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 June 30, 2006
                                       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

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|
<PAGE>

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 June 30, 2006
---------------------------------------   --------------------------------------
Common Stock, $0.01 par value             37,341,676

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

                                       2
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              Page
                                                                             ------
<S>                                                                             <C>
PART I - FINANCIAL INFORMATION ..................................................4

  ITEM 1. FINANCIAL STATEMENTS ..................................................4

  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS ............................................31

  ITEM 3. CONTROL AND PROCEDURES ...............................................39

PART II - OTHER INFORMATION ....................................................40

  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS...........40

  ITEM 5. OTHER EVENTS..........................................................40

  ITEM 6. EXHIBITS .............................................................40
</TABLE>

            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.

                                       3
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENT

           CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEET
                       AS OF JUNE 30, 2006

<TABLE>
<CAPTION>
                                     ASSETS
                                     ------
                                                                       June 30,
                                                                         2006
                                                                     ------------
                                                                      (Unaudited)
                                                                     ------------
<S>                                                                  <C>
CURRENT ASSETS:
   Cash                                                              $  3,167,439
   Accounts receivable, trade, net of allowance
     for doubtful accounts of $753,158
     and $525,391 for June 30, 2006
     and December 31, 2005, respectively                               11,132,994
   Accounts receivable, related parties                                    70,112
   Other receivables                                                    2,690,617
   Other receivables - related parties                                    164,894
   Advances to suppliers                                                  814,941
   Prepaid expenses                                                        67,135
   Inventories                                                          6,677,137
                                                                     ------------
     Total current assets                                              24,785,269
                                                                     ------------

PLANT AND EQUIPMENT, net                                               12,772,244
                                                                     ------------

OTHER ASSETS:
   Intangible asset, net                                               12,696,792
   Long term notes receivable                                             800,800
   Long term other receivables - related parties                        1,431,438
   Restricted cash                                                        982,991
   Other assets                                                            47,115
                                                                     ------------
     Total other assets                                                15,959,136
                                                                     ------------

       Total assets                                                  $ 53,516,649
                                                                     ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                     ------------

CURRENT LIABILITIES:
   Accounts payable                                                  $  6,397,065
   Accounts payable - related parties                                     146,008
   Short-term loans                                                     7,549,560
   Other payables                                                         346,137
   Other payables - related parties                                       682,132
   Investment payable                                                     465,119
   Customer deposits                                                      565,782
   Notes payable                                                        1,653,211
   Short-term convertible notes payable                                        --
   Taxes payable                                                        1,312,964
   Dividends payable                                                           --
   Other accrued liabilities                                              605,389
                                                                     ------------
     Total current liabilities                                         19,723,367
                                                                     ------------

LONG TERM LIABILITIES:
   Long term debt                                                      11,000,000
   Long term debt - related parties                                       460,039
                                                                     ------------
     Total long term liabilities                                       11,460,039
                                                                     ------------

     Total liabilities                                                 31,183,406
                                                                     ------------

MINORITY INTEREST                                                       5,313,448
                                                                     ------------

SHAREHOLDERS' EQUITY:
   Preferred stock, $0.01 par value, 10,000,000 shares authorized;
     930,000 shares Issued and outstanding as of June 30, 2006              9,300
   Common stock, $0.01 par value, 200,000,000 shares authorized;
     37,341,676 shares issued and outstanding as of June 30,2006          373,417
   Paid-in capital                                                     13,570,591
   Capital receivable                                                    (252,471)
   Deferred compensation                                                  (24,000)
   Statutory reserves                                                   2,529,945
   Retained earnings                                                      137,820
   Accumulated other comprehensive income                                 675,193
                                                                     ------------
     Total shareholders' equity                                        17,019,795
                                                                     ------------

       Total liabilities and shareholders' equity                    $ 53,516,649
                                                                     ============
</TABLE>

The accompanying notes are an integral part of this statement.

                                       4
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                Three months ended June 30,      Six months ended June 30,
                                                               ----------------------------   ----------------------------
                                                                   2006            2005           2006            2005
                                                               ------------    ------------   ------------    ------------
                                                                 (Unaudited)   (Unaudited)    (Unaudited)     (Unaudited)
                                                               ------------    ------------   ------------    ------------
<S>                                                            <C>             <C>            <C>             <C>
REVENUES                                                       $  9,776,364    $  3,642,565   $ 16,916,873    $  5,631,073

COST OF GOODS SOLD                                                7,122,201       2,835,430     12,680,884       3,934,497
                                                               ------------    ------------   ------------    ------------

GROSS PROFIT                                                      2,654,163         807,135      4,235,989       1,696,576
                                                               ------------    ------------   ------------    ------------

OPERATING EXPENSES
     Research and development expenses                              240,747                       498,822
     Selling, general and administrative expenses                   892,019         604,177      1,677,853         961,545
                                                               ------------    ------------   ------------    ------------
        Total Operating Expenses                                  1,132,766         604,177      2,176,675         961,545
                                                               ------------    ------------   ------------    ------------

INCOME  FROM OPERATIONS                                           1,521,397         202,958      2,059,314         735,031
                                                               ------------    ------------   ------------    ------------

OTHER INCOME (EXPENSE)
     Interest income ( expenses)                                   (181,976)             --       (259,765)             --
     Other income (expenses)                                        194,405          24,524        174,832         (12,575)
                                                               ------------    ------------   ------------    ------------
        Total Other Income (expenses)                                12,429          24,524        (84,933)        (12,575)
                                                               ------------    ------------   ------------    ------------

INCOME BEFORE INCOME TAXES                                        1,533,826         227,482      1,974,381         722,456

PROVISION FOR INCOME TAXES                                          160,472              --        160,472              --
                                                               ------------    ------------   ------------    ------------

INCOME BEFORE MINORITY INTEREST                                   1,373,354         227,482      1,813,909         722,456

MINORITY INTEREST                                                   410,748         102,023        657,311         189,330
                                                               ------------    ------------   ------------    ------------

NET INCOME                                                          962,606         125,459      1,156,598         533,126

OTHER COMPREHENSIVE INCOME (LOSS):
     Foreign currency translation adjustment                        401,137              --        519,104              --
                                                               ------------    ------------   ------------    ------------

COMPREHENSIVE INCOME (LOSS)                                    $  1,363,743    $    125,459   $  1,675,702    $    533,126
                                                               ============    ============   ============    ============

NET INCOME PER SHARE - BASIC AND DILUTED                       $       0.04    $      0.005   $       0.05    $       0.02
                                                               ============    ============   ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC           33,662,770      25,347,099     33,662,770      25,347,099
                                                               ============    ============   ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED         34,592,770      25,436,688     34,592,770      25,436,688
                                                               ============    ============   ============    ============
</TABLE>

The accompanying notes are an integral part of this statement.

                                       5
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE SIX MONTHS ENDED JUNE 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                             Common Stock              Preferred Stock
                                                      --------------------------------------------------    Paid-in      Capital
                                                          Shares      Amount       Shares        amount     Capital     Receivable
                                                      ------------ ------------ ------------  ---------- ------------  ------------
<S>                                                   <C>          <C>          <C>           <C>        <C>           <C>
BALANCE, December 31, 2004                              24,358,757      243,588                             1,363,601            --
  Shares issued for services                               175,000        1,750                               122,817            --
  Common shares issued for lab use right                   300,000        3,000                               297,000
  Shares issued for Erye acquisition                     3,300,000       33,000                             1,617,000            --
  Preferred shares issued                                                          1,090,000      10,900      945,245            --
  Net income
  Statutory reserves
  Foreign currency translation adjustments
                                                      ------------ ------------ ------------  ---------- ------------  ------------
BALANCE, June 30, 2005, Unaudited                       28,133,757      281,338    1,090,000      10,900    4,345,663            --
  Adjustment for shares issued for Hengyi acquisition                                                        (667,974)           --
  adjustment for shares issued for lab use right                --           --                              (270,000)
  Common shares issued for services                        482,959        4,829                               110,319            --
  Capital receivable                                                                                                       (252,471)
  Deferred compensation
  Preferred shares issued                                                             62,500         625       54,199            --
  Net income
  Statutory reserves
  Foreign currency translation adjustments
                                                      ------------ ------------ ------------  ---------- ------------  ------------
BALANCE, December 31, 2005                              28,616,716 $    286,167    1,152,500  $   11,525 $  3,572,207  $   (252,471)
  Common shares issued for cash                          7,831,863       78,319                             6,845,090
  Common shares issued for services                         50,000          500                                 4,500
  Common shares issued for note conversion                 399,820        3,998                               421,002
  Common shares issued for preferred stock conversion      443,277        4,433     (312,500)     (3,125)      (1,308)
  Preferred shares issued                                                             90,000         900       89,100
  Assumed warrants to issue common stocks                                                                   2,640,000
  Net income
  Statutory reserves
  Dividends paid to preferred stock shareholders
  Foreign currency translation adjustments
                                                      ------------ ------------ ------------  ---------- ------------  ------------
BALANCE, June 30, 2006, Unaudited                       37,341,676      373,417      930,000       9,300   13,570,591      (252,471)
                                                      ============ ============ ============  ========== ============  ============


