Management Services Agreement between UPMG (Hong Kong)
      Limited and American-Sino Human Resources Consulting and Management
      (Shanghai) Ltd. Dated October 26, 2006. (incorporated by reference from
      our Current Report on Form 8-K filed on July 31, 2008)                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.29   | Services Agreement PMEHK and PMEUS dated March 28, 2004.
      (incorporated by reference from our C 8 fil d l 31 2008)                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|10.30   | Project Consultancy Agreement between PMEHK and PMEUS
      dated March 28, 2004. (incorporated by reference from our Current Report
      on Form 8-K filed on July 31, 2008)                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|(21)    | Subsidiaries of the Small Business Issuer                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|        | UPMG International Limited                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|        | Proactive Medicare Enterprise (Hong Kong) Limited                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|        | Proactive Medicare (Shenzhen) Company Limited                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|        | Proactive Medicare (Changsha) Company Limited                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                
|        | Proactive Medicare (Xiamen) Company Limited                                                                                                                                                                                                                                                                                                                                                    

19

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|Exhibit |                                                                  
|------- | -----------------------------------------------------------------
|No.     | Description                                                      
|        |                                                                  
|        | Proactive Medicare (Nanjing) Company
      Limited               
|        |                                                                  
|        | Proactive Medicare (Hangzhou)
      Company Limited              
|        |                                                                  
|        | Proactive Medicare (Wuxi) Company
      Limited                  
|        |                                                                  
|        | United Premier Medical Group (Shanghai)
      Limited            
|        |                                                                  
|        | Proactive Medicare Services (Hong
      Kong) Limited            
|        |                                                                  
|        | Proactive Medicare (Beijing) Company
      Limited               
|        |                                                                  
|        | UPMG (Hong Kong) Limited                                         
|        |                                                                  
|        | UPMG (US) Limited                                                
|        |                                                                  
|        | Guangzhou Inno-Proactive Medicare
      Consultancy Limited      
|        |                                                                  
|        | Shanghai Proactive Medicare Health
      Education Center Limited
|        |                                                                  
|        | UPMG (Shenzhen) Limited                                          
|        |                                                                  
|        | Broad Prosper Limited                                            
|        |                                                                  
|        | UPMG (Macau) Company Limited                                     
|        |                                                                  
|(31)    | Section 302 Certification                                        
|        |                                                                  
|31.1*   | Section 302 Certification
      of Siew Man Pang                 
|        |                                                                  
|31.2*   | Section 302 Certification
      of Edwin Chan                    
|        |                                                                  
|(32)    | Section 906 Certification                                        
|        |                                                                  
|32.1*   | Section 906 Certification
      of Siew Man Pang                 
|        |                                                                  
|32.2*   | Section 906 Certification
      of Edwin Chan                    

*filed herewith

20

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.



CHINA HEALTH CARE CORPORATION

By:  /s/ Siew Man
PangSiew Man Pang Chief Executive Officer Principal Executive
Officer Date: November 14, 2008.



By:  /s/ Edwin
ChanEdwin Chan Chief Financial Officer Principal Financial Officer
and Principal Accounting Officer Date: November 14, 2008.

21

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