UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  FORM 10-QSB

(Mark One)

/X/  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934.

     For the Period ended March 31, 2007 or

/_/  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

     For the transition period from ___________ to __________

                          Commission File No. 814-00063

                     CHINA BIOPHARMACEUTICALS HOLDINGS, INC.
                     ---------------------------------------
                 (Name of small business issuer in its charter)

            Delaware                                     13-2949462
 ------------------------------              ---------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

   Suite 602, China Life Tower
   No. 16, Chaowai Street
   Chaoyang District, Beijing
   China                                                   100020
   ----------------------------------------              ----------
   (Address of principal executive offices)              (Zip Code)

Issuer's telephone number: (86) 10 8525 1616

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

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $0.01

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes: |_| No: |X|

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Title of Each Class of                              Number of Shares Outstanding
Equity Securities                                   as of May 11, 2007
-----------------------------                       ----------------------------
Common Stock, $0.01 par value                         36,340,312


Transitional Small Business Disclosure Format:  Yes:  |_|    No:  |X|



<PAGE>





                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I -   FINANCIAL INFORMATION

  ITEM 1.  FINANCIAL STATEMENTS                                               1

  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS                                         29

  ITEM 3.  CONTROL AND PROCEDURES                                            33

PART II -  OTHER INFORMATION

  ITEM 1.  LEGAL PROCEEDINGS                                                 33

  ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                   33

  ITEM 6.  EXHIBITS                                                          33



      References in this Quarterly Report on Form 10-QSB to the "Company", "we",
"us" or "our" include China Biopharmaceuticals Holdings, Inc. and its
subsidiaries, unless the context requires otherwise.





<PAGE>
                        PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENT



            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2007

                                                                     March 31,
                                                                       2007
                                                                   ------------
                                                                    Unaudited
                                   ASSETS
CURRENT ASSETS:
   Cash                                                            $  2,484,059
   Accounts receivable, trade, net of allowance for doubtful
      accounts of $999,045                                            5,530,362
   Accounts receivable, related parties                                  92,219
   Other receivables                                                  3,093,034
   Other receivables - related parties                                2,628,454
   Advances to suppliers                                                919,402
   Prepaid expenses                                                      65,055
   Inventories                                                        7,941,033
   Loan to shareholders                                                  42,143
                                                                   ------------
      Total current assets                                           22,795,761
                                                                   ------------

PLANT AND EQUIPMENT, net                                             12,202,860
                                                                   ------------

OTHER ASSETS:
   Intangible asset, net                                             12,634,295
   Long term notes receivable                                           753,563
   Long term other receivables - related parties                        620,000
   Restricted cash                                                    1,029,766
   Other assets                                                          74,219
                                                                   ------------
      Total other assets                                             15,111,843
                                                                   ------------

         Total assets                                              $ 50,110,464
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                $  5,781,676
   Short-term loan - related parties                                    388,500
   Short-term loans                                                  17,003,750
   Other payables - related parties                                   2,823,613
   Customer deposits                                                  1,991,888
   Notes payable                                                      2,434,600
   Taxes payable                                                      1,221,942
   Other accrued liabilities                                            657,515
                                                                   ------------
      Total current liabilities                                      32,303,484

LONG TERM LIABILITIES                                                   162,799

      Total liabilities                                              32,466,283
                                                                   ------------

COMMITMENTS AND CONTINGENCIES                                                --
                                                                   ------------

MINORITY INTEREST                                                     4,574,194
                                                                   ------------

SHAREHOLDERS' EQUITY:
   Preferred stock, $0.01 par value, 10,000,000 shares
      authorized; 417,500 shares Issued and outstanding                   4,175
   Common stock, $0.01 par value, 200,000,000 shares
      authorized; 36,340,312 shares issued and outstanding              363,404
   Paid-in capital                                                   13,057,500
   Capital receivable                                                  (252,471)
   Deferred compensation                                                (18,000)
   Statutory reserves                                                 2,606,440
   Retained earnings (deficit)                                       (3,593,544)
   Accumulated other comprehensive income                               902,483
                                                                   ------------
      Total shareholders' equity                                     13,069,987
                                                                   ------------

         Total liabilities and shareholders' equity                $ 50,110,464
                                                                   ============

The accompanying notes are an integral part of this statement.

                                      - 1 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

      CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

<TABLE>
<CAPTION>
                                                                       2007            2006
                                                                   ------------   -------------
                                                                    (Unaudited)    (Unaudited)
<S>                                                                <C>            <C>
REVENUES                                                           $  7,532,122   $   5,549,923

COST OF GOODS SOLD                                                    5,523,280       4,116,154
                                                                   ------------   -------------

GROSS PROFIT                                                          2,008,842       1,433,769
                                                                   ------------   -------------
OPERATING EXPENSES
   Research and development                                              43,163         258,075
   Selling, general and administrative                                1,325,315         713,972
                                                                   ------------   -------------
      Total Operating Expenses                                        1,368,478         972,047
                                                                   ------------   -------------

INCOME FROM OPERATIONS                                                  640,364         461,722
                                                                   ------------   -------------

OTHER INCOME (EXPENSE)
   Interest income (expense), net                                      (363,357)        (46,742)
   Other income (expense), net                                           (2,674)        (17,406)
                                                                   ------------   -------------
      Total Other Income (expense), net                                (366,031)        (64,148)
                                                                   ------------   -------------

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST                        274,333         397,574

PROVISION FOR INCOME TAXES                                                9,606              --
                                                                   ------------   -------------

INCOME BEFORE MINORITY INTEREST                                         264,727         397,574

MINORITY INTEREST                                                       352,995         246,298
                                                                   ------------   -------------

INCOME (LOSS) FROM CONTINUING OPERATIONS                                (88,268)        151,276

INCOME FROM DISCONTINUED OPERATIONS, net of tax                              --          42,716
                                                                   ------------   -------------
NET  (LOSS) INCOME                                                      (88,268)        193,992

OTHER COMPREHENSIVE INCOME:
   Foreign currency translation adjustment                               34,954         117,967
                                                                   ------------   -------------

COMPREHENSIVE (LOSS) INCOME                                        $    (53,314)  $     311,959
                                                                   ============   =============
INCOME (LOSS) PER SHARE OF COMMON STOCK
BASIC
   CONTINUING OPERATIONS                                           $     (0.002)  $       0.005

   DISCONTINUED OPERATIONS                                                   --           0.001
                                                                   ------------   -------------

   NET (LOSS) INCOME                                               $     (0.002)  $       0.006
                                                                   ============   =============
DILUTED
   CONTINUING OPERATIONS                                           $     (0.002)  $       0.005

   DISCONTINUED OPERATIONS                                                   --           0.001
                                                                   ------------   -------------

   NET (LOSS) INCOME                                               $     (0.002)  $       0.006
                                                                   ============   =============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC               36,027,615      30,267,875
                                                                   ============   =============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED             36,719,560      31,420,375
                                                                   ============   =============
</TABLE>

The accompanying notes are an integral part of this statement.

                                     - 2 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

<TABLE>
<CAPTION>
                                                              Preferred Stock           Common Stock
                                                           ---------------------  -----------------------     Paid-in     Capital
                                                             Shares    Par Value     Shares    Par Value      Capital    Receivable
                                                           ----------  ---------  -----------  ----------  ------------  ----------
<S>                                                        <C>         <C>        <C>          <C>         <C>           <C>
BALANCE, December 31, 2005                                  1,152,500  $  11,525   28,616,716  $  286,167  $  3,572,207  $ (252,471)

   Common shares issued for cash                                                    7,831,863      78,319     6,905,090
   Common shares issued for note conversion                                           399,820       3,998       421,002
   Net income
   Statutory reserves
   Dividends paid to preferred stock shareholders
   Foreign currency translation adjustments
                                                           ----------  ---------  -----------  ----------  ------------  ----------
BALANCE, March 31, 2006 (Unaudited)                         1,152,500  $  11,525   36,848,399  $  368,484  $ 10,898,299  $ (252,471)

   Common shares issued for cash                                                                                (60,000)
   Common shares issued for services                                                   99,805         998        56,502
   Common shares issued for preferred stock conversion       (312,500)    (3,125)     443,277       4,433        (1,308)
   Common shares returned from Hengyi due to divestiture                           (1,200,000)    (12,000)     (520,026)
   Deferred compensation
   Preferred shares issued for cash                            90,000        900                                 89,100
   Warrants issued for Enshi Acquisition                                                                      2,640,000
   Common shares cancelled                                                           (604,741)     (6,047)        6,047
   Preferred stock dividends                                                                                    (48,703)
   Net loss
   Statutory reserves
   Foreign currency translation adjustments
                                                           ----------  ---------  -----------  ----------  ------------  ----------
BALANCE, December 31, 2006                                    930,000  $   9,300   35,586,740  $  355,868  $ 13,059,911  $ (252,471)

   Common shares issued for preferred stock conversion       (512,500)    (5,125)     753,572       7,536        (2,411)         --
   Net loss
   Statutory reserves
   Foreign currency translation adjustments
                                                           ----------  ---------  -----------  ----------  ------------  ----------
BALANCE, March 31, 2007 (Unaudited)                           417,500  $   4,175   36,340,312  $  363,404  $ 13,057,500  $ (252,471)
                                                           ==========  =========  ===========  ==========  ============  ==========


<CAPTION>
                                                                             Retained Earnings
                                                                         -------------------------      Other
                                                             Deferred                   Statutory   Comprehensive
                                                           Compensation  Unrestricted    Reserves   Income (Loss)     Totals
                                                           ------------  ------------  -----------  -------------  -------------
<S>                                                        <C>           <C>           <C>          <C>            <C>
BALANCE, December 31, 2005                                 $    (24,000) $  1,074,584  $   444,623  $     156,089  $   5,268,724

   Common shares issued for cash                                                                                       6,983,409
   Common shares issued for note conversion                                                                              425,000
   Net income                                                                 193,992                                    193,992
   Statutory reserves                                                        (104,584)     104,271                          (313)
   Dividends paid to preferred stock shareholders                              (8,040)                                    (8,040)
   Foreign currency translation adjustments                                                               117,967        117,967
                                                           ------------  ------------  -----------  -------------  -------------
BALANCE, March 31, 2006 (Unaudited)                        $    (24,000) $  1,155,952  $   548,894  $     274,056  $  12,980,739

   Common shares issued for cash                                                                                         (60,000)
   Common shares issued for services                                                                                      57,500
   Common shares issued for preferred stock conversion                                                                        --
   Common shares returned from Hengyi due to divestiture                                                                (532,026)
   Deferred compensation                                          6,000                                                    6,000
   Preferred shares issued for cash                                                                                       90,000
   Warrants issued for Enshi Acquisition                                                                               2,640,000
   Common shares cancelled                                                                                                    --
   Preferred stock dividends                                                                                             (48,703)
   Net loss                                                                (2,603,995)                                (2,603,995)
   Statutory reserves                                                      (1,975,448)   1,975,761                           313
   Foreign currency translation adjustments                                                               593,473        593,473
                                                           ------------  ------------  -----------  -------------  -------------
BALANCE, December 31, 2006                                 $    (18,000) $ (3,423,491) $ 2,524,655  $     867,529  $  13,123,301

   Common shares issued for preferred stock conversion                                                                        --
   Net loss                                                                   (88,268)                                   (88,268)
   Statutory reserves                                                         (81,785)      81,785                            --
   Foreign currency translation adjustments                                                                34,954         34,954
                                                           ------------  ------------  -----------  -------------  -------------
BALANCE, March 31, 2007 (Unaudited)                        $    (18,000) $ (3,593,544) $ 2,606,440  $     902,483  $  13,069,987
                                                           ============  ============  ===========  =============  =============
</TABLE>

The accompanying notes are an integral part of this statement.