<CAPTION>
                                                                                                    Accumulated
                                                                     Unappropriated                    Other
                                                          Deferred       Retained     Statutory    Comprehensive
                                                        Compensation     Earnings      Reserves     Income (Loss)     Totals
                                                        ------------   ------------  ------------   ------------   ------------
<S>                                                     <C>            <C>           <C>            <C>            <C>
BALANCE, December 31, 2004                                        --        530,861        60,750         (3,339)     2,195,461
  Shares issued for services                                      --                                                    124,567
  Common shares issued for lab use right                                                                                300,000
  Shares issued for Erye acquisition                              --                                                  1,650,000
  Preferred shares issued                                         --                                                    956,145
  Net income                                                                533,126                                     533,126
  Statutory reserves                                                             --            --                            --
  Foreign currency translation adjustments                                                                                   --
                                                        ------------   ------------  ------------   ------------   ------------
BALANCE, June 30, 2005, Unaudited                                 --      1,063,987        60,750         (3,339)     5,759,299
  Adjustment for shares issued for Hengyi acquisition             --                                                   (667,974)
  adjustment for shares issued for lab use right                                                                       (270,000)
  Common shares issued for services                               --                                                    115,148
  Capital receivable                                                                                                   (252,471)
  Deferred compensation                                      (24,000)                                                   (24,000)
  Preferred shares issued                                         --                                                     54,824
  Net income                                                                394,470                                     394,470
  Statutory reserves                                                       (383,873)      383,873                            --
  Foreign currency translation adjustments                                                               159,428        159,428
                                                        ------------   ------------  ------------   ------------   ------------
BALANCE, December 31, 2005                              $    (24,000)  $  1,074,584  $    444,623   $    156,089   $  5,268,724
  Common shares issued for cash                                                                                       6,923,409
  Common shares issued for services                                                                                       5,000
  Common shares issued for note conversion                                                                              425,000
  Common shares issued for preferred stock conversion                                                                        --
  Preferred shares issued                                                                                                90,000
  Assumed warrants to issue common stocks                                                                             2,640,000
  Net income                                                              1,156,598                                   1,156,598
  Statutory reserves                                                     (2,085,322)    2,085,322                            --
  Dividends paid to preferred stock shareholders                             (8,040)                                     (8,040)
  Foreign currency translation adjustments                                                               519,104        519,104
                                                        ------------   ------------  ------------   ------------   ------------
BALANCE, June 30, 2006, Unaudited                            (24,000)       137,820     2,529,945        675,193     17,019,795
                                                        ============   ============  ============   ============   ============
</TABLE>

The accompanying notes are an integral part of this statement.

                                       6
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                                     2006           2005
                                                                                  -----------    -----------
                                                                                  (Unaudited)   (Unaudited)
                                                                                  -----------    -----------
<S>                                                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                     $ 1,156,598    $   533,126
   Adjustments to reconcile net income to cash
     provided by (used in) operating activities:
       Depreciation and amortization                                                  569,970         70,666
       Minority interest                                                              657,311        479,675
   Change in operating assets and liabilities:
     (Increase) decrease in assets:
       Accounts receivable                                                         (1,666,058)     3,255,680
       Accounts receivable, related parties                                           (69,787)            --
       Notes receivable                                                                47,434             --
       Other receivables and prepayments                                           (1,505,219)      (137,387)
       Other receivables - related parties                                         (1,437,177)            --
       Long term other receivables - related parties                               (1,424,806)            --
       Advances to suppliers                                                          299,649             --
       Other assets                                                                        --        307,974
       Inventories                                                                   (835,285)      (408,946)
       Restricted cash                                                                357,489             --
     Increase (decrease) in liabilities:
       Accounts payable                                                                28,474             --
       Accounts payable - related parties                                             (96,729)            --
       Other payables and accrued liabilities                                        (115,589)    (4,007,403)
       Other payables - related parties                                             2,654,626            (22)
       Customer deposits                                                             (183,762)       186,963
       Taxes payable                                                                   61,661        (19,029)
                                                                                  -----------    -----------
         Net cash provided by (used in ) operating activities                      (1,501,200)       261,297
                                                                                  -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Business acquisition - cash paid                                                  (500,000)      (200,000)
   Cash acquired from business acquisition                                            415,361             --
   Purchase of intangible asset                                                      (348,936)            --
   Purchase of property and equipment                                                (505,623)      (164,693)
   Payment to Erye's shareholders                                                    (430,000)            --
   Dividend paid to Erye's former shareholders                                       (186,930)            --
   Payments for long-term loans receivable                                           (798,480)            --
                                                                                  -----------    -----------
         Net cash used in investing activities                                     (2,354,608)      (364,693)
                                                                                  -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of preferred stock                                           90,000        397,000
   Proceeds from issuance of common stock                                           7,348,409      1,090,000
   Proceeds (payments) on loans payable                                              (547,760)       156,962
   Proceeds (payments) on short-term convertible notes                               (425,000)       475,000
   Payments on long-term debts                                                       (604,376)            --
   Proceeds from long-term debts - related parties                                     40,097             --
                                                                                  -----------    -----------
         Net cash provided by financing activities                                  5,901,370      2,118,962
                                                                                  -----------    -----------

EFFECT OF EXCHANGE RATE ON CASH                                                        95,271             --
                                                                                  -----------    -----------

INCREASE IN CASH                                                                    2,140,833      2,015,566

CASH, beginning of period                                                           1,026,606        467,036
                                                                                  -----------    -----------

CASH, end of period                                                               $ 3,167,439    $ 2,482,602
                                                                                  ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes                                                        $        --    $    72,493
                                                                                  ===========    ===========

Cash paid for interest expense                                                    $   154,348        149,591
                                                                                  ===========    ===========
</TABLE>

The accompanying notes are an integral part of this statement.

                                       7
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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 additional
$1,600,000 as additional contribution into the acquired Hengyi 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. The detail information of
accounting for this transaction is disclosed on Note 15 - Business Combinations.

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 operation 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 its common stock to existing shareholders
of Tianyin or their designees and also agreed to invest an amount of US$2
million into Tianyin operations. 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
at least US$3,000,000. Our auditors are currently engaged to audit the financial
statements of Tianyin. 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
operation control of Tianyin at this moment 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 has been in
the process of evaluation, the final determination of this merger transaction
has not reasonably reached a conclusion; the financial statements of Tianyin
were not included in the consolidated financial statements for the six months
ended June 30, 2006.


                                       8
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 1- ORGANIZATION AND OPERATIONS , (continued)

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 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 the $11,500,000 debt of RACP. The detail information of
accounting for this transaction is disclosed on Note 15 - Business Combinations.

The principle activities of the Company 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. The principle activities are in China only.

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.

Basis of Presentation

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

Since the Tianyin's transaction is in the evaluation process, the final
determination of this merger transaction has not reasonably reached a
conclusion; the financial statements of Tianyin were not included in the
consolidated financial statements for the six months ended June 30, 2006.

On August 4, 2004, the Company declared that the majority stockholders of Globus
executed a written consent providing a merger (the "Merger") of Globus with and
into its wholly owned subsidiary, CBH. On July 3, 2004, an Agreement and Plan of
Merger (the Merger Agreement) was signed by and between Globus and CBH. The
Merger Agreement provided for a tax-free reorganization pursuant to the
provisions of Section 368 of the Internal Revenue Code, whereby Globus would be
merged with and into CBH. The separate corporate existence of Globus ceased and
CBH continued as the surviving corporation of the merger. In the Merger, all
issued and outstanding shares of Globus were converted into shares of common
stock of CBH on the basis of seven for five (7 for 5).


