UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

(Mark One)


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

For the Period ended March 31, 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 1601, Building A, Jinshan Tower
No. 8, Shan Xi Road
Nanjing, Jiangsu
           China                                         210009
----------------------------------------                ----------
(Address of principal executive offices)                (Zip Code)

Issuer's telephone number: (86) 25 8320 5758

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

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

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

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

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

Title of Each Class of                              Number of Shares Outstanding
Equity Securities                                   as of March 31, 2006
-----------------------------                       ----------------------------
Common Stock, $0.01 par value                       36,848, 399

Transitional Small Business Disclosure Format:  Yes:  [ ]    No:  |X|


<PAGE>

TABLE OF CONTENTS


                                                                            Page
                                                                            ----

PART I - FINANCIAL INFORMATION.................................................2

  ITEM 1. FINANCIAL STATEMENTS.................................................2

  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          iiiiAND RESULTS OF OPERATIONS.......................................26

  ITEM 3. CONTROL AND PROCEDURES..............................................34

PART II - OTHER INFORMATION...................................................34

  ITEM 6. EXHIBITS............................................................34


         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.



















                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENT



            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                              AS OF MARCH 31, 2006

                                     ASSETS

                                                                     March 31,
                                                                       2006
                                                                   ------------
                                                                    (Unaudited)
                                                                   ------------
CURRENT ASSETS:
   Cash                                                            $  6,985,765
   Accounts receivable, trade, net of allowance for doubtful
     accounts of $528,708 March 31, 2006
     and December 31, 2005, respectively                              6,109,708
   Other receivables                                                    334,461
   Other receivables - related parties                                  492,438
   Advances to suppliers                                                554,933
   Prepaid