                                      -4-

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

<TABLE>
<CAPTION>
                                                                                             2007          2006
                                                                                         -----------   -----------
                                                                                          Unaudited     Unaudited
<S>                                                                                      <C>           <C>
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
   Net (loss) income                                                                     $   (88,268)  $   193,992
   Net income from discontinued operations                                                        --        42,716
                                                                                         -----------   -----------
   Net income (loss) from continuing operations                                              (88,268)      151,276
   Adjustments to reconcile net income (loss) from continuing
     operations to cash provided by (used in) continuing operating activities:
      Depreciation and amortization                                                          269,800       157,465
      Bad debt expense                                                                        78,444            --
      Minority interest                                                                      516,243       246,563
   Change in operating assets and liabilities:
     (Increase) decrease in assets:
      Accounts receivable, trade                                                            (754,414)   (1,202,777)
      Accounts receivable, related parties                                                   (38,311)           --
      Other receivables and prepayments                                                     (429,445)     (188,547)
      Other receivables - related parties                                                   (726,401)     (161,670)
      Long term other receivables - related parties                                               --    (1,246,576)
      Advances to suppliers                                                                 (104,711)      120,953
      Other assets                                                                            14,113            --
      Inventories                                                                           (905,842)     (826,836)

   Increase (decrease) in liabilities:
      Accounts payable                                                                     1,140,671       (15,384)
      Accounts payable - related parties                                                          --     2,003,789
      Other payables and accrued liabilities                                                (355,789)      (34,525)
      Other payables - related parties                                                        43,795     1,546,187
      Customer deposits                                                                    1,009,050       249,679
      Taxes payable                                                                          (35,272)     (350,968)
                                                                                         -----------   -----------
         Net cash provided by (used in) continuing operating activities                     (366,337)      448,629
                                                                                         -----------   -----------

CASH FLOWS FROM CONTINUING OPERATIONS INVESTING ACTIVITIES:
   Purchase of intangible asset                                                                   --      (347,984)
   Purchase of property and equipment                                                        (13,820)     (143,240)
   Payment to long term loans receivables                                                     67,224       449,456
                                                                                         -----------   -----------
         Net cash provided by (used in) continuing operations investing activities            53,404       (41,768)
                                                                                         -----------   -----------

CASH FLOWS FROM CONTINUING OPERATIONS FINANCING ACTIVITIES:
   Restricted cash                                                                          (125,784)      149,136
   Proceeds from issuance of common stock                                                         --     7,408,409
   Payments on loans payable                                                                      --      (323,128)
   Payments on short-term convertible notes                                                       --      (425,000)
   Payments on long term debts - related parties                                                (659)     (128,945)
                                                                                         -----------   -----------
         Net cash (used in) provided by continuing operation financing activities           (126,443)    6,680,472
                                                                                         -----------   -----------

Net (decrease) increase in cash from continuing operations                                  (439,376)    7,087,333
                                                                                         -----------   -----------

Cash provided by discontinued operating activities                                                --       389,582
Cash used in discontinued operations investing activities                                         --    (1,592,766)
Cash provided by discontinued operations financing activities                                     --        22,370
                                                                                         -----------   -----------
Net cash used in discontinued operations                                                          --    (1,180,814)
                                                                                         -----------   -----------

EFFECT OF EXCHANGE RATE ON CASH                                                              (35,121)       52,640
                                                                                         -----------   -----------

(DECREASE) INCREASE IN CASH                                                                 (474,497)    5,959,159

CASH, beginning of period                                                                  2,958,556     1,026,606
                                                                                         -----------   -----------

CASH, end of period                                                                      $ 2,484,059   $ 6,985,765
                                                                                         ===========   ===========
</TABLE>

The accompanying notes are an integral part of this statement.

                                      - 5-

<PAGE>


            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Note 1 -  ORGANIZATION AND OPERATIONS

China  Biopharmaceuticals  Holdings,  Inc.  (CBH), a Delaware  corporation,  was
originally organized as a corporation under the laws of the state of New York on
August 6, 1976 under the name of  Globuscope,  Inc. On August 7, 1984,  its name
was changed to Globus Growth Group, Inc., which was its name until it was merged
into CBH,  its wholly  owned  subsidiary  in the state of Delaware on August 28,
2004 through an internal  re-organizational  merger.  Effective August 28, 2004,
CBH completed the  acquisition  of China  Biopharmaceuticals  Corp.  ("CBC"),  a
British Virgin Islands  corporation  as the parent,  the management  company and
holder of 90% of the ownership  interest in its then only  operating  subsidiary
and asset,  Nanjing  Keyuan  Pharmaceutical  R&D Co.,  Ltd.,  doing  business in
English  a.k.a.  Nanjing  Chemsource  Pharmaceutical  R&D Co. Ltd,  ("Keyuan" or
"Chemsource"),  a company  established  in China and  engaged in the  discovery,
development   and    commercialization   of   innovative   drugs   and   related
bio-pharmaceutical  products in China.  Nanjing Keyuan  Pharmaceutical  R&D Co.,
Ltd. was established in March 2000 in Nanjing City of Jiangsu Province, China.

On  September  29,  2004,  we signed a purchase  agreement  which was amended on
December 31, 2004 to acquire  approximately  75.8% ownership  interest of Suzhou
Hengyi  Pharmaceuticals  of Feedstock  Co., Ltd  ("Hengyi"),  a Chinese  company
established in Suzhou, China for 1,200,000 of common shares and $1,600,000 to be
used for working capital and/or expansion purposes.  The cash contribution is to
be made in installments.

On June 11, 2005, we signed a purchase agreement, which was amended on August 3,
2005 under which, we acquired  approximately  51% of the  controlling  ownership
interest of Suzhou  Erye  Pharmaceutical  Limited  Company  ("Erye"),  a company
established  in Suzhou,  China.  Total  consideration  paid by us to acquire 51%
ownership  interest in Erye is $3,000,000 cash to be paid in  installments,  and
3,300,000 of common shares valued at $1.00 per share or  $3,300,000.  Out of the
$3,000,000 to be paid in cash,  $2,200,000  will be  contributed to the acquired
Erye for working capital and/or expansion purposes.

On  December  31,  2005,  our wholly  owned  subsidiary,  CBC,  entered  into an
Agreement  with four  shareholders  of Chengdu  Tianyin  Pharmaceutical  Limited
Company,  a  pharmaceutical  company  located  in the city of  Chengdu,  Sichuan
Province, China ("Tianyin") to immediately assume operational control of Tianyin
in all  aspects  of its  business  operations  and to  acquire  a 51%  ownership
interest in Tianyin.  Pursuant to the Agreement,  subject to certain conditions,
we agreed to issue 3 million shares of common stock to existing  shareholders of
Tianyin or their  designees  and also agreed to invest $2 million  into  Tianyin
operations.  An additional  300,000 shares of our common stock will be issued to
the existing shareholders of Tianyin or their designees,  if Tianyin's after tax
audited  profit for the year ended  December  31, 2005 reaches  $3,000,000.  The
unaudited  numbers are  substantially  lower than the agreed to targets.  We are
currently evaluating the viability of the implementation of the Tianyin purchase
agreement and will make a final  determination  after consulting with management
of Tianyin.  Based on the pre-conditions in the purchase Agreement,  the Company
decided  not to assume  the  operational  control of Tianyin at this time and is
exploring   options  of  changing  the  transaction   terms  or  abandoning  the
acquisition of Tianyin should Tianyin's shareholders not compromise and meet the
company's request for a reasonable purchase price.  Appropriate  disclosure will
be announced upon the final  determination by the board of the directors.  Since
this  transaction is in the process of evaluation,  the final  determination  of
this merger transaction has not reasonably  reached a conclusion;  the financial
statements  of Tianyin  have not been  included  in the  consolidated  financial
statements for the period ended March 31, 2007.


                                      - 6 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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



On May 16, 2006 we entered into a purchase  agreement which became  effective at
June 5, 2006, under which we acquired 100% of the controlling ownership interest
of RACP Pharmaceutical Holdings LTD. ("RACP") which owns 100% ownership interest
of Shengyang Enshi Pharmaceutical Limited Company ("Enshi"). Total consideration
of $14,690,000 paid by us to acquire the 100% interest in both RACP and Enshi is
$550,000 paid in cash, 12,000,000 of CBH warrants valued at $0.22 per warrant or
$2,640,000 and to assume  $11,500,000  debt of RACP.  The detail  information of
accounting for this transaction is disclosed in Note 15 - Business Combinations.

On August 28,  2006,  the  Company  entered to an  agreement  with the  minority
shareholders  of Suzhou  Hengyi to rescind and  terminate the purchase of Hengyi
and  its  50%  subsidiary,  Suzhou  Sintofarm.  Pursuant  to the  agreement  all
consideration  paid to the shareholders of Hengyi including  1,200,000 shares of
the  Company's  common  stock and  $620,000  in cash,  will be  returned  to the
Company.  As of March 31, 2007,  Hengyi had already fully returned all 1,200,000
shares of the Company's  common stock to the Company.  Furthermore,  the Company
anticipates  Hengyi will  return the  $620,000  in cash by March 31,  2008.  The
Company  will not have any other  obligations  to  Hengyi  or its  shareholders.
Simultaneously  the 75.8%  ownership  interest  of Hengyi  will be  returned  to
Hengyi's  shareholders or its designated party. As a result, Hengyi ceased to be
a subsidiary of the Company.  All the parties to the rescission  agreed that the
transaction took effect as of July 1, 2006. The detail information of accounting
for this transaction is disclosed in Note 15 - Business Combinations.

The principal  activities of the Company,  located in Mainland China ("China" or
"PRC"),  are  research,   manufacture,  and  sale  of  drug  raw  materials  and
intermediates  as well as prescription and  non-prescription  chemical drugs and
Traditional Chinese Medicines.

Note 2 - SIGNIFICANT ACCOUNTING POLICIES

Economic and Political Risks

The Company faces a number of risks and challenges  since its assets are located
in China and its revenues are derived from its  operations in China.  China is a
developing  country  with a young market  economic  system  overshadowed  by the
state.  Its  political  and economic  systems are very  different  from the more
developed countries and are still in the stage of change.  China also faces many
social,  economic and  political  challenges  that may produce  major shocks and
instabilities  and even crises,  in both its domestic arena and its relationship
with other  countries,  including  but not  limited to the United  States.  Such
shocks, instabilities and crises may in turn significantly and negatively affect
the Company's performance.

                                      - 7 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Basis of Presentation

The consolidated  financial  statements  include the accounts of the Company and
all  its  majority-owned  subsidiaries  which  require  consolidation.  Material
inter-company transactions have been eliminated in the consolidation.