                                       9
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

Basis of Presentation, (continued)

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                                 50 years

The cost and related accumulated depreciation of assets sold or otherwise
retired are eliminated from the accounts and any gain or loss is included in the
statement of 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.


                                       10
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

Patent and Development Costs

The patent and development costs 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 it within not more than two months, otherwise the patent
and development costs will be subject to amortization over its estimated useful
life period. Such costs comprise purchase costs of patented pharmaceutical
formulas, development costs, raw materials and other related expenses of
pharmaceutical formulas. Patent and development costs are accounted for on an
individual basis. The carrying value of patent and development costs is reviewed
for impairment annually when events 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. The costs of the acquisition of
technology is capitalized if it has alternative future uses in other research
and development projects or otherwise.

Cash and concentration of risk

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 June 30, 2006 amounted to $3,167,439 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.

Fair Value of Financial Instruments

The Company's financial instruments primarily include cash and cash equivalents,
accounts receivable, 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.

Revenue and Revenue Recognition

We have three categories of revenue resources, revenue from sales of new drugs
formulas, revenue from R&D service rendered by the Company and revenue from
sales of medical product.

The Company recognizes revenue from product and drug formula sales when title
has been transferred, 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 revenue from R&D service, revenue is recognized when milestone goals are
achieved at the amount of the corresponding milestone payment.


                                       11
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

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.

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. 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.

SFAS No. 130, Reporting Comprehensive Income, established standard 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 and cash flow are translated at average exchange
rates during the period, and 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.

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.


                                       12
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

Foreign Currency Translation, (continued)

Translation adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and amounted to $519,104 and $0 for the six months ended June 30, 2006 and 2005,
respectively. The balance sheet amounts with the exception of equity at June 30,
2006 were translated at 7.99 RMB to 1.00 USD as compared to 8.26 RMB at June 30,
2005. The equity accounts were stated at their historical rate. The weighted
average translation rate of 8.02 RMB to 1.00 USD for the six months ended June
30, 2006 was applied to income statement accounts.

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 not material 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 EPS and Diluted EPS.

As of June 30, 2006, the Company's issued and outstanding shares of Series A
convertible preferred stock was 930,000. The Company computed the Diluted EPS by
taking into account the dilutive effect of the preferred stock issued and
determined that there was no material difference between Basic and Diluted EPS
for the six months ended June 30, 2006 and 2005. We also took into account the
warrants we issued for computation of Earnings per share. We decided that all
the warrants were anti-dilutive because the excise prices were higher than
market price in the period presented. The number of shares used in computing
diluted earnings per share for the six months ended June 30, 2006 and 2005
amounted to 34,592,770 which included 930,000 weighted average number of
convertible preferred stock, and 25,436,688, respectively. The number of shares
used in computing basic earnings per share for the six months ended June 30,
2006 and 2005 were 33,662,770 and 25,347,099 respectively. Basic and Diluted
earnings per share for the six months ended June 30, 2006 and 2005 amounted to
0.05 and 0.02, respectively.

Recent Accounting Pronouncements

In March 2005, the FASB published FASB Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations," which clarifies that the term,
conditional asset retirement obligations, as used in SFAS No. 143, "Accounting
for Asset Retirement Obligations," refers to a legal obligation to perform an
asset retirement activity in which the timing and (or) method of settlement are
conditional on a future event that may or may not be within the control of the
entity. The uncertainty about the timing and (or) method of settlement of a
conditional asset retirement obligation should be factored into the measurement
of the liability when sufficient information exists. The interpretation also
clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. This interpretation
is effective no later than the end of the Company's fiscal year 2006. The
adoption of this Interpretation is not expected to have a material effect on the
Company's consolidated financial position or results of operations.


                                       13
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

Recent Accounting Pronouncements, (continued)

In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS No. 154"). SFAS No. 154 replaces APB No. 20 ("APB 20") and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements," and
applies to all voluntary changes in accounting principle, and changes the
requirements for accounting for and reporting of a change in accounting
principle. APB 20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of change a
cumulative effect of changing to the new accounting principle whereas SFAS No.
154 requires retrospective application to prior periods' financial statements of
a voluntary change in accounting principle, unless it is impracticable.

SFAS No. 154 enhances the consistency of financial information between periods.
SFAS No. 154 will be effective beginning with the Company's first quarter of
fiscal year 2006. The Company does not expect that the adoption of SFAS No. 154
will have a material impact on its results of operations, financial position or
cash flows.

In June 2005, the FASB's Emerging Issues Task Force ("EITF") reached a consensus
on Issue No. 05-06, "Determining the Amortization Period for Leasehold
Improvements" (EITF 05-06). EITF 05-06 provides guidance for determining the
amortization period used for leasehold improvements acquired in a business
combination or purchased after the inception of a lease, collectively referred
to as subsequently acquired leasehold improvements. EITF 05-06 provides that the
amortization period used for the subsequently acquired leasehold improvements be
the lesser of (a) the subsequently acquired leasehold improvements' useful
lives, or (b) a period that reflects renewals that are reasonably assured upon
the acquisition or the purchase. EITF 05-06 is effective on a prospective basis
for subsequently acquired leasehold improvements purchased or acquired in
periods beginning after the date of the FASB's ratification, which was on June
29, 2005. The Company does not anticipate that EITF 05-06 will have a material
impact on its consolidated results of operations.

In July 2005, the Financial Accounting Standards Board (FASB) issued an Exposure
Draft of a proposed Interpretation "Accounting for Uncertain Tax Positions--an
interpretation of FASB Statement No. 109." Under the proposed Interpretation, a
company would recognize in its financial statements its best estimate of the
benefit of a tax position, only if the tax position is considered probable of
being sustained on audit based solely on the technical merits of the tax
position. In evaluating whether the probable recognition threshold has been met,
the proposed Interpretation would require the presumption that the tax position
will be evaluated during an audit by taxing authorities. The proposed
Interpretation would be effective as of the end of the first fiscal year ending
after December 15, 2005, with a cumulative effect of a change in accounting
principle to be recorded upon the initial adoption.

The proposed Interpretation would apply to all tax positions and only benefits
from tax positions that meet the probable recognition threshold at or after the
effective date would be recognized. The Company is currently analyzing the
proposed Interpretation and has not determined its potential impact on our
Consolidated Financial Statements. While we cannot predict with certainty the
rules in the final Interpretation, there is risk that the final Interpretation
could result in a cumulative effect charge to earnings upon adoption, increases
in future effective tax rates, and/or increases in future interperiod effective
tax rate volatility.


                                       14
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 2- SIGNIFICANT ACCOUNTING POLICIES, (continued)

Recent Accounting Pronouncements, (continued)

In October 2005, FASB Staff Position (FSP) FAS 13-1, "Accounting for Rental
Costs Incurred during a Construction Period" was issued. This FSP concluded that
rental costs associated with ground or building operating leases that are
incurred during a construction period be expensed.

The guidance in the FSP is required to be applied to the first reporting period
beginning after December 15, 2005. The adoption of this pronouncement is not
expected to have a material impact on the Company's financial position or
results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments" ("FAS 155"), which amends SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133") and SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("FAS 140"). FAS 155 provides guidance to simplify the
accounting for certain hybrid instruments by permitting fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative, as
well as, clarifies that beneficial interests in securitized financial assets are
subject to FAS 133. In addition, FAS 155 eliminates a restriction on the passive
derivative instruments that a qualifying special-purpose entity may hold under
FAS 140. FAS 155 is effective for all financial instruments acquired, issued or
subject to a new basis occurring after the beginning of an entity's first fiscal
year that begins after September 15, 2006.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets" ("FAS 156"), which amends SFAS No. 140. FAS 156 specifically
provides guidance addressing the recognition and measurement of separately
recognized servicing assets and liabilities, common with mortgage securitization
activities, and provides an approach to simplify efforts to obtain hedge
accounting treatment. FAS 156 is effective for all separately recognized
servicing assets and liabilities acquired or issued after the beginning of an
entity's fiscal year that begins after September 15, 2006, with early adoption
being permitted.

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with FAS 109, "Accounting for
Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The requirements of FIN 48 are
effective for our fiscal year beginning January 1, 2007.