Due to the  rescission  of the  acquisition  of Suzhou  Hengyi and its 50% owned
subsidiary,  Sintofarm,  these two companies  ceased to be  subsidiaries  of the
Company.  In  accordance  with  FASB  Statement  No.  144,  Accounting  for  the
Impairment or Disposal of Long-Lived  Assets,  the Company has  reclassified the
financial  statements  for all periods  presented to reflect  Suzhou  Hengyi and
Sintofarm business as discontinued operations.

The consolidated financial statements of China biopharmaceuticals holdings, Inc.
and subsidiaries reflect the activities of the following subsidiaries:

Entity                  Percentage of Ownership                  Location
--------------------------------------------------------------------------------
CBH                          Parent Company             United States of America
Enshi                      100% owned by CBH                      P.R.C
Erye                        51% owned by CBH                      P.R.C
CBC                        100% owned by CBH             British Virgin Inland
Keyuan                      90% owned by CBC                      P.R.C

Reclassifications

Certain  prior  period  amounts  have been  reclassified  to  conform to current
period's   presentation.   This  reclassification  had  no  material  effect  on
operations or cash flows

Land Use Rights

According to Chinese law, the government  owns all the land in China.  Companies
or individuals  are authorized to possess and use the land only through land use
rights granted by the Chinese  government.  Land use rights are being  amortized
using the straight-line method over the lease term of 40 to 50 years.

Plant and Equipment

Plant  and  equipment  are  stated  at  cost  less   accumulated   depreciation.
Depreciation  is  provided  on the  straight-line  basis over  their  respective
estimated useful lives. Estimated useful lives are as follows.

Equipment and machinery                      5 years
Motor vehicles                               5 years
Furniture and fixtures                       5 years
Buildings                                   20 years
Land use right                           40-50 years

                                      - 8 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

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  operations.  The cost of  maintenance  and  repairs is charged to
income  as  incurred,   whereas   significant   renewals  and   betterments  are
capitalized.

Long-term  assets of the  Company  are  reviewed  annually  as to whether  their
carrying value has become  impaired,  pursuant to the guidelines  established in
Statement of Financial  Accounting  Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived  Assets.  The Company also re-evaluated the
periods of amortization to determine whether subsequent events and circumstances
are warrant revised estimate of useful lives.

Cash and Cash Equivalents

For  financial  reporting  purposes,  the Company  considers  all highly  liquid
investment  purchased with original  maturity of three months or less to be cash
equivalents.  The Company  maintains  no bank  accounts in the United  States of
America.

Inventories

Inventories  are  stated  at the lower of cost or  market  using  the  first-in,
first-out basis.

Patent

The  patents  represent  patented  pharmaceutical  formulas,  on  which  we have
obtained  official  registration  certificate or official  approval for clinical
trials.  No  amortization  is provided  when the Company  intends to and has the
ability  to sell  the  patent  or  formulas  within  not more  than two  months,
otherwise  the patent costs will be subject to  amortization  over its estimated
useful  life   period.   Such  costs   comprise   purchase   costs  of  patented
pharmaceutical formulas and costs incurred for patent application.  Patent costs
are accounted for on an individual  basis. The carrying value of patent costs is
reviewed  for  impairment  annually  when  events and  changes in  circumstances
indicate  that  the  carrying  value  may  not  be  recoverable.

Research and Development Costs

Research and development (or "R&D") expenses  include  salaries,  benefits,  and
other headcount related costs, clinical trial and related clinical manufacturing
costs,  contract and other outside  service fees,  and  facilities  and overhead
costs. R&D costs are expensed when incurred.

Under the  guidance of  paragraphs  8 to 11 of SFAS 2, the Company  expenses the
costs  associated  with the research and  development  activities when incurred.
None of the intangible  assets of the Company and its  subsidiaries was recorded
based on R&D costs.

                                      - 9 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Concentration risks

Cash includes cash on hand and demand deposits in accounts maintained with state
owned banks within the People's  Republic of China and Hong Kong.  Total cash in
these banks at March 31, 2007 amounted to  $2,484,059,  of which no deposits are
covered  by  insurance.  The  Company  has not  experienced  any  losses in such
accounts  and  believes  it is not  exposed  to any  risks  on its  cash in bank
accounts.

The Company has five major  customers which  represent  approximately  15.3% and
26.7% of the Company's  total sales for the three months ended March 31,2007 and
2006,  respectively.  Three  customers  accounted  for 21.2%  of total  accounts
receivable as of March 31, 2007.

For the three  months  ended  March 31,  2007 and 2006,  the  Company  purchases
approximately  34.6% and 34.5%,  respectively,  of their raw materials from five
major suppliers.  Four suppliers accounted for 37% of total accounts payables at
March 31, 2007.

Fair Value of Financial Instruments

The Company's financial instruments primarily include cash and cash equivalents,
accounts receivable,  and accounts payable, accrued expenses,  customer deposits
and amounts due to related  parties and  shareholders.  Management has estimated
that the carrying amounts  approximate their fair values due to their short-term
nature.  In  addition,  the  Company  has notes  payable  issued by the bank and
special  payables.  Management  estimates the carrying amount  approximates fair
values because the historical  terms of the notes  approximate  terms  available
today.

Revenue Recognition

The  Company  has  three  categories  of  revenue  resources,  sales of new drug
formulas, R&D services and revenue from sales of medical product.

The Company  recognizes  revenue from product and drug formula  sales when title
has passed,  the risks and rewards of  ownership  have been  transferred  to the
customer,  the fee is fixed and determinable,  and the collection of the related
receivable  is probable  which is generally at the time of shipment.  Allowances
are established for estimated rebates, wholesaler charge backs, prompt pay sales
discounts, product returns, and bad debts.

For the quarters ended March 31, 2007 and 2006, revenue from sale of product was
$7,532,122  and  $5,292,930,  respectively,  made  up of the  following  product
categories.

                                                        2007           2006
                                                    ------------   ------------
                                                    (Unaudited)     (Unaudited)
Intermediary pharmaceutical products                $  1,923,000   $  2,063,000
Prescription drugs                                     4,626,679      2,283,507
Over-the-counter drugs                                   982,443        946,423
                                                    ------------   ------------
Total                                               $  7,532,122   $  5,292,930
                                                    ============   ============

                                     - 10 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

For  revenue  from R&D  service,  revenue  is  recognized  based on  fixed-price
refundable new drug contracts.  The fixed-price  refundable new drug contract is
also called as milestone contract,  which establishes the phase goals of the R&D
service provided by the Company and the corresponding  milestone payments by the
customers.  Milestone payments become payable and are recognized as revenue when
milestone  goals,  as defined in the  contract,  are  achieved.  Milestones  are
substantive and not derived solely from arriving at a specific date.  Revenue is
recognized when milestone goals are achieved at the amount of the  corresponding
milestone  payment.  To determine when milestones are achieved,  typically,  the
milestone goals require one or more of the following:  (1) a certificate  from a
licensed  authoritative agency, (2)  approval/acknowledgement  by a governmental
agency,  such as agency like Food and Drug  Administration of the United States,
(3) an  authoritative  professional  appraisal  report,  or  (4) an  independent
technological  feasibility report,  testing analysis and other form of valuation
on  the  result  and  value  of  products  and  service.  After  receipt  of the
certificate,  and/or approval and/or report,  continued  service is not required
thus the  respective  milestone  goals are  achieved.  Therefore,  the milestone
payment is no longer refundable and revenue is recognized.

For the period ended March 31, 2007, revenue from sales of product, sales of new
drug  formulas,  and  revenue  from R&D  service  was  $7,532,122,  $0,  and $0,
respectively.

For the period ended March 31, 2006, revenue from sales of product, sales of new
drug formulas,  and revenue from R&D service was  $5,292,930,  $0, and $256,993,
respectively.

Income Taxes

Income taxes are provided on the liability  method  whereby  deferred tax assets
and  liabilities  are recognized for the expected tax  consequences of temporary
differences   between  the  tax  basis  and  reported   amounts  of  assets  and
liabilities.  Deferred tax assets and liabilities are computed using enacted tax
rates  expected  to apply to taxable  income in the  periods in which  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and liabilities from a change in tax rates is recognized in income in the
period that  includes  the  enactment  date.  The  Company  provides a valuation
allowance  for certain  deferred tax assets,  if it is more likely than not that
the Company will not realize tax assets through future operations.

The Company  adopted FASB  Interpretation  48,  "Accounting  for  Uncertainty in
Income Taxes" ("FIN 48"), as of January 1, 2007. A tax position is recognized as
a benefit only if it is "more  likely than not" that the tax  position  would be
sustained in a tax examination,  with a tax examination being presumed to occur.
The amount  recognized is the largest amount of tax benefit that is greater than
50% likely of being realized on  examination.  For tax positions not meeting the
"more  likely than not" test,  no tax benefit is  recorded.  The adoption had no
effect on the Company's financial statements.

Use of Estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses during the reporting periods.


                                     - 11 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

For example, the Company estimates the collectibility of its receivables which
affects the carry value of the related asset. Management makes these estimates
using the best information available at the time the estimate are made; however
actual results could differ materially from those estimates.

Comprehensive Income

SFAS No. 130,  Reporting  Comprehensive  Income,  establishes  standards for the
reporting and display of  comprehensive  income,  its components and accumulated
balances in a full set of general  purpose  financial  statements.  SFAS No. 130
defines  comprehensive  income to include  all  changes in equity  except  those
resulting form investments by owners and  distributions  to owners.  Among other
disclosures,  SPAS No.  130  requires  that all items  that are  required  to be
recognized  under current  accounting  standards as components of  comprehensive
income be  reported  in  financial  statement  that is  presented  with the same
prominence as other financial  statements.  The Company's only current component
of comprehensive income is the foreign currency translation adjustment.

Foreign Currency Translation

The reporting  currency of the Company is the US dollar.  The Company's  Chinese
subsidiaries'  financial  records are  maintained  and the  statutory  financial
statements are stated in its local currency, Renminbi (RMB), as their functional
currency.  Results of operations are translated at average exchange rates during
the period,  assets and liabilities are translated at the unified  exchange rate
as quoted by the People's Bank of China at the end of each reporting period, and
equity are stated at their historical  rates.  Cash flows are also translated at
average  translation  rates for the period,  therefore,  amounts reported on the
statement  of  cash  flows  will  not  necessarily  agree  with  changes  in the
corresponding balances on the balance sheet.

This quotation of the exchange rates does not imply free  convertibility  of RMB
to other foreign currencies.  All foreign exchange transactions continue to take
place either through the People's Bank of China or other banks authorized to buy
and sell foreign  currencies at the exchange rate quoted by the People's Bank of
China.

Approval of foreign currency payments by the Bank of China or other institutions
requires submitting a payment application form together with invoices,  shipping
documents and signed contracts.

Translation  adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and amounted to $34,954 and  $117,967  for the periods  ended March 31, 2007 and
2006,  respectively.  The balance  sheet amounts with the exception of equity at
March 31, 2007 were  translated  at 7.72 RMB to 1.00 USD. The  weighted  average
translation  rate of 7.75 and 8.05 RMB to 1.00 USD for the  periods  ended March
31, 2007 and 2006 were applied to income statement accounts. Cash flows are also
translated  at average  translation  rates for the  period,  therefore,  amounts
reported on the statement of cash flows will not necessarily  agree with changes
in the corresponding balances on the balance sheet.


                                     - 12 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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


Transaction  gains and losses  that arise from  exchange  rate  fluctuations  on
transactions  denominated in a currency  other than the functional  currency are
included in the results of operations as incurred.  These amounts are immaterial
to the consolidated financial statements.

Earnings Per Share

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings Per Share"  (SFAS128).  SFAS 128 requires the presentation of earnings
per  share  (EPS) as Basic  and  Diluted  EPS.  Basic  earnings  per  share  are
calculated by taking net income divided by the weighted average shares of common
stock outstanding during the period. Diluted earnings per share is calculated by
taking  basic  weighted  average  shares of common stock and  increasing  it for
dilutive common stock  equivalents  such as preferred stock, as well as warrants
and options that are in the money.

The Company  determined  that all the warrants  were  anti-dilutive  because the
exercise  prices were higher than average market price in the period  presented.
The number of shares used in computing diluted earnings per share for the period
ended March 31, 2007 and 2006 was 36,719,560,  which included  691,945  weighted
average number of convertible  preferred stock,  and 31,420,375,  which included
1,152,500 weighted average number of convertible preferred stock,  respectively.
The number of shares used in computing  basic earnings per share for the periods
ended March 31, 2007 and 2006 was 36,027,615 and 30,267,875, respectively. Basic
and  Diluted  loss per share for the period  ended  March 31,  2007  amounted to
$0.002. Basic and Diluted earnings per share for the period ended March 31, 2006
amounted to $0.006

Recent Accounting Pronouncements

In June 2006, the Emerging  Issues Task Force (EITF) reached a consensus on EITF
No. 06-3,  How Taxes  Collected  from  Customers  and  Remitted to  Governmental
Authorities  Should Be Presented in the Income  Statement (EITF No. 06-3).  EITF
No. 06-3  permits  that such taxes may be presented on either a gross basis or a
net basis as long as that  presentation  is used  consistently.  The adoption of
EITF No.  06-3 on  January 1, 2007 did not  impact  our  consolidated  financial
statements.  We present  the taxes  within  the scope of EITF No.  06-3 on a net
basis.

                                     - 13 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

In September 2006, the FASB issued Statement of Financial  Accounting  Standards
No.  157,  "Fair Value  Measurements"  ("SFAS  157"),  which  provides  enhanced
guidance for using fair value to measure assets and  liabilities.  This standard
also responds to investors'  requests for expanded  information about the extent
to which companies measure assets and liabilities at fair value, the information
used to  measure  fair  value,  and the  effect of fair  value  measurements  on
earnings.  The standard  applies  whenever other  standards  require (or permit)
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair  value  in any new  circumstances.  SFAS  157 is  effective  for
financial  statements issued for fiscal years beginning after November 12, 2007,
and interim periods within those fiscal years.  Early adoption is permitted.  We
are  currently  evaluating  whether the adoption of SFAS157 will have a material
effect on our consolidated results of operations and financial condition.

In February 2007, the Financial  Accounting Standards Board issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial  Liabilities--Including
an Amendment of SFAS 115 (SFAS No. 159),  which allows for the option to measure
financial  instruments and certain other items at fair value.  Unrealized  gains
and  losses on items  for  which the fair  value  option  has been  elected  are
reported in earnings.  The objective of SFAS 159 is to provide  opportunities to
mitigate  volatility in reported earnings caused by measuring related assets and
liabilities  differently  without having to apply hedge  accounting  provisions.
SFAS 159 also establishes  presentation and disclosure  requirements designed to
facilitate  comparisons  between  companies  that choose  different  measurement
attributes  for  similar  types of assets and  liabilities.  This  statement  is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007.  The Company is currently  evaluating  the impact of SFAS No.
159 on our consolidated financial statements.

Note 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest and income taxes paid

      o     Interest  expense  paid  amounted  to  $797,452  and $77,789 for the
            periods ended March 31, 2007 and 2006, respectively.

      o     No Income  taxes was paid for the three  months ended March 31, 2007
            and 2006.

Non-cash investing and financing activities

      o     During the first  quarter of 2007,  the  Company  converted  512,500
            shares of preferred stock to 753,572 shares of common stock.

Note 4 - ACCOUNTS RECEIVABLE

Accounts receivable are carried at original invoice amount less an estimate made
for  doubtful  receivables  based on a review of all  outstanding  amounts  on a
monthly basis.  Management's  judgment and estimates are made in connection with
establishing the allowance for doubtful accounts.  Specifically,  we analyze the
aging of accounts

                                     - 14 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Significant changes in customer  concentrations or payment terms,  deterioration
of customer  credit-worthiness  or  weakening  in economic  trends  could have a
significant  impact  on the  collectibility  of  receivables  and our  operating
results.  If the  financial  condition  of our  customers  were to  deteriorate,
resulting  in an  impairment  of  their  ability  to make  payments,  additional
allowances may be required.  The reserve for bad debts was $999,045 at March 31,
2007.

As of March 31, 2007, accounts receivable consisted of the following:

Accounts receivable                                                $  6,529,407
Allowance for doubtful accounts                                        (999,045)
                                                                   ------------
Accounts receivable, net                                           $  5,530,362
                                                                   ============

Note 5 - INVENTORIES

Inventories consisted of the following at March 31, 2007:

Raw materials                                                      $  2,457,913
Refinery material                                                     1,680,549
Packaging supplies                                                      385,472
Sundry supplies                                                           9,145
Work in process                                                         498,348
Finished goods                                                        2,909,606
                                                                   ------------
   Total inventories                                               $  7,941,033
                                                                   ============

Note 6 - PLANT AND EQUIPMENT

Plant and equipment consisted of the following as of March 31, 2007:

Plant                                                              $  9,542,313
Office equipment                                                        229,414
Machinery                                                             8,999,768
Automobiles                                                             365,925
Construction in progress                                                 10,282
                                                                   ------------
Total plant and equipment                                            19,147,702
Less: accumulated depreciation                                        6,944,842
                                                                   ------------
Plant and equipment, net                                           $ 12,202,860
                                                                   ============

Depreciation  expense for the periods ended March 31, 2007 and 2006 was $224,418
and $211,835 respectively.

                                     - 15 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Note 7- OTHER ASSETS

Intangible Assets

Intangible  assets at March 31, 2007  included land use rights and drug patents,
and consist of the following:

Land use rights:
   Erye                                                            $  5,719,058
   Less: Accumulated amortization                                      (436,139)
                                                                   ------------
                                                                      5,282,919

   Enshi                                                              5,572,497
   Less: Accumulated amortization                                      (423,405)
                                                                   ------------
                                                                      5,149,092

   Prepayment on land - Erye                                          1,165,500

Patents:
   Approved drugs                                                     1,535,755
   Less: Accumulated amortization                                      (498,971)
                                                                   ------------
                                                                      1,036,784

                                                                   ------------
Total intangible assets, net                                       $ 12,634,295
                                                                   ============

Amortization  expense for the periods  ended March 31, 2007 and 2006 was $45,382
and $24,430, respectively.

Restricted Cash

Restricted  cash  represents  cash  required to be deposited  with banks for the
balance of bank notes  payable but are subject to withdrawal  with  restrictions
according  to the  agreement  with  the  bank.  The  required  deposit  rate  is
approximately  30-50% of the notes  payable.  Given the nature of the restricted
cash, it is reclassified as a financing activity in Statement of Cash Flows. The
following  lists the  depositors,  the amount and names of the banks as of March
31, 2007:

Depositor                 Name of Bank                                Amount
---------                 ------------                             ------------

Erye        Hua Xia Bank, Suzhou                                   $    606,301
            Industrial and Commercial Bank, Suzhou                      423,465
                                                                   ------------
Total                                                              $  1,029,766
                                                                   ============

                                     - 16 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

--------------------------------------------------------------------------------
Long Term Notes Receivable

Long term notes receivable  represents loans made to third parties for cash flow
needs for R&D projects on new drugs.  The Company has first priority to purchase
the new drug rights if the projects are successfully  completed.  If the Company
gives up the right, the debtors required to repay the loans plus 3% interest per
annum within one month after the drug rights are sold to another party. If on or
before  February 28, 2010,  the R&D  projects are not  completed or failed,  the
debtors are  required to repay the loans plus 6% interest  per annum  within ten
days after such a conclusion was made. As of March 31, 2007, the total amount of
the long term notes  receivable  was  $753,563.  51% of ownership  equity of the
debtor was pledged for the loan. Management believes the likelihood of repayment
to be  collected  is high  based on the  above  conditions  and  well  financial
conditions of the counter parties.

Note 8- RELATED PARTIES TRANSACTIONS

Accounts Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiary               Amount         Due from        Term         Manner of settlement
----------------------   ------------   -------------   ----------   ----------------------
<S>                      <C>            <C>             <C>          <C>
                                        Liao Ning Xie
                                        He, former
                                        owner's
Enshi                    $     53,763   company         Short term   To be received in cash
Erye                           38,456   Hainan Kaiye    Short term   To be received in cash
                         ------------
Total - March 31, 2007   $     92,219
                         ============
</TABLE>

Other Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiary               Amount         Due from        Term         Manner of settlement
----------------------   ------------   -------------   ----------   ----------------------
<S>                      <C>            <C>             <C>          <C>
                                        Advance to
CBC                      $      3,360   shareholders    Short term   To be received in cash
Erye                        1,002,330   Hainan Kaiye    Short term   To be received in cash
Erye                        1,036,000   Erye Trading    Short term   To be received in cash
Enshi                          86,764   Li Xiao Bo      Short term   To be received in cash
CBH                           500,000   Li Xiao Bo      Short term   To be received in cash
                         ------------
Total - March 31, 2007   $  2,628,454
                         ============
</TABLE>

                                     - 17 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Loan to Shareholder

Subsidiaries    Amount        Due from       Term         Manner of settlement
-------------   -----------   ------------   ----------   ----------------------
                              Keyuan's
Keyuan          $    42,143   shareholder    Short term   To be received in cash

Short-Term Loan - Related Parties

Subsidiaries    Amount        Due to         Term         Manner of settlement
-------------   -----------   ------------   ----------   ----------------------
Enshi           $   388,500   Erye Trading   Short term   To be paid in cash


The Company  guaranteed  the loan using the Company's 51% ownership  interest in
Erye as security.  This loan matured in August 2006.  As of March 31, 2007,  The
loan was not paid back  according to the original  terms.  The Company is in the
process negotiating for an extension or renewal with related parties.


Other Payables - Related Parties

<TABLE>
<CAPTION>
Subsidiaries          Amount          Due to             Term         Manner of settlement
-------------------   -------------   ----------------   ----------   ----------------------
<S>                   <C>             <C>                <C>          <C>
Enshi                 $     560,735   Liao Ning Xie He   Short term   To be paid in cash
Enshi                        86,765   Li Xiao Bo         Short term   To be paid in cash
Erye                      1,523,143   Hainan Kaiye       Short term   To be paid in cash
Erye                        609,009   Erye Trading       Short term   To be paid in cash
CBH                          43,961   Shareholder        Short term   To be paid in cash
                      -------------
Total-March 31,2007   $   2,823,613
                      =============
</TABLE>

In April 2007, the amount of $560,735 due to Liao Ning Xie He and $86,765 due to
Li Xiao Bo have been paid off.