The implementation of the above pronouncements is not expected to have a
material effect on the Company's financial statement presentation or
disclosures.

Note 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest expense paid amounted to $154,348 and $149,591 for the six months ended
June 30, 2006 and 2005, respectively.

No income tax payments were paid for the six months ended June 30, 2006 and
2005.


                                       15
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION, (continued)

During 2005, the Company issued 657,959 shares of common stock for services. The
fair market value of the services received was $239,715.

On March 8, 2005, the Company issued 300,000 shares of common stock to China
Pharmaceutical University for a lab use right.

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 receivables balances, historical bad debts, customer
concentrations, customer credit-worthiness, current economic trends and changes
in our customer payment terms. 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
increased from $525,391 at December 31, 2005 to $753,158 at June 30, 2006. This
increase is mainly due to the acquisition of Enshi.

As of June 30, 3006, accounts receivable consist of the following:

Accounts receivable                              11,886,152
Allowance for doubtful accounts                    (753,158)
                                         -------------------
Accounts receivable, net                         11,132,994
                                         ===================

Note 5-  INVENTORIES

Inventories consisted of the following at June 30, 2006:

                                                                   June 30, 2006
                                                                      ----------
Raw materials                                                         $1,651,570
Packaging supplies                                                       320,853
Sundry supplies                                                            7,556
Work in process                                                        2,333,704
Finished goods                                                         2,363,454
                                                                      ----------
                                                                      $6,677,137
                                                                      ==========


                                       16
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 6-  PLANT AND EQUIPMENT

Plant and equipment consist of the following as of June 30, 2006:

                                                                   June 30, 2006
                                                                    ------------
Plant                                                                  7,454,685
Office equipment                                                         853,182
Machinery                                                              9,860,055
Automobiles                                                              767,769
Construction in progress                                                 656,945
                                                                    ------------
Total plant and equipment                                             19,592,636
Less: Accumulated depreciation                                         6,820,392
                                                                    ------------
Fixed assets (net)                                                    12,772,244
                                                                    ============

Depreciation expense for the six months ended June 30, 2006 and 2005 was
$491,459 and $70,666, respectively.

Note 7-  OTHER ASSETS

Intangible Assets - Land use rights

                                                               June 30, 2006
                                                              -----------------
Hengyi         Cost of land use right                                1,527,440
               Less: Accumulated amortization                         (109,467)
                                                              -----------------
                                                                     1,417,973
                                                              -----------------

Erye           Cost of land use right                                6,372,436
               Less: Accumulated amortization                         (350,049)
                                                              -----------------
                                                                     6,022,387
                                                              -----------------

Enshi          Cost of land use right                                4,688,236
               Less: Accumulated amortization                         (317,173)
                                                              -----------------
                                                                     4,371,063
                                                              -----------------

               Cost of drug patent                                   1,228,711
               Less: Accumulated amortization                         (343,342)
                                                              -----------------
                                                                       885,369
                                                              -----------------

Total intangible assets, net                                        12,696,792
                                                              =================

Amortization expense for the six months ended June 30, 2006 and 2005 was $78,511
and $0, respectively.

Restricted Cash

Restricted cash represents cash required to be deposited to bank but subject to
withdrawal with restrictions according to the agreement with bank. The following
list the depositors, the amount and names of the bank as of June 30, 2006:


                                       17
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 7-  OTHER ASSETS, (continued)

Restricted Cash, (continued)

Depositor       Name of Bank                         Amount
--------------  -----------------------------  ---------------
Hengyi          Taicang Chengxiang Bank               197,816

Erye            Hua Xia Bank, Suzhou                  785,175
                                               ---------------
Total                                                 982,991
                                               ===============

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. According to loan agreements, the Company
has first priority to purchase the new drug rights if the projects were
successfully completed. If the company gave up the right, the debtors need to
repayment the loans plus 3% interest per annum within one month after the drug
rights were sold. If on or before February 28, 2010, the R&D projects were not
able to complete or failed , the debtors need to repay the loans plus 6%
interest per annum within ten days after such a conclusion was made. As of June
30, 2006, the total amount of the long term notes receivable was $800,800. 51%
of ownership equity of the debtor was pledged for the loan.

Note 8- RELATED PARTIES TRANSACTIONS

Accounts Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiaries        Amount            Due from                Term               Manner of settlement
----------------    ---------------   ---------------------   ---------------    --------------------------
<S>                         <C>       <C>                     <C>                <C>
Keyuan                      70,112    Suzhou Wanqing          Short term         To be received
                                                                                 in cash
                    ---------------
Total                       70,112
                    ===============
</TABLE>

As of June 30, 2006, total accounts receivables due from related parties were
$70,112.

Other Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiaries        Amount          Due from                        Term             Manner of settlement
-----------------   -------------   ------------------------------  --------------   ----------------------
<S>                         <C>       <C>                     <C>                <C>
Keyuan                    41,317    Shareholder of Keyuan           Short term       To be received in cash
Sintofarm                 81,117    Shareholder of Sintofarm        Short term       To be received in cash
CBC                       42,460    Advance to shareholders         Short term       To be received in cash
                    -------------
Total                    164,894
                    =============
</TABLE>

As of June 30, 2006, total receivables due from related parties were $164,894.


                                       18
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 8- RELATED PARTIES TRANSACTIONS, (continued)

Accounts Payable - Related Parties

<TABLE>
<CAPTION>
Subsidiaries       Amount           Due to                 Term           Manner of settlement
----------------   --------------   ---------------------  ------------   -------------------------
<S>                         <C>       <C>                     <C>                <C>
Hengyi                    48,172    Suzhou Wanqing         Short term     To be paid in cash
Sintofarm                 97,836    Wujaing Hengyi         Short term     To be paid in cash
                   --------------
Total                    146,008
                   ==============
</TABLE>

As of June 30, 2006, total accounts payable due to related parties were
$146,008.

Other Payables - Related Parties

<TABLE>
<CAPTION>
Subsidiaries            Amount            Due to                   Term           Manner of settlement
---------------------   ---------------   ----------------------   -------------  -------------------------
<S>                         <C>          <C>                     <C>                <C>
Erye and Hengyi                682,132    Erye Jinmao and          Short term     To be paid in cash
                                          Su Zhou Wanqing
</TABLE>

As of June 30, 2006, total other payables due to related parties were $682,132

Long Term Other Receivables - Related Parties

<TABLE>
<CAPTION>
Subsidiary          Amount            Due to                        Term           Manner of settlement
------------------  ----------------  ---------------------------   -------------  ------------------------

<S>                         <C>          <C>                     <C>                <C>
Hengyi                    1,431,438   Shareholder of Hengyi         Long term      To be received in cash
                                                                                   in three installments.
</TABLE>

Long Term Debt - Related Parties

<TABLE>
<CAPTION>
Subsidiary          Amount            Due to                        Term           Manner of settlement
------------------  ----------------  ---------------------------   -------------  ------------------------
<S>                         <C>          <C>                     <C>                <C>
Erye                        460,039   Erye Jinmao                   Long term      To be paid in five
                                                                                   years in cash.
</TABLE>

As of June 30, 2006, the Company's subsidiary Erye had a remaining outstanding
payable to Erye Jingmao Limited ("Jingmao") in the amount of $460,039.

Note 9- PAYABLES

Notes Payable - $ 1,653,211

The Company's subsidiary Erye has $1,653,211 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.


                                       19
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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
and approximately 76% ownership interest in Hengyi; while Hengyi controls a 50%
ownership interest of Sintofarm. 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.

<TABLE>
<CAPTION>
                                            Ownership                           Minority
              Equity of the                     in                             Interest in
              Subsidiaries                 Subsidiaries                        Subsidiaries
                  as of           ---------------------------        ----------------------------
Subsidiary    June 30, 2006       Percentage         Amount          Percentage         Amount
----------    -------------       ----------    --------------       ----------    --------------
<S>          <C>                       <C>      <C>                       <C>      <C>
Erye         $    7,077,200            51.00%   $    3,609,372            49.00%   $    3,467,828
Keyuan            1,316,774            90.00%        1,185,097            10.00%          131,677
Hengyi            3,475,646            75.76%        2,633,149            24.24%          842,497
Sintofarm         1,742,892            50.00%          871,446            50.00%          871,446
Enshi            15,567,617           100.00%       15,567,617             0.00%               --
             --------------                     --------------                     --------------
Total        $   29,180,129                     $   23,866,681                     $    5,313,448
             ==============                     ==============                     ==============
</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 15% 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. The following list the provision of statutory reserves as of June 30,
2006.