Long Term Other Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiary            Amount          Due from           Term         Manner of settlement
-------------------   -------------   ----------------   ----------   ----------------------
<S>                   <C>             <C>                <C>          <C>
CBH                   $     620,000   Hengyi             Long term    To be received in cash
</TABLE>

Note 9 - NOTES PAYABLE

The Company's subsidiary Erye has $2,434,600 notes payable to Erye's vendors for
the purchase of drug raw materials.  Notes payable are interest free and usually
mature after a six month period.

Note 10 - MINORITY INTEREST

Minority  interest  consists of the  interest of  minority  shareholders  in the
subsidiaries of the Company.  The Company owns a 51% ownership interest in Erye.
The Company's wholly owned subsidiary China Biopharmaceuticals  Corporation (BVI
Company) owns 90% ownership interest in Keyuan. There is no minority interest in
Enshi since the Company owns 100% of Enshi.

                                     - 18 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

<TABLE>
<CAPTION>
                                        Ownership                   Minority
              Equity of the                in                     Interest in
              Subsidiaries            Subsidiaries               Subsidiaries
                 as of         --------------------------   ------------------------
Subsidiary    March 31, 2007   Percentage       Amount      Percentage     Amount
----------   ---------------   ----------   -------------   ----------   -----------
<S>          <C>               <C>          <C>             <C>          <C>
Erye         $     9,190,551           51%  $   4,687,179           49%  $ 4,503,372
Keyuan               708,222           90%        637,400           10%       70,822
Enshi             14,575,745          100%     14,575,745            0%           --
             ---------------                -------------                -----------
Total        $    24,474,518                $  19,900,324                $ 4,574,194
             ===============                =============                ===========
</TABLE>

Note 11- STATUTORY RESERVES

According  to  Chinese  corporation  law,  a  company  incorporated  in China is
required  to  contribute  an amount of no less then 10% of its yearly net income
for its employees to a reserve  account in the company.  This statutory  reserve
fund is planned  for future  development  of the  company or use for  employee's
benefits.  These reserves represent restricted retained earnings.  The following
list the provision of statutory reserves contributed as of March 31, 2007.

   Year            Amount
   -----        ------------

   2004         $     60,750
   2005              383,873
   2006            2,080,032
   2007               81,785
                ------------
   Total        $  2,606,440
                ============

Note 12 - INCOME TAXES

Corporation Income Tax (CIT)

In  accordance  with  the  relevant  tax laws and  regulations  of the  People's
Republic of China,  a company is entitled to a full  exemption  from CIT for the
first two years, and a 50% deduction in CIT for the next three years, commencing
from the first profitable year. For 2005, of the Company's subsidiaries,  Keyuan
and Enshi were exempt from CIT,  while Erye was subject to a 33% income tax rate
for the year of 2005.  Erye was  granted  income  tax  exemption  for two  years
commencing from January 1, 2006.

The  Company's  income tax expense for the periods ended March 31, 2007 and 2006
was $9,606 and $0, respectively.

According to China's income tax law,  company income tax is due to the State Tax
Bureau monthly or quarterly.  Subsidiaries of the Company paid its income tax by
quarter.  Before  every 15th day of pay month,  subsidiaries  pay its income tax
base on its  quarterly  net  profit.  Since  income  tax rate,  with  income tax
preference or not, is a flat rate in China, that there is no need for income tax
reconciliation to practice in China.

                                     - 19 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

The  Company's  subsidiaries  operate in China.  According to the Chinese  Joint
Venture Business Law, these  subsidiaries  have been registered and incorporated
with the status of Sino-foreign joint venture companies and are subject to a two
year tax exemption and a three year 50% reduction in income tax rates preference
treatment, which generally commences from the first year of establishing a joint
venture or the approval date of the income tax preference application.

The  following  list  depicts  the  tax  preference   rate   applicable  to  the
subsidiaries and the applicable years:

                                Income Tax 5 year preference Period and Tax Rate
                                Full Exemption Period     Half-Reduction Period
                                ---------------------     ----------------------
Subsidiaries                     Period      Tax Rate      Period      Tax Rate
---------------                 ---------   ---------     ---------   ----------
Nanjing Keyuan                  2005-2006     0.00%       2007          16.50%
Suzhou Erye                     2006-2007     0.00%       2008-2010     12.00%
Shengyang Enshi                 2004-2005     0.00%       2006-2007     15.00%

After the  income  tax  preference  period  expired,  a 25%  income  tax rate is
applicable.

Beginning  January 1, 2008,  the new  Enterprise  Income  Tax  ("EIT")  law will
replace the existing laws for Domestic  Enterprises ("DES") and Foreign Invested
Enterprises ("FIEs"). The new standard EIT rate of 25% will replace the 33% rate
currently  applicable to both DES and FIEs. The two years tax  exemption,  three
years  50% tax  reduction  tax  holiday  for  production-oriented  FIEs  will be
eliminated.  The Company is currently  evaluating  the effect of the new EIT law
will have on its financial position.

The  following  table  reconciles  the U.S.  statutory  rates  to the  Company's
effective tax rate:

                                                                  March 31,
                                                                2007     2006
                                                              -------   -------
U.S. Statutory rate                                              34.0%     34.0%
Foreign income not recognized in USA                            (34.0)    (34.0)
China income taxes                                               33.0      33.0
Income tax exempted                                             (33.0)    (33.0)
                                                              -------   -------
Total provision for income taxes                                   --%       --%
                                                              =======   =======

The  estimated  tax savings  due to the  reduced tax rate for the periods  ended
March 31, 2007 and 2006 amounted to $244,168 and $64,017,  respectively. The net
effect on  earnings  (loss) per share if the income tax had been  applied  would
decrease  (increase)  earnings  (loss) per share for March 31,  2007 and 2006 by
($0.004) and $0.008, respectively.

Business Tax

The Company is subject to Business Tax, which is charged on the selling price of
applicable  product and service at a general rate of 5% in  accordance  with the
tax law  applicable.  Keyuan is exempt  from  business  tax  according  to local
applicable favorable tax policy.

                                     - 20 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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



Value Added Tax ("VAT")

In  accordance  with  the  relevant  taxation  laws in  China,  the VAT rate for
domestic sales is 17% and 0% for export sales on the invoiced value of sales and
is payable  by the  purchaser.  A credit is  available  whereby  VAT paid on the
purchases of  semi-finished  products or raw materials used in the production of
the  Company's  finished  products can be used to offset the VAT due on sales of
the finished product.

VAT on sales and VAT on purchases  amounted to  $1,313,308  and $970,503 for the
period  ended March 31, 2007 and  $1,134,417  and  $888,164 for the period ended
March 31,  2006,  respectively.  Sales and  purchases  are  recorded  net of VAT
collected and paid as the Company acts as an agent for the government. VAT taxes
are not impacted by the income tax holiday.

Note 13 - SHORT TERM LOANS

Loan from RimAsia

The Company  assumed a loan of $11,500,000 in connection with the acquisition of
Enshi as presented in Note 15, Business  Combination.  Interest on the loan will
be paid  semi-annually  at an  annual  rate of 11%.  As of March 31,  2007,  the
balance of the long-term debt was $11,500,000.

After a review of the covenants in connection with the above-mentioned loan, the
Company  determined  that it is likely in violation of certain of the covenants.
Therefore,  In  accordance  with the US GAAP,  the $11.5  million  loan is fully
classified as a current liability.

Short Term Bank Loans

The  Company  has a total  amount of  $5,503,750  in short  term loans from five
different  banks in  China.  These  loans  mature  in one year or less and renew
automatically.  The average  interest rate is  approximately  6.3%.  Among those
short term bank loans,  $1,618,750 was  collateralized  by the land use right of
Erye,  $1,061,900  was  collateralized  by the land use right and  buildings  of
Enshi,  $1,295,000 was collateralized by Enshi's prior shareholder,  Li Xiaobo's
personal assets, and $906,500 was collateralized by buildings of a third party.

Interest  expense for  quarters  ended March 31, 2007 and 2006 was  $368,113 and
$67,181 respectively.

Note 14 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office space and dormitory  facilities for its employees from
a third party. Accordingly,  for the quarters ended March 31, 2007 and 2006, the
Company recognized rent expense of $17,065 and $6,738, respectively.


                                     - 21 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

As of March 31,  2007,  the Company has  outstanding  commitments  in respect to
non-cancelable operating leases, which fall due as follows:

                            Amount
                        --------------
            2007        $       96,642
            2008                56,783
            2009                35,870
            2010                39,000
         Thereafter                 --
                        --------------
                        $      228,295
                        ==============

Legal proceedings

The Company has  commenced  action to freeze up to $10 million  assets of Mr. Li
Xiaobo,   the  former  shareholder  and  management  of  Enshi,  for  breach  of
representations  and  warranties  as  contained in the  acquisition  agreements.
Additionally,  the Company  reserves the right to seek further  damages from the
former shareholder.

Note 15 - BUSINESS COMBINATIONS

Enshi Acquisition

On May 16, 2006, we entered into a purchase  agreement which became effective at
June 5, 2006, under which we acquired 100% of the controlling ownership interest
of RACP Pharmaceutical Holdings LTD. ("RACP") which owns 100% ownership interest
of Shengyang Enshi  Pharmaceutical  Limited Company ("Enshi").  The Company paid
$14.7  million to acquire  100%  interest in both RACP and Enshi.  Consideration
included  $12  million  cash  and $2.7  million  in  warrants.  We  applied  the
Black-Scholes model method to determine the value of the warrants.

We  determined  the  fair  value of the  acquired  assets  of Enshi  based on an
independent  appraisal.  The fair value of Enshi's net assets was in  accordance
with the independent appraisal of $16.7 million.  Pursuant to SFAS 141, Business
Combination,  the excess of total fair value acquired over the acquisition  cost
should be allocated as pro rata  deduction of the amount of Enshi's fixed assets
and intangible assets that would have been assigned to those assets.

Under the terms of the purchase  agreement,  the Company placed $625 thousand of
the purchase price in escrow to cover certain contingencies including collection
of  receivables  on the  date  of  purchase.  In  October  2006,  because  those
conditions  were not met, the escrowed  funds are being returned to the Company,
and  therefore  the purchase  price was reduced,  pursuant to FAS 141,  Business
Combinations,  paragraph 27. As of March 31, 2007,  the Company was still in the
process of collecting the escrowed funds through legal action.

In March 2007, management  determined that  approximately $2.6 million of trade
receivables purchased are likely non-existent and therefore had no fair value on
the date of  acquisition. (See Note 14 for discussion  of legal action  pursued
against the  former owner and manager of  Enshi.)  Consistent with SFAS No. 141,
the Company  is  allowed an  allocation  period  not  to  exceed  one  year  to
re-allocate its purchase price to the "fair value of the net assets acquired on
the purchase date" based on facts available today. Accordingly, $2.6 million of
the purchase price originally allocated to receivables have been re-allocated to
buildings and land use rights.


                                     - 22 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

Assets acquired and debts assumed are listed below:

                                         Original Allocated      Re-allocated
                 Item                        Fair Value           Fair Value
--------------------------------------   ------------------   -----------------
Current assets                           $        6,840,881   $       4,220,081
Property, plant, and equipment                    7,188,912           8,340,664
Intangible assets                                 5,253,973           6,098,021
                                         ------------------   -----------------
Total assets                                     19,283,766          18,658,766
                                         ------------------   -----------------

Total liabilities                                 4,593,766           4,593,766
                                         ------------------   -----------------

Net assets                               $       14,690,000   $      14,065,000
                                         ==================   =================

Pro Forma

The following  unaudited pro forma  condensed  income  statement for the quarter
ended March 31, 2006 was prepared under Generally Accepted Accounting Principles
as if the  acquisition  of Enshi had occurred on January 1, 2006.  The pro forma
information  may not be  indicative  of the  results  that  actually  would have
occurred if the  acquisition  had been in effect from and on the dates indicated
or which may be obtained in the future.

                                    Amount
                                --------------
Sales                           $      946,423
Cost of Goods Sold                     629,733
                                --------------
Gross Profit                           316,690
Operating Expenses                     317,532
Income Tax                                  --
                                --------------
Net Loss                        $         (842)
                                ==============

Discontinued Operation - Suzhou Hengyi

On August 28,  2006,  the  Company  entered to an  agreement  with the  minority
shareholders  of Suzhou  Hengyi to rescind and  terminate the purchase of Hengyi
and  its  50%  subsidiary,  Suzhou  Sintofarm.  Pursuant  to the  agreement  all
consideration  paid to the  shareholders  of Hengyi of  1,200,000  shares of the
Company's  common  stock and  $620,000  in cash,  which will be  returned to the
Company in three installments by March 2008.

As of March 31, 2007,  the  1,200,000  shares of common stock were  returned and
cancelled.  The  Company  will not have any other  obligations  to Hengyi or its
shareholders.  Simultaneously  the 75.8%  ownership  interest  of Hengyi will be
returned to Hengyi's  shareholders or its designated party. As a result,  Hengyi
will cease to be a subsidiary of the Company.


                                      - 23 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

All the parties to the rescission  agreed that the transaction took effect as of
July 1, 2006,  considering  the fact that there was a significant  change in the
financial condition and operating performance of the two companies.  The Company
recognized income on discontinued operation,  net of tax effect, of $42,716, for
the quarter ended March 31, 2006.  The prior period  results of  operations  and
cash flows for Hengyi have been reported within  discontinued  operations in the
accompanying statements.

Note 16 - SHAREHOLDERS' EQUITY

Private placement closed on December 31, 2004 (the "Notes Private Placement")

In January  2005,  we raised  gross  proceeds of  $500,000  through the sales of
promissory notes, pursuant to a subscription agreement (referred to as the Notes
Subscription  Agreement),  which we entered  into with  twenty  (20)  accredited
investors  (referred  to  as  the  Notes  Subscribers.  Pursuant  to  the  Notes
Subscription  Agreement,   the  Notes  Subscribers  received  convertible  notes
("Notes" or "Convertible Notes") for a total aggregate amount of $500,000 with a
maturity date of 180 days from the Notes issuance (the  "Maturity"),  bearing an
interest rate on the  principal  balance of the Notes of 7% per annum payable at
Maturity or upon satisfaction or discharge of the Note.

Each note  holder has the right to convert  all,  but not less than all,  of the
Notes into shares of our common  stock (each a "Share") at one dollar per share.
In September 2005, the Notes Subscribers extended the maturity date of the Notes
until December 31, 2005.  All of the Notes were either  converted into shares or
redeemed.

In addition,  as an inducement for the Notes  Subscribers to extend the maturity
date, the Company has issued 42,500 additional shares to these Notes Holders who
agreed to grant the  extension as described  above.  Management  determined  the
warrants had no value.

Upon the execution of the Notes  Subscription  Agreement,  we also issued to the
Notes  Subscribers  one (1) warrant for every one (1) Share that the convertible
notes can  convert  into  under  the Notes  Subscription  Agreement  (the  "Note
Warrants").  The exercise  price of the  majority of Note  Warrants is $1.50 per
share.  Pursuant to the Note  Warrants,  the Notes  Subscribers  are entitled to
purchase  an  aggregate  amount of  341,657  shares.  The Note  Warrants  may be
exercised  only in full.  The Note  Warrants  will  expire  three (3) years from
issuance date of the Note  Warrants.  Management  determined the warrants had no
value.

WestPark Capital Inc.  ("WestPark")  acted as our placement agent in the private
placement described above. In consideration of WestPark's services,  the Company
issued to  WestPark  or its  designees  65,000  shares in  consideration  of its
service as our private  placement  agent and 26,666  warrants  representing  the
right to purchase up to 26,666  shares  under the same terms as described in the
preceding paragraph. Management determined the warrants had no value.

Pursuant to the Notes Subscription  Agreement,  we are required to file with the
Securities and Exchange  Commission ("SEC") a registration  statement within 120
days after the issuance date of the Notes and the Note Warrants, which registers
all the shares to which the Notes may be converted and the shares underlying the
Note Warrants  issued or issuable to the Notes  Subscribers  and WestPark in the
private placement.


                                      - 24 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

In addition,  pursuant to the Notes Subscription  Agreement,  we are required to
pay a  penalty  of 5% per month if the  registration  statement  has not  become
effective  before the required  date.  The related  penalties  prior to the SB-2
registration  effective  date were accrued for and recorded by the Company.  The
SB-2 registration was filed and effective on May 11, 2006.

Common stock issued for lab use right

On March 8, 2005,  the Company  issued  300,000  shares of common stock to China
Pharmaceutical  University  located  in  Nanjing,  China,  pursuant  to a  joint
laboratory  agreement  and agreed to invest  $36,245 into the  laboratory in the
next five  years.  The value of the  300,000  shares has not been  stated in the
agreement.  The management  originally estimated the stock value as $1.00 share.
However, the management  reevaluated the value of the stock based upon the stock
performance  in the past year and decided to discount  the value of the stock to
$0.10 per share as of December 31, 2005.

Private  placement  closed  in June,  2005  (the  "Initial  Preferred  A Private
Placement")

In June 2005, the Company entered into a June subscription  agreement,  referred
to as the Initial Preferred A Subscription Agreement,  with each of twenty eight
(28)  accredited  investors,  to which  we  collectively  refer  as the  Initial
Preferred  A  Subscribers.  Pursuant to the  Initial  Preferred  A  Subscription
Agreement,  the Initial Preferred A Subscribers  received shares of our Series A
Convertible Preferred Stock ("Series A Convertible Preferred Stock"), face value
$1.00 per share,  purchase  price $1.00 per share  convertible at a ratio of 1:1
into shares.

Upon the  execution  of the Initial  Preferred A  Subscription  Agreements,  the
Company also issued to the Initial  Preferred A Subscribers  one (1) warrant for
every one (1) share of Series A Convertible Preferred Stock subscribed under the
Initial Preferred A Subscription  Agreements  ("Initial  Preferred A Warrants").
The  exercise  price of the  Initial  Preferred  A Warrants  is $2.00 per Share.
Pursuant  to  the  Initial  Preferred  A  Warrants,   the  Initial  Preferred  A
Subscribers  are entitled to purchase an aggregate  amount of 1,090,000  shares.
The Initial  Preferred A Warrants  may be  exercised  only in full.  The Initial
Preferred A Warrants  will expire three (3) years from the issuance  date of the
Initial Preferred A Warrants. Management determined the warrants had no value.

WestPark acted as placement agent in the private  placement  described above. In
consideration  of  WestPark's  services,  the Company  issued to WestPark or its
designees  76,500 shares of common stock in  consideration of its service as our
private placement agent and 76,500 Initial Preferred A Warrants representing the
right to purchase up to 76,500  shares  under the same terms as described in the
preceding paragraph. Management determined the warrants had no value.

Private  placement  closed on October  19,  2005 (the  "Subsequent  Preferred  A
Private Placement")


                                      - 25 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

On October 19, 2005, the Company entered into a subscription agreement, referred
to as the  Subsequent  Preferred A  Subscription  Agreement  (together  with the
Initial  Preferred A  Subscription  Agreement,  the  "Preferred  A  Subscription
Agreement"),  with each of three (3) accredited investors,  to which the Company
collectively refers to as the Subsequent Preferred A Subscribers  (together with
the Initial Preferred A Subscribers, the "Preferred A Subscribers"). Pursuant to
the Subsequent  Preferred A Subscription  Agreement,  the Subsequent Preferred A
Subscribers received 62,500 shares of our Series A Convertible Preferred Stock.

Upon the execution of the Subsequent Preferred A Subscription Agreement, we also
issued to the Subsequent  Preferred A Subscribers  one (1) warrant for every one
(1)  share  of  Series  A  Convertible  Preferred  Stock  subscribed  under  the
Subsequent  Preferred  A  Subscription   Agreement   ("Subsequent   Preferred  A
Warrants",  and together with the Initial Preferred A Warrants, the "Preferred A
Warrants").  The Subsequent  Preferred A Warrants has the same terms as of those
of the Initial  Preferred A Warrants and the Subsequent  Preferred A Subscribers
are  entitled to  purchase  an  aggregate  amount of 62,500  shares.  Management
determined the warrants had no value.

WestPark acted as placement agent in the private  placement  described above. In
consideration  of  WestPark's  services,  the Company  issued to WestPark or its
designees  5,625  common  stock in  consideration  of its service as our private
placement  agent and 5,625  warrants  representing  the right to  purchase up to
5,625  shares of our  common  stock  under the same  terms as  described  in the
preceding paragraph.

Management  determined  the warrants have no value.  Pursuant to the Preferred A
Subscription  Agreement,  we are  required  to file with the SEC a  registration
statement  within 120 days, which registers all the shares to which the Series A
Preferred  Convertible  Stock may be  converted  and the shares  underlying  the
Preferred  A Warrants  issued or issuable to the  Preferred  A  Subscribers  and
WestPark in the private placements.

In  addition,  pursuant  to  Initial  Preferred  A  Subscription  Agreement  and
Subsequent  Preferred A Subscription  Agreement we are required to pay a penalty
of 5% per month if the  registration  statement has not become  effective before
the required date. The related  penalties  prior to the SB-2 effective date were
accrued by the Company. The SB-2 was filed and effective on May 11, 2006.

Dividend Paid on the Preferred Stocks

Pursuant  to  the  Initial  Preferred  A  Subscription  Agreement,  the  Initial
Preferred A Subscribers  were entitled to receive  annual  dividend of 7% of the
amount invested.

Issuance of Shares for Requisitions

On May 31,  2005,  the Company  issued  3,300,000  shares of common  stock to 38
persons  including  and  represented  by Shi Ming Sheng or its assigned  natural
person or legal  representative,  all 38 persons are shareholders of Suzhou Erye
Pharmaceutical  Limited Co.,  pursuant to the acquisition of Erye effective June
11, 2005.

Issuance of Shares/Warrants for Services


                                      - 26 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

During 2005, the Company  engaged with  Consulting For Strategic  Growth 1, Ltd.
for six months  ending May 14,  2006.  The terms of the  agreement  were for the
consultant  to receive cash payment of $4,000 plus value at $2,500 common stocks
and 10,000 three year warrants to purchase common stock at $0.50 per share, each
month during the agreement. In December 2005, the Company reengaged this company
for a period of six months and the terms of the agreement are for the consultant
to  receive a cash  payment of $4,000  plus  common  stock  valued at $2,500 and
10,000 three year  warrants to purchase  common  stock at $0.50 per share,  each
month  during  the  agreement.  The shares of common  stock  were  issued to the
consultant in 2006.