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

    2004                  $     1,135,001
    2005                        1,152,036
    2006                          242,908
                            --------------
    Total                 $     2,529,945
                            ==============

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, Hengyi,
Keyuan, Sintofarm, 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 six months ended June 30, 2006 and 2005
are $160,472 and 0, respectively.


                                       20
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 12-   INCOME TAXES, (continued)

Corporation Income Tax (CIT), (continued)

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.

The Company's controlling operating subsidiaries are all operated in China.
According to the Chinese Joint Venture Business Law, those subsidiaries, been
registered and incorporated with the status of Sino-foreign joint venture
companies, are subject to a two-year-exemption-and-three-year-halve income tax
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:

<TABLE>
<CAPTION>
                          Full Exemption Period           Half-Reduction Period
                          -----------------------------   ------------------------------
Subsidiaries              Period           Tax Rate       Period            Tax Rate
----------------------    -------------    ------------   -------------     ------------
<S>                       <C>              <C>            <C>              <C>
Nanjing Keyuan            2005-2006        0.00%          2007-2009         16.50%
Suzhou Hengyi             2005-2006        0.00%          2007-2009         16.50%
Suzhou Erye               2006-2007        0.00%          2008-2010         16.50%
Shengyang Enshi           2004-2005        0.00%          2006-2008         15.00%
</TABLE>

After the income tax preference period expired, a 33% income tax rate is
applicable.

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

                                                          June 30, 2006
                                                        2006           2005
                                                      ---------      ---------
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 six months ended
June 30, 2006 and 2005 amounted to $491,074 and $238,410, respectively. The net
effect on earnings per share if the income tax had been applied would decrease
earnings per share for June 30, 2006 and 2005 to $0.01 and $0.009, respectively.


                                       21
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 12-   INCOME TAXES, (continued)

Business Tax ("BT"), (continued)

Business Tax ("BT")

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.

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.

Note 13- LOANS

Long Term Bank Loans

The Company assumed a loan of $11,500,000 in connection with the acquisition of
Enshi as presented in Notes 15-Business Combination. The interest of the loan
shall be paid semi-annually with an annual rate of 11%. The Company paid off
$500,000 ahead of the payment schedule. As of June 30, 2006, the balance of the
long-term debt was $11,000,000.The following lists the repayment schedule of the
principal of the loan.

                             Amount
                       ---------------------
               2006    $                 --
               2007               2,875,000
               2008               5,750,000
               2009               2,375,000
Thereafter                               --
                       ---------------------
                                 11,000,000
                       =====================

Short Term Bank Loans

The Company has a total amount of $7,549,560 in short term loans from four
different banks in China. These loans mature in one year or less and renew
automatically. The average interest rate is approximately 5.2%.

Interest expense for the six months ended June 30, 2006 and 2005 was $259,765
and $0, respectively.


                                       22
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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 six months ended June 30, 2006 and 2005 the
Company recognized rent expense of $13,476 and $7,030, respectively.

As of June 30, 2006, the Company has outstanding commitments in respect of
non-cancelable operating leases, which fall due as follows:

Note 14- COMMITMENTS AND CONTINGENCIES, (continued)

                    Amount
                 --------------
         2006    $      13,475
         2007           29,650
         2008           32,610
         2009           35,870
Thereafter              39,000

Note 15- BUSINESS COMBINATIONS

Erye acquisition

On June 11, 2005, the Company signed a purchase agreement, which was amended on
August 3, 2005 under which, the Company acquired a controlling ownership
interest of approximately 51% in Erye, a company established in Suzhou City,
Jiangsu Province, China.

Assets acquired and debts assumed of the transaction are listed as below:

<TABLE>
<CAPTION>
                                                                   Acquired (Assumed)
               Item                                 Fair Value      by the Company
--------------------------------------------       -----------       -----------
<S>                                                <C>                 <C>
Current assets                                     $ 8,601,786         4,386,911
Property, plant, and equipment                       4,305,631         2,195,872
Intangible assets                                  $ 7,755,221         3,955,162
Other assets                                         1,178,000           600,780
                                                   -----------       -----------
Total assets                                        21,840,637        11,138,725
                                                   -----------       -----------

Current liability                                   11,465,031         5,847,166
Ling term liability                                  1,257,959           641,559
                                                   -----------       -----------
Total liabilities                                   12,722,990         6,488,725

Net assets                                           9,117,647         4,650,000
                                                   ===========       ===========
</TABLE>


                                       23
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 15- BUSINESS COMBINATIONS, (continued)

Erye acquisition, (continued)

The original purchase price amounted to $80,000 in cash, 3,300,000 shares of
common stock valued at $1.00 per share and $2,200,000 of additional cash to be
contributed in installments. The original purchase price generated goodwill of
approximately $4,893,113 that was reported on our September 30, 2005 financial
statements and form 10QSB. The Board of Directors and management reevaluated the
common stock value based upon the stock trading history in the past year and
determined that the common stock should be valued at less than $1.00 per share
for the purpose of determining the total purchase price of the acquisition. On
April 12, 2006, the Board Directors decided to amend the purchase price for 51%
of ownership interest in Erye to be $3,000,000 cash to be paid in installments,
and 3,300,000 shares of common stock valued at $0.50 per share, which amounted
to a total amount of $4,650,000, effective as of December 31, 2005. The
amendment resulted in a write down of goodwill and equity. As of December 31,
2005, $2,200,000 of cash contribution has not been made. The Company contributed
the $2,200,000 in full by the end of April, 2006.

In determining the cost of the acquired equity, we considered all aspect of the
acquisition and weighted the consideration we paid and the assets we received.
Since we have an independent appraisal report on Erye's assets and liabilities
and according to our management's understanding and judgment about Erye's assets
and liabilities, we believed that the net fair value of assests acquired and
debt assumed was more determinable and evident. The value of our equity was
recognized as a residual value of total net assets we received, deducting the
cash $2,200,000 we paid in installment.

We accounted for the business acquisition in conformity with SFAB 141 Business
Combination. Sepcifically, we depend on Paragraph 20-24 in arriving at the fair
of our equity. As there is no quoted price at that point of time, we believe the
fair value of assets we acquired was a reliable base for determine the fair
value of our equity.

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"). Total consideration
of $14,690,000 paid by us to acquire 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 the $11,500,000 debt of RACP.


                                       24
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 15- BUSINESS COMBINATIONS, (continued)

Enshi acquisition, (continued)

Assets acquired and debts assumed of the transaction are listed as below:

<TABLE>
<CAPTION>
                                                                   Acquired (Assumed)
               Item                                 Fair Value      by the Company
--------------------------------------------       -----------       -----------
<S>                                                <C>                 <C>
Current assets                                     $ 6,840,881         6,840,881
Property, plant, and equipment                       7,188,912         7,188,912
Intangible assets                                  $ 5,253,973         5,253,973
                                                   -----------       -----------
Total assets                                        19,283,766        19,283,766
                                                   -----------       -----------

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

Net assets                                          14,690,000        14,690,000
                                                   ===========       ===========
</TABLE>

The acquisition generated no goodwill since total consideration was equal to
total net assets acquired. In determining the cost of the acquisition, we
considered all aspect of the acquisition and weighted the consideration we paid
and the assets we received. We applied the Black-Scholes model method to
determine the value of the warrants, which was at $0.22 per unit. Thus we
concluded the total consideration was $14,690,000. 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 was
$16,683,503.63, exceeding our total consideration by $1,993,504. 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. As a result, we arrived at the above list of amount of assets
acquired and debt assumed.

Pro Forma

The following unaudited pro forma condensed income statement for six months
ended June 30, 2006 and balance sheet were prepared under Generally Accepted
Accounting Principles and 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.

Sales                                                                $20,269,829
Cost of Goods Sold                                                    13,548,650
                                                                     -----------

Gross Profit                                                           6,755,547
Operating Expenses                                                     2,953,483
Income Tax                                                               160,472
Minority Interest                                                        657,311
                                                                     -----------

Net Income                                                           $ 2,984,281
                                                                     ===========

                                       25
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL 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, to which we refer as the
Notes Subscription Agreement, which we entered into with twenty (20) accredited
investors, to which we collectively refer 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. Holder of the
Note has a 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 have agreed to extend the maturity date of the Notes
until December 31, 2005. As of March 31, 2006, all of the Notes have been either
converted into shares or have been 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 it the extension as described above.