On April 1, 2005,  the Company  entered  into an advisory  agreement  with Robin
Smith as the Chairman of the Company's  Advisory Board for a period of one year.
The  terms of the  agreement  were for Ms.  Smith to  receive  60,000  shares of
unregistered  common stock plus three year warrants to purchase 35,000 shares of
common stock of the Company at an exercise  price equal to $2.00.  The shares of
common stock were issued to Ms. Smith in 2005.

On April 1, 2005, the Company  engaged a consultant for a period of seven months
ending  October 31, 2005.  The terms of the agreement are for the  consultant to
receive a cash  payment of $50,000  plus  50,000  shares of common  stock of the
Company.  On December 20, 2005,  the Company  reengaged  this  consultant  for a
period  ending  December  31, 2006 and the terms of the  agreement  were for the
consultant  to receive a cash  payment of $50,000  plus 50,000  shares of common
stock of the Company. During the year of 2006, total number of shares issued for
services was 99,805, valued at a total amount of $57,500.

Private  placement closed in February 2, 2006 (the "Initial Common Stock Private
Placement")

On February 2, 2006, the Company entered into a securities  purchase  agreement,
referred to as the Initial Common Stock Securities Purchase Agreement,  with GCE
Property  Holdings,  Inc.  ("GCE"),  referred  to as the  Initial  Common  Stock
Purchaser.  Pursuant to the Initial Common Stock Securities  Purchase Agreement,
the Company  issued one million  (1,000,000)  shares of our common  stock to the
Initial Common Stock Purchaser at $1.00 per share.

Upon the execution of the Initial Common Stock Securities Purchase Agreement, we
also issued to the  Initial  Common  Stock  Purchaser  one  million  (1,000,000)
warrant  with an  exercise  price of $1.25 per share of common  stock  ("Initial
Common Stock Warrants").  The Initial Common Stock Warrants will expire four (4)
years from the date of the issuance.

Under the Initial Common Stock Securities  Purchase  Agreement,  The Company has
agreed not to issue shares or securities convertible or exchangeable into shares
at a price equal to or lower than $1.00 per share and not issue any  warrants or
securities  that are  exercisable  into  shares at a price  lower than $1.25 per
share.

Pursuant to the Initial Common Stock Securities Purchase Agreement,  the Initial
Common Stock  Purchaser was granted a right to  participate up to 100% in any of
our subsequent financing by offering of common stock or common stock equivalents
in the twelve (12) months the effective date of the registration statement..

                                      - 27 -

<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007
                                    Unaudited

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

The Company  agreed to file a  registration  statement with the SEC covering the
shares and shares underlying the Warrants,  within 65 days from this closing and
obtain  effectiveness  of such  registration  statement  within  170  days  from
closing.  The SB-2 registration  statement was filed timely and became effective
on May 11, 2006. Therefore, no penalties were incurred.

Private placement closed on March 10, 2006 (the "Subsequent Common Stock Private
Placement")

On March 10, 2006,  the Company  entered into a securities  purchase  agreement,
referred to as the Subsequent Common Stock Securities Purchase  Agreement,  with
various  investors,  referred  to as  the  Subsequent  Common  Stock  Purchaser.
Pursuant to the Subsequent Common Stock Securities Purchase Agreement, we issued
6,831,863 shares to the Subsequent Common Stock Purchaser at $1.01 per share.

Upon the execution of the Subsequent Common Stock Securities Purchase Agreement,
the Company  also issued to the  Subsequent  Common  Stock  Purchaser  6,831,684
warrants with an exercise price of $1.26 per share of common stock  ("Subsequent
Common Stock  Warrants").  The Subsequent Common Stock Warrants will expire four
(4) years from the date of the issuance.

Under the Subsequent  Common Stock Securities  Purchase  Agreement,  The Company
agreed not to issue shares or securities convertible or exchangeable into shares
at a price equal to or lower than $1.01 per share and not to issue any  warrants
or securities that are  exercisable  into shares at a price lower than $1.26 per
share.

Pursuant to the Subsequent Common Stock Securities Purchase  Agreement,  subject
and  subordinated  to the  participation  rights  of the  Initial  Common  Stock
Purchasers,  the  Subsequent  Common  Stock  Purchaser  was  granted  a right to
participate up to 100% in any of our subsequent  financing by offering of common
stock or common stock  equivalents  in the twelve (12) months from the effective
date of the registration statement of which this prospectus constitutes a part.

In  connection  with  the  Enshi  acquisition  described  in  Note 15 - Business
acquisition,  12,000,000  warrants  were  issued to RimAsia  in June  2006.  The
warrants  have an exercise  price of $1.375 and an  expiration  date of June 30,
2009, three years from the issuance date.

Note 17 - Subsequent Event

In April  2007,  the  Company  lost an action to offset  claims  against  Mr. Li
against Mr. Li's working  capital loan to Enshi.  The court decided to view each
action  separately on its own merit. The Company paid the amount of $560,735 due
to Liao Ning Xie He and $86,765 due to Li Xiao Bo,  which are included in Note 8
as other payables - related parties.





                                      - 28 -


<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The following discussion and analysis should be read in conjunction with
the consolidated financial statements and related notes thereto. The following
discussion contains forward-looking statements. China Biopharmaceuticals
Holdings, Inc. is referred to herein as "we", "our,", "us", or "the Company".
The words or phrases "would be," "will allow," "expect to", "intends to," "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," or similar expressions are intended to identify forward-looking
statements. Such statements include those concerning our expected financial
performance, our corporate strategy and operational plans. Actual results could
differ materially from those projected in the forward-looking statements as a
result of a number of risks and uncertainties, including: (a) those risks and
uncertainties related to general economic conditions in China, including
regulatory factors that may affect such economic conditions; (b) whether we are
able to manage our planned growth efficiently and operate profitable operations,
including whether our management will be able to identify, hire, train, retain,
motivate and manage required personnel or that management will be able to
successfully manage and exploit existing and potential market opportunities;(c)
whether we are able to generate sufficient revenues or obtain financing to
sustain and grow our operations; and (d) whether we are able to successfully
fulfill our primary requirements for cash which are explained below under
"Liquidity and Capital Resources". Statements made herein are as of the date of
the filing of this Form 10-QSB with the Securities and Exchange Commission and
should not be relied upon as of any subsequent date. Unless otherwise required
by applicable law, we do not undertake, and we specifically disclaim any
obligation, to update any forward-looking statements to reflect occurrences,
developments, unanticipated events or circumstances after the date of such
statement.

OUR BUSINESS

     We are a vertically integrated bio-pharmaceutical company focused on
developing, manufacturing and distributing innovative drugs in the People's
Republic of China ("China" or PRC"). Our mission is to maximize investment
returns for our shareholders by integrating our strong drug discovery and
development strength with manufacturing and commercialization capabilities and
by actively participating in the consolidation and privatization of the
pharmaceutical industry in China to become a dominant player in the
bio-pharmaceutical industry in China.

CRITICAL ACCOUNTING POLICIES

     We have identified the policies below as critical to understanding of our
financial statements. The application of these polices requires management to
make estimates and assumptions that affect the valuation of assets and expenses
during the reporting period. There can be no assurance that actual results will
not differ from these estimates. The impact and any associated risks related to
these policies on our business operations are discussed below.

REVENUE AND REVENUE RECOGNITION

     For fixed-price refundable contracts, we recognize revenue on a milestone
basis. Progress payments received/receivables are recognized as revenue only if
the specified milestone is achieved and accepted by the customer. Confirmed
revenue is not refundable and continued performance of future research and
development services related to the milestone are not required. For sale of
patented pharmaceutical formulas, the Company recognizes revenue upon delivery
of the patented formulas. For sales of final medicines and processed materials,
we recognize revenue upon delivery of the goods. The company usually does not
offer sales returns or refunds on the products except for some specific
circumstances, such as quality problems, which is rare and is difficult to have
an accurate estimate.


                                     - 29 -
<PAGE>
ACCOUNTS RECEIVABLE

     Accounts receivable are carried at original invoice amount less an estimate
made for doubtful receivables based on a review of all outstanding amounts on a
monthly basis. Management judgment and estimates are made in connection with
establishing the allowance for doubtful accounts. Specifically, we analyze the
aging of accounts receivable balances, historical bad debts, customer
concentrations, customer credit-worthiness, current economic trends and changes
in our customer payment terms. Significant changes in customer concentration or
payment terms, deterioration of customer credit-worthiness or weakening in
economic trends could have a significant impact on the collectibility of
receivables and our operating results. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. The reserve for bad debts
increased to $999,045 at March 31, 2007 from $911,064 at December 31, 2006.This
increase represents 1.17% of total revenues and is mainly resulted from increase
in the aged balances due to the slower collection during the Chinese holiday
season in February and March. As of March 31, 2007, accounts receivable, net of
allowance for doubtful accounts, amounted to $5,530,362. The days sales
outstanding were 78 days for three months ended March 31, 2007, compared to 71
days for the same period in 2006. The increase in the collection period was
mainly resulted from the slow collection of AR from Keyuan's customers due to
the enhanced government regulations on R&D activities. Also, in 2007, we
approved to extend payment term for several major customers, which slightly
slowed down the collection of accounts receivable.

The following table provides the roll forward of the allowance of doubtful
accounts:

     Allowance for doubtful accounts

     As of December 31, 2006                                       $911,064
     Provision for the three month period ended
     March, 2007                                                     87,981
                                                                   --------

     As of March 31, 2007                                          $999,045
                                                                   ========


The following list the aging of our accounts receivable as of March 31, 2007:
<TABLE>
<CAPTION>

                        3 months            6 months           9 months       Over 9 months          Over 1 year
     Total          Amount      %        Amount     %      Amount      %     Amount       %        Amount     %
----------------  ---------  ------    ---------  ------  --------   -----  ---------   ------    --------  ------
<S>               <C>        <C>       <C>        <C>     <C>        <C>    <C>         <C>       <C>       <C>
  $6,529,407      2,474,668  37.90%    1,007,930  15.44%  628,318    9.62%  1,371,887   21.01%    1,046,604 16.03%

</TABLE>

We prepare the above consolidated aging based on the aging for each subsidiary
in above format. As each subsidiary of the Company conducts business with
different customers with different size and creditworthiness, and each
subsidiary has different impact on and different relationship with their
customers, we determine the allowance on an individual basis. Basically, we
assign various rates to each of the aging group of AR and add up the products
for respective aging group to the total allowance for doubtful accounts.
Different subsidiaries have different rates for even the same aging category. In
addition to that, we also consider the changes in specific financial condition
of their customers if situation or events indicate that some accounts may pose
unusual risk compared to others, additional allowance may be provided for those
accounts.

INCOME TAX

     Significant judgment is required in determining our income tax provision.
In the ordinary course of business, there are many transactions and calculations
where the ultimate tax outcome is uncertain. Although we believe that our
estimates are reasonable, no assurance can be given that the final outcome of
these matters will not be different than that which is reflected in our
historical income tax provisions and accruals. Such differences could have a
material effect on our income tax provision and net income in the period in
which such determination is made. We apply an asset and liability approach to
accounting for income taxes. Deferred tax liabilities and assets are recognized
for the expected future tax consequences of temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The recoverability of deferred tax assets is dependent upon our assessment of
whether it is more likely than not that sufficient future taxable income will be
generated to utilize the deferred tax asset. In the event we determine that
future taxable income will not be sufficient to utilize the deferred tax asset,
a valuation allowance is recorded.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2007 AS COMPARED TO THREE
MONTHS ENDED MARCH 31, 2006

     We acquired Enshi on June 6, 2006; therefore, operating results of Enshi
for the three months ended March 31, 2007 are not reflected in this quarter
report. On August 29, 2006, the Company entered to an agreement with the
minority shareholders of Hengyi to divest Hengyi and its subsidiary, Suzhou
Sintofarm, in which Hengyi has 50% controlling ownership interest from its
subsidiary portfolio. Therefore, the results of Hengyi's operations and cash
flows for the three months ended March 31, 2006 were reported as discontinued
operations in the consolidated financial statements.