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 "Notes
Warrants"). The exercise price of the majority of Notes warrants is $1.50 per
share. Pursuant to the Notes Warrants, the Notes Subscribers are entitled to
purchase an aggregate amount of 341,657 shares. The Notes Warrants may be
exercised only in full. The Notes Warrants will expire three (3) years from
issuance date of the Notes Warrants. See also "Selling Shareholders."

WestPark Capital Inc. ("WestPark") acted as our placement agent in the private
placement described above. In consideration of WestPark's services, we 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.

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 Notes Warrants, which
registers all the shares to which the Notes may be converted and the shares
underlying the Notes Warrants issued or issuable to the Notes Subscribers and
WestPark in the private placement. 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 required date. The
related penalties prior to the SB-2 effective date were accounted for and
recorded by the Company. The SB-2 was filed and effective on May 11, 2006.

                                       26
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 16- SHAREHOLDERS' EQUITY, (continued)

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 as
$0.10 per share as of December 31, 2005.

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

In June, 2005, we entered into a June subscription agreement, to which we refer
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 US$1.00 per share convertible at a ratio of 1:1
into shares. For more information on Series A Convertible Preferred Stock, see
"Description of Securities."

Upon the execution of the Initial Preferred A Subscription Agreements, we 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.

WestPark acted as our placement agent in the private placement described above.
In consideration of WestPark's services, we 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.

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

On October 19, 2005, we entered into a subscription agreement, to which we refer
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 we collectively refer 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.


                                       27
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 16- SHAREHOLDERS' EQUITY, (continued)

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.

WestPark acted as our placement agent in the private placement described above.
In consideration of WestPark's services, we 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. 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
required date. The related penalties prior to the SB-2 effective date were
accounted for and recorded 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. The total dividends paid was $8,400 in January 2006.

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

During 2005, the Company engaged with Consulting For Strategic Growth 1, Ltd.
for six months ending May 14, 2006. The terms of the agreement are 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 month and the terms of the agreement are 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. The shares of common stock will be issued to the
consultant in 2006.

                                       28
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 16- SHAREHOLDERS' EQUITY, (continued)

On April 1, 2005, the company entered into an advisory agreement with Robin
Smith as the Chairman of Company's Advisory Board for a period of one year. The
terms of the agreement are for Ms. Smith to receive 60,000 shares of
unregistered 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 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 are for the
consultant to receive cash payment of $50,000 plus 50,000 shares of common stock
of the Company.

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

On February 2, 2006, we entered into a securities purchase agreement, to which
we refer as the Initial Common Stock Securities Purchase Agreement, with GCE
Property Holdings, Inc. ("GCE"), to which we refer as the Initial Common Stock
Purchaser. Pursuant to the Initial Common Stock Securities Purchase Agreement,
we 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, we have 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 of
which this prospectus constitutes a part.

Pursuant to a registration rights agreement entered between the Initial Common
Stock Purchaser and us, we have 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. In case the registrant does not meet the filing deadlines
listed above we will pay a penalty of 1% of the aggregate investment made by
Investors and on each monthly anniversary of such default an amount equal to
1.5% of the aggregate investment amount of Investors, respectively.


                                       29
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note 16- SHAREHOLDERS' EQUITY, (continued)

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

On March 10, 2006, we entered into a securities purchase agreement, to which we
refer as the Subsequent Common Stock Securities Purchase Agreement, with various
investors, to which we refer 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,
we 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, we have 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.

Note 17- SUBSEQUENT EVENTS

On August 3, the Company has filed an application with the American Stock
Exchange ("AMEX") to list its shares of common stock on the AMEX.

On August 10, 2006, the Company entered into an agreement with Zixun Capital
Limited ("Zixun") to issue 1,100,000 shares of common stock to Zixun to
compensate Zixun for introducing Enshi and its assistance in the Enshi
acquisition negotiation and for providing a third party guarantee of up to $1
million to former Enshi shareholders to secure the completion of the acquisition
of Enshi.

                                       30
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS and 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.

         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 operation 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 its common stock to existing shareholders
of Tianyin or their designees and also agreed to invest an amount of US$2
million into Tianyin operations. 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
at least US$3,000,000. Our auditors are currently engaged to audit the financial
statements of Tianyin. 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 final
determination after consulting with management of Tianyin. Based on the
pre-conditions in the purchase Agreement, the Company decided not to assume the
operation control of Tianyin at the moment 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
purchased price. Appropriate disclosure will be announced upon the final
determination by the board of the directors.

            On May 16, 2006, we entered into a Conditional Stock Purchase
Agreement with RACP Pharmaceutical Holdings Ltd., a British Virgin Islands
company ("RACP") and certain other parties to ultimately acquire 100% ownership
interest in Shenyang Enshi Pharmaceutical Co, Ltd. ("Enshi"), a pharmaceuticals
manufacturer. On June 6, 2006, our management moved into Enshi's offices and
acquired effective control of Enshi's operations. On June 30, 2006, all required
paperwork and legal procedures and audit procedures have been completed and the
title ownership of 100% of Enshi has been transferred to us.

On August 3, the Company has filed an application with the American Stock
Exchange ("AMEX") to list its shares of common stock on the AMEX.

Results of operations for the six months ended June 30, 2006 is below:

                                       31
<PAGE>

                          ENSHI PHARMACEUTICALS LTD CO
               STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                     FOR THE SIX MONTHS ENDED JUNE 30, 2006

                                                       Six months ended June 30,
                                                     --------------------------
                                                         2006           2005
                                                     -----------    -----------
                                                      (Unaudited)  (Unaudited)
                                                     -----------    -----------
REVENUES                                             $ 6,018,108    $ 6,144,158

COST OF GOODS SOLD                                     2,264,701      2,562,910
                                                     -----------    -----------

GROSS PROFIT                                           3,753,407      3,581,247
                                                     -----------    -----------

OPERATING EXPENSES
     Research and development expenses                         0         22,453
     Selling, general and administrative expenses        614,454        615,676
                                                     -----------    -----------
        Total Operating Expenses                         614,454        638,129
                                                     -----------    -----------

INCOME  FROM OPERATIONS                                3,138,954      2,943,119
                                                     -----------    -----------

OTHER INCOME (EXPENSE)
     Interest income ( expenses)                         (20,158)       (53,193)
     Other income (expenses)                              32,110         12,450
                                                     -----------    -----------
        Total Other Income (expenses)                     11,952        (40,743)
                                                     -----------    -----------

INCOME BEFORE INCOME TAXES                             3,150,906      2,902,376

PROVISION FOR INCOME TAXES                               472,145              0
                                                     -----------    -----------

NET INCOME                                             2,678,761      2,902,376

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

         We have three categories of revenue resources, revenue from sales of
      new drugs formulas, revenue from R&D service rendered by the Company and
      revenue from sales of medical product.

      The Company recognizes revenue from product and drug formula sales when
      title has been transferred, 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.

                                       32
<PAGE>

      For revenue from R&D service, revenue is recognized when milestone goals
      are achieved at the amount of the corresponding milestone payment.

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.

Our accounts receivable are concentrated in numbers of pharmaceutical
manufacturers. We believe that a significant change in the liquidity or
financial position of few of our big customers would have a material adverse
impact on the collectibility of the Company's accounts receivable. Based upon
our historical experience, payment delays may materially influence our financial
and operating results.

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 JUNE 30, 2006 AS COMPARED TO THREE
MONTHS ENDED JUNE 30, 2005

            On June 11, 2005, the Company signed a purchase agreement which was
amended on August 3, 2005 to acquire approximately 51% ownership interest of
Suzhou Erye Pharmaceutical Limited Company ("Erye"). The operating results for
the three months ended June 30, 2005 reported in our quarterly report on Form
10-QSB filed with the SEC on August 15, 2005 included Erye's results for the
period of June 11, 2005 to June 30, 2005.. We took actual control of Enshi on
June 6, 2006. and the operating results for the three months ended June 30, 2006
reported in this quarterly report includes Enshi's results for the period of
June 6, 2006 to June 30, 2006.

                                       33
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                   Three months ended June 30,
                                                                  ------------    ------------
                                                                      2006            2005
                                                                  ------------    ------------
                                                                   (Unaudited)     (Unaudited)
                                                                  ------------    ------------
<S>                                                               <C>             <C>
REVENUES                                                          $  9,776,364    $  3,642,565

COST OF GOODS SOLD                                                   7,122,201      2,835,430,
                                                                  ------------    ------------

GROSS PROFIT                                                         2,654,163         807,135
                                                                  ------------    ------------

OPERATING EXPENSES
     Research and development expenses                                 240,747               0
     Selling, general and administrative expenses                      892,019         604,177
                                                                  ------------    ------------
        Total Operating Expenses                                     1,132,766         604,177
                                                                  ------------    ------------

INCOME  FROM OPERATIONS                                              1,521,397         202,958
                                                                  ------------    ------------

OTHER INCOME (EXPENSE)
     Interest income ( expenses)                                      (181,976)             0-
     Other income (expenses)                                           194,405          24,524)
                                                                  ------------    ------------
        Total Other Income (expenses)                                   12,429          24,524
                                                                  ------------    ------------

INCOME BEFORE INCOME TAXES                                           1,533,826         227,482

PROVISION FOR INCOME TAXES                                             160,472              0-
                                                                  ------------    ------------

INCOME BEFORE MINORITY INTEREST                                      1,373,354         227,482

MINORITY INTEREST                                                      410,748         102,023
                                                                  ------------    ------------

NET INCOME                                                             962,606         125,459

OTHER COMPREHENSIVE INCOME (LOSS):
     Foreign currency translation adjustment                           401,137               0
                                                                  ------------    ------------

COMPREHENSIVE INCOME (LOSS)                                       $  1,363,743    $    125,459
                                                                  ============    ============

NET INCOME PER SHARE - BASIC AND DILUTED                          $       0.04    $      0.005
                                                                  ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC              33,662,770      25,347,099
                                                                  ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED            34,592,770      25,436,688
                                                                  ============    ============
</TABLE>

                                       34
<PAGE>

REVENUE

            Revenue for the three months ended on June 30, 2006 was $9,776,364,
while the revenue for the three months ended June 30, 2005 was $3,642,565,
representing an approximately 168% increase. The increase is attributable mainly
to strong organic growth of revenue generated by Erye, as well as to revenue
generated as a result of the acquisitions of Enshi and which was not reflected
in the Company's financial statements for the three months ended June 30, 2005.

COST OF GOODS SOLD

Cost of goods sold for the three months ended on June 30, 2006 was $7,122,201 as
compared to $2,835,430 for the three months ended June 30, 2005. Cost of goods
sold as a percentage of sales revenues was approximately 72% for the three
months ended June 30, 2006 as compared to approximately 78% for the three months
ended June 30, 2005. The decrease of cost of goods sold as a percentage of sales
revenues is primarily attributable to the acquisition of Enshi.

GROSS PROFIT

            Gross profit in the three months ended on June 30, 2006 amounted at
$2,654,163, as compared to $807,135 for the three months ended June 30, 2005,
representing approximately 229% increase. The gross profit margin for the three
months ended June 30, 2006 was 27% as compared to approximately 22% for the
three months ended June 30, 2005. The increase in gross profit margin is mainly
due to Enshi's high gross profit margin.

OPERATING EXPENSES

            Operating expenses for the three months ended June 30, 2006 were
$1,132,766 as compared to $604,177 for the three months ended June 30, 2005,
representing 87% increase. The increase in operating expenses is primarily
attributable to one time transactional expenses in connection with the
acquisition of Enshi including financing expenses, auditing expenses and legal
expenses. The increase of operating expenses is also attributable to expenses
incurred by Enshi and expenses in connection with the private placements.

R&D

            Research and Development cost for the three months ended June 30,
2006 was $240,747 as compared to $0 for the three months ended June 30, 2005.
The increase is mainly due to the research and development activities conducted
by Erye and Enshi.

NET INCOME

            Net Income for the three months ended June 30, 2006 was $962,606 as
compared to net income of $125,459 for the three months ended June 30, 2005,
representing 667% increase. The increase of the net income of the Company is
mainly due to the strong organic growth of Erye as well as to net income
generated as a result of the acquisitions of Enshi and which was not reflected
in the Company's financial statements for the three months ended June 30, 2005.


RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2006 AS COMPARED TO SIX MONTHS
ENDED JUNE 30, 2005

             On June 11, 2005, the Company signed a purchase agreement which was
amended on August 3, 2005 to acquire approximately 51% ownership interest of
Erye. The operating results for the six months ended June 30, 2005 reported in
our quarterly report on Form 10-QSB filed with the SEC on August 15, 2005
included Erye's results for the period of June 11, 2005 to June 30, 2005. We
took actual control of Enshi on June 6, 2006 and the operating results for the
six months ended June 30, 2006 reported in this quarterly report includes
Enshi's results for the period of June 6, 2006 to June 30, 2006.

                                       35
<PAGE>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                 FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                                              Six months ended June 30,
                                                           ------------    ------------
                                                                2006            2005
                                                           ------------    ------------
                                                            (Unaudited)    (Unaudited)
                                                           ------------    ------------
<S>                                                        <C>             <C>
REVENUES                                                   $ 16,916,873    $  5,631,073

COST OF GOODS SOLD                                           12,680,884       3,934,497
                                                           ------------    ------------

GROSS PROFIT                                                  4,235,989       1,696,576
                                                           ------------    ------------

OPERATING EXPENSES

     Research and development expenses                          498,822

     Selling, general and administrative expenses             1,677,853         961,545
                                                           ------------    ------------
        Total Operating Expenses
                                                              2,176,675         961,545
                                                           ------------    ------------

INCOME  FROM OPERATIONS                                       2,059,314         735,031
                                                           ------------    ------------

OTHER INCOME (EXPENSE)

     Interest income ( expenses)                               (259,765)             --

     Other income (expenses)                                    174,832         (12,575)
                                                           ------------    ------------
        Total Other Income (expenses)
                                                                (84,933)        (12,575)
                                                           ------------    ------------

INCOME BEFORE INCOME TAXES                                    1,974,381         722,456

PROVISION FOR INCOME TAXES                                      160,472              --
                                                           ------------    ------------

INCOME BEFORE MINORITY INTEREST                               1,813,909         722,456

MINORITY INTEREST                                               657,311         189,330
                                                           ------------    ------------

NET INCOME                                                    1,156,598         533,126

OTHER COMPREHENSIVE INCOME (LOSS):

     Foreign currency translation adjustment                    519,104              --
                                                           ------------    ------------

COMPREHENSIVE INCOME (LOSS)                                $  1,675,702    $    533,126
                                                           ============    ============

NET INCOME PER SHARE - BASIC AND DILUTED                   $       0.05    $       0.02
                                                           ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC       33,662,770      25,347,099
                                                           ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED     34,592,770      25,436,688
                                                           ============    ============
</TABLE>

REVENUE

            Revenue for the six months ended on June 30, 2006 was $16,916,873,
while the revenue for the six months ended June 30, 2005 was $5,631,073,
representing an approximately 200% increase. The increase is attributable mainly
to strong organic growth of revenue generated by Erye, as well as to revenue
generated as a result of the acquisition of Enshi and which was not reflected in
the Company's financial statements for the six months ended June 30, 2005.

COST OF GOODS SOLD

            Cost of goods sold for the six months ended on June 30, 2006 was
$12,680,884 as compared to $3,934,497 for the six months ended June 30, 2005.
Cost of goods sold as a percentage of sales revenues was approximately 75% for
the six months ended June 30, 2006 as compared to approximately 70% for the six
months ended June 30, 2005. The increase of cost of goods sold as a percentage
of sales revenues is primarily attributable to the low gross margin of Erye.

GROSS PROFIT

            Gross profit in the six months ended on June 30, 2006 amounted at
$4,235,989, as compared to $1,696,576 for the six months ended June 30, 2005,
representing approximately 150% increase. The gross profit margin for the six
months ended June 30, 2006 was 25% as compared to approximately 30% for the six
months ended June 30, 2005. The decrease in gross profit margin is mainly due to
Erye's low gross profit margin.