     The Enshi acquisition has created a drag on the Company's overall operation
results and expansion plan due to Enshi below-expectation results and the
associated large acquisition financing loan. The Company has moved aggressively
to stabilize Enshi operations. Other than Enshi, the other main manufacturing
unit, Erye has delivered an impressive growth of more than 30% in net income,
along the line of our expectation. The Enshi acquisition may slow down our
original expansion plan in terms of management resources devoted to its
operations and integration but we are still actively looking for growth and
expansion opportunities and still believe in the overall strategy of internal
growth and acquisitions. The recent reshuffle of top management in inviting
Erye's top management, Ms. ZHANG Jian and Mr. SHI Mingsheng, to play a more
active role in the Company's management is expected to improve the overall
operaions of the Company giving play to their industrial and manufacturing and
marketing expertise.


                                     - 30 -
<PAGE>

REVENUE.

     Revenue for the three months ended March 31, 2007 was $7,532,122 while the
revenue for the three months ended March 31, 2006 was $5,549,923, representing
an approximately 36% increase. The result for the quarter ended March 31, 2007
include the revenue generated by Enshi which was not yet a part of the Company
during the first quarter of 2006.

COST OF GOODS SOLD

     Cost of goods sold for the three months ended March 31, 2007 was $5,523,280
as compared to $4,116,154 for the three months ended March 31, 2006. Cost of
goods sold as a percentage of sales revenues was approximately 73% for the three
months ended March 31, 2007 as compared to approximately 74% for the three
months ended March 31, 2006. The result for the quarter ended March 31, 2007
include the cost of goods sold generated by Enshi which was not yet a part of
the Company during the first quarter of 2006.

GROSS PROFIT.

     Gross profit in the three months ended March 31, 2007 amounted at
$2,008,842, as compared to $1,433,769 for the three months ended March 31, 2006,
representing approximately 40% increase. The gross profit margin for the three
months ended March 31, 2007 was 27% as compared to approximately 26% for the
three months ended March 31, 2006. Erye's higher gross margins contributed
mainly to the Company's increase in the quarter.

OPERATING EXPENSES

     Operating expenses for the three months ended March 31, 2007 was $1,368,478
as compared to $972,047 for the three months ended March 31, 2006, representing
41% increase. Higher operational expenses at Erye, as well as higher
professional service fees incurred at the parent company, many of which were one
time transactional expenses, were the main contributors to this increase.

RESEARCH AND DEVELOPMENT

     Research and development costs for the three months ended March 31 ,2007
was $43,163 as compared to $258,075 for the three months ended March 31, 2006,
representing a 83% decrease. This decrease was primarily attributable to a
slowing of research and development activity as the Chinese SFDA drastically
reduced its level of regulatory approval activity. This change at the Chinese
SFDA occurred because of wide-ranging scandals leading to the departure of many
high and mid-level SFDA officials.

INCOME FROM OPERATIONS

     Income from operations in the three months ended March 31, 2007 amounted at
$640,364, as compared to $461,722 for the three months ended March 31, 2006,
representing approximately 39% increase. The increase is mainly due to the
significant increase in Erye's strong performance and its operating income.

NET INCOME

     Net loss for the three months ended March 31, 2007 was $88,268 as compared
to net income of $193,992 for the three months ended March 31, 2006,
representing 146% decrease. Much of the loss is attributable to higher payment
and accrued interest expenses as a result of the acquisition financing loan due
to RimAsia for the Enshi acquisition.


INTEREST EXPENSE

     Interest expense for the three months ended March 31, 2007 was $368,113 as
compared to $46,742 for the three months ended March 31, 2006, representing 688%
increase. This significant increase mainly attributed to the large interest
payment on RimAsia's acquisition loan for the Enshi acquisition.

LIQUIDITY AND CAPITAL RESOURCES

     For the three months ended March 31, 2007, net cash used in operating
activities was $366,337, net cash provided by investing activities was $53,404,
net cash used in financing activities was $126,443. For the three months ended
March 31, 2006, net cash provided by operating activities was $448,629, net cash
used in investing activities was $41,768, net cash provided in financing
activities was $6,680,472.



                                     - 31 -
<PAGE>
     Cash and cash equivalents as of March 31, 2007 was $2,484,059. This is a
unique period for merger and acquisition in China. To achieve our goal of
continued acquisitions in the industry, we need to raise additional funding in
the near future to fund such future acquisitions. In February 2006, we conducted
a private placement of our common stock with gross proceeds of $1,000,000. In
March 2006, we sold additional shares of our common stock with gross proceeds of
$6,900,000. Pursuant to various agreements entered by us in connection with the
private placement mentioned above, we are required to file with the SEC a
registration statement, which registers all the shares of common stock issued
under these placements, including the shares to which the Series A Preferred
Convertible Stock may be converted and the shares underlying the warrants issued
or issuable pursuant to these placements. In addition, pursuant to the
agreements, we are required to pay a penalty of 5% per month if the registration
statement has not become effective before required date. We have filed a
registration statement on form SB-2 covering the shares issued and issuable on
April 30, 2006 and this registration statement has became effective on May 11,
2006.

     Due to the Enshi acquisition financing, the Company is servicing a loan of
$11,500,000 in connection with the acquisition of RACP Pharmaceuticals as
presented in Note 15 of our notes to consolidated financial statements, Business
Combination. Interest on the loan will be paid semi-annually at an annual rate
of 11%. As of March 31, 2007, the balance of the long-term debt was $11,500,000.

     After a review of the covenants in connection with the above-mentioned
loan, the Company determined that it may be in violation of certain of the
covenants due to the situation at Enshi. Therefore, the $11.5 million loan is
fully classified as a current liability.

     We are in a process of discussion and negotiation with RimAsia, the lender
of the Enshi acquisition loan, for a workout package for the $11.5 million Enshi
acquisition loan in view of the performance of Enshi.

     In addition, the board of directors has approved a loan of RMB4,000,000
from Erye and Erye affiliate to finance the operations of Enshi using the
Company's 51% ownership interest as collateral. Erye's assitance and expertise
are instrumental in improving the performance of Enshi.

     Going forward, our primary requirements for cash consist of: (1) Stabilize
and streamline the Enshi operation;(2) acquisition of additional pharmaceutical
manufacturing companies with GMP standard facilities in order to commercialize
new drugs in our extensive new drug pipeline and further extend of product
pipeline and expand the our sales network (3) Continued R&D for more selected
new drug projects (4) build up sales network for new drug distribution. We
anticipate that our internal source of liquid assets may enable us to continue
our operation activities other than acquisition activities for next three
months. However, we anticipate that our current operating activities may not
enable us to meet the anticipated cash requirements for future acquisition
activities. External source of capital may be needed for our expansion. We are
exploring bank loans and private equity financing to finance such expenditures
and intend to raise equity through the capital market to allow us to accomplish
our future acquisition goals.

MANAGEMENT ASSUMPTIONS

     Management anticipates, based on internal forecasts and assumptions
relating to our current operations, that existing cash and funds generated from
operations may not be sufficient to meet capital requirements for future
acquisition activities. We could therefore be required to seek additional
financing. There can be no assurance that we will be able to obtain such
additional financing at acceptable terms to us, or at all.

EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES

     Our operating subsidiaries are located in China. Their business activities
are mainly in China using Chinese Renminbi as the functional currency. The value
of the Renminbi against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in China's political and economic
conditions. As we rely entirely on revenues earned in China, any significant
revaluation of the Renminbi may materially and adversely affect our cash flows,
revenues and financial condition. For example, to the extent that we need to
convert U.S. dollars we receive from an offering of our securities into Renminbi
for our operations, appreciation of the Renminbi against the U.S. dollar could
have a material adverse effect on our business, financial condition and results
of operations.

     Conversely, if we decide to convert our Renminbi into U.S. dollars for the
purpose of making payments for dividends on our common shares or for other
business purposes and the U.S. dollar appreciates against the Renminbi, the U.S.
dollar equivalent of the Renminbi we convert would be reduced. To date, however,
we have not engaged in transactions of either type.

     Since 1994 China has pegged the value of the Renminbi to the U.S. dollar.
We do not believe that this policy has had a material effect on our business.
However, there have been indications that the Chinese government may be
reconsidering its monetary policy in light of the overall devaluation of the
U.S. dollar against the Euro and other currencies during the last two years. In
July 2005, the Chinese government revalued the Renminbi by 2.1% against the U.S.
dollar, moving from Renminbi 8.28 to Renminbi 8.11 per dollar. As of March 31,
2007, the value of the Renminbi to the U.S. dollar was translated at 7.73 RMB to
$1.00 USD.


                                     - 32 -

<PAGE>
ITEM 3. CONTROL AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures - We maintain a system of
disclosure controls and procedures that are designed for the purposes of
ensuring that information required to be disclosed in our SEC reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), as appropriate to allow timely decisions
regarding required disclosures.

     As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our CEO and CFO,
of the effectiveness of our disclosure controls and procedures as defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on that
evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are effective.

     Changes in Internal Control Over Financial Reporting - There has been no
change in our internal control over financial reporting during the first quarter
of 2007 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     The Company has commenced legal proceeding for damages of $10,000,000
against Mr. Li Xiaobo the formershareholder of Enshi for breach of
representations and warranties and frozen approximately $7,000,000 worth of
assets. The Company reserves the right to take further actions if necessary to
seek additional damages and compensation for such serious breach of
representations and warranties and will make appropriate disclsoures pending the
legal proceedings. In April 2007, the Company lost an action in a court in
Shenyang, China to offset claims against Mr. Li against Mr. Li's working capital
loan to Enshi. The court decided to view each action separately on its own
merit. The Company paid the amount of $560,735 due to Liao Ning Xie He and
$86,765 due to Li Xiao Bo. The Company reserves the right to take additional
actions against Mr. Li and will continue its proceedings in other courts outside
as well as in China.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this quarterly report on Form
10-QSB:

EXHIBIT
NUMBER         DESCRIPTION
------         --------------------------------------------------------------

31.1           Certification of Chief Executive Officer Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

31.2           Certification of Chief Financial Officer Pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

32.1            Certification of Chief Executive Officer pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002

32.2           Certification of Acting Chief Financial Officer pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002



                                     - 33 -
<PAGE>







SIGNATURES

      In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                     CHINA BIOPHARMACEUTICALS HOLDINGS, INC.


                                     By: /s/ Chris Peng Mao
                                     -------------------------------------------
                                     Name:  Chris Peng Mao
                                     Title: Chief Executive Officer
                                     Date: May 15, 2007


                                     By: /s/ HUNAG Chentai
                                     -------------------------------------------
                                     Name:  HUANG Chentai
                                     Title: Chief Financial Officer
                                     Date: May 15, 2007


                                     - 34 -
<PAGE>