OPERATING EXPENSES

            Operating expenses for the six months ended June 30, 2006 was
$2,176,675 as compared to $961,545 for the six months ended June 30, 2005,
representing 126% increase. The increase in operating expenses is primarily
attributable to one time transactional expenses in connection with the
acquisition of Enshi including financing expenses, auditing expenses and legal
expenses. The increase of operating expenses is also attributable to expenses
incurred by Erye and Enshi and expenses in connection with the private
placements.

                                       36
<PAGE>

R&D

            Research and Development cost for the six months ended June 30, 2006
was $498,822 as compared to $390,393 for the six months ended June 30, 2005,
representing a 28% increase. The increase is mainly due to the research and
development activities conducted by Erye and Enshi.

NET INCOME

            Net Income for the six months ended June 30, 2006 was $1,156,598 as
compared to net income of $533,126 for the six months ended June 30, 2005,
representing 117% increase. The increase of the net income of the Company is
mainly due to strong organic growth of Erye, as well as to net income generated
as a result of the acquisitions of Enshi and which was not reflected in the
Company's financial statements for the six months ended June 30, 2005.

LIQUIDITY AND CAPITAL RESOURCES

            For the six months ended June 30, 2005, net cash provided by
operating activities was $261,297, compared to an outflow of $1,501,200 for the
six months ended June 30, 2006. Net cash used by operating activities mainly
results from $370,000 one time transactional expenses , $ 799,220 increase in
funding 3 new patentable drug projects,and $320,000 increase in out of pocket
expenses.

Net cash used in investing activities was $364,693 for the six months ended June
30, 2005, compared to an outflow of $2,354,608 for the six months ended June 30,
2006. Cash used by investing activities in the six months ended June 30, 2006
results from $430,000 for completion of Erye acquisition, $500,000 increase in
fixed asset, $798,480 in secured short term loan.

Net cash provided by financing activities was $2,118,962 for the six months
ended June 30, 2005, compared to an inflow of $5,905,470 for the six months
ended June 30, 2006. Cash provided by financing activities for the six months
ended June 30, 2006 results primarily from private placement offset by
repayments of short term bank credit.

Cash and cash equivalents as of six month ended June 30, 2006 was $3,167,439.

For the six months ended June 30, 2006, cash flow performance is below our
management's expectation. This is mainly due to large amount of account
receivables occurred during this period and extended aging of the account
receivable. This has negative impact on the Company's working capital and
weakened the Company's capital strength. During the six month period of 2006,
the pharmaceutical industry in China was significantly influenced by new
government regulatory policies. For example, the government initialized an
anti-corruption program prohibiting doctors to receive commissions and set price
cap for drugs sold through hospitals. This has created significant negative
impacts to all prescription drug manufacturers and drug distribution companies
in the market. The Company's prescription drugs were mainly sold to hospitals
through major drug distribution companies. During this period of time, such
distribution companies have difficulties to sell the Company's prescription
drugs to hospitals and collect money. It is still not clear how long the
negative market environment will remain and how fast the market will recover
from these regulatory impacts. Our management has been putting great efforts to
strengthen the Company's cash flows by providing incentives to our distributors
such as bonus discount on drug price, attracting these distributors to collect
money from hospitals and shortening the age of account receivables. We believe
that this government campaign shall gradually create a healthy and fair market
for every player in the Chinese pharmaceutical industry and provide better
opportunities for companies having clear competitive advantages. In addition,
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 January of 2005, we
raised gross proceeds of $500,000 through the sales of promissory note to
accredited investors. In June of 2005, pursuant to an exemption under the
Securities Act, we have conducted a private placement of approximately
$1,090,000 with 28 accredited investors, through issuance of Series A
Convertible Preferred Stock. In October of 2005, we conducted a private
placement of additional Series A Convertible Preferred Stock worth $62,500. 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. We have filed a registration statement
on form SB-2 covering the shares issued and issuable on March 24, 2006, which
became effective on May 11, 2006. We have assumed a loan of $11,500,000 which
was contracted on June 29, 2006("Grant Date") due to RimAsia Capital Partners,
L.P. in connection with the acquisition of Enshi. The interest of the loan is to
be paid semi-annually with an annual rate of 11%. We paid off $500,000 ahead of
the down payment schedule. At June 30, 2006, the balance of the Long-term Debt
is $11,000,000.

                                       37
<PAGE>

            Going forward, our primary requirements for cash consist of: (1)
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 (2) Continued R&D for more selected new drug projects (3) build up sales
network for new drug distribution (4) working capital requirements. 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. The value of the
Renminbi to the U.S. dollar was translated at 8.06 RMB to $1.00 USD at the end
of June 30, 2005 and 7.99 RMB to $1.00 USD at the end of June 30, 2006. Because
of the pegging of the Renminbi to the U.S. dollar is loosened, we anticipate
that the value of the Renminbi appreciate against the dollar with the
consequences discussed above.

                                       38
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

         In December 2004, the Financial Accounting Standards Board ("FASB")
issued a revised SFAS No. 123, Accounting for Stock-Based Compensation, which
supersedes APB opinion No. 25, Accounting for Stock Issued to Employees, and its
related implementation guidance. This statement requires a public entity to
recognize and measure the cost of employee services it receives in exchange for
an award of equity instruments based on the grant-date fair value of the award
(with limited exceptions). These costs will be recognized over the period during
which an employee is required to provide service in exchange for the award-the
requisite service period (usually the vesting period). This statement also
establishes the standards for the accounting treatment of these share-based
payment transactions in which an entity exchanges its equity instruments for
goods or services. It addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. We have implemented SFAS 123R effective January 2006.

         In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections" ("SFAS No. 154"). SFAS No. 154 replaces APB No. 20 ("APB 20")
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements,"
and applies to all voluntary changes in accounting principle, and changes the
requirements for accounting for and reporting of a change in accounting
principle. APB 20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of change a
cumulative effect of changing to the new accounting principle whereas SFAS No.
154 requires retrospective application to prior periods' financial statements of
a voluntary change in accounting principle, unless it is impracticable.

         SFAS No. 154 enhances the consistency of financial information between
periods. We have implemented SFAS No. 154 beginning with the Company's first
quarter of fiscal year 2006. Currently SFAS No. 154 does not have a material
impact on the Company's results of operations, financial position or cash flows.

         The implementation of the above pronouncements  does not currently
have a material effect on the Company's financial statement presentation or
disclosures.

ITEM 3.     CONTROLS 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 Securities and
Exchange Commission ("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
second quarter of 2006 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

                                       39
<PAGE>

                           PART II - OTHER INFORMATION
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 15, 2006, pursuant to a consulting agreement, the Company issued to one
of its consultants 50,000 shares of its common stock.

On June 30, 2006, pursuant to the agreement with RACP Pharmaceutical Holdings
Ltd. and certain other parties to under which the Company acquired 100%
ownership interest in Shenyang Enshi Pharmaceutical Co. Ltd. ("Enshi"), the
Company issued RimAsia Capital Partners, L.P. a warrant to purchase 12,000,000
common shares of the Company at an exercise price of USD1.375 per share.

All of the above issuances and sales were deemed to be exempt under Regulation
S, Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
No advertising or general solicitation was employed in offering the securities.
The offerings and sales were made to a limited number of persons, all of whom
were accredited investors, business associates of ours or our executive
officers, and transfer was restricted by us in accordance with the requirements
of the Securities Act.

ITEM 5. OTHER EVENTS

On August 10, 2006, the Company entered into an agreement with Zixun Capital
Limited ("Zixun") to issue 1,100,000 shares of common stock to Zixun to
compensate Zixun for introducing Enshi and its assistance in the Enshi
acquisition negotiation and for providing a third party guarantee of up to $1
million to former Enshi shareholders to secure the completion of the acquisition
of Enshi.

ITEM 6.    EXHIBITS

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

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

 2.1              Conditional Stock Purchase Agreement between and among the
                  registrant, RACP Pharmaceutical Holdings Ltd. and certain
                  other parties dated as of May 16, 2006. (incorporated by
                  reference to Exhibit 2.1 to the registrant's Current Report on
                  Form 8-K filed with the SEC on May 18, 2006)

 10.1             Agreement dated August 10, 2006 by and between the registrant
                  and Zixun Capital Limited.

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

                                       40
<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: August 14, 2006

                           By: /s/ HUNAG Chentai
                           --------------------------------------------------
                           Name:  HUANG Chentai
                           Title: Chief Financial Officer
                           Date: August 14, 2006

                                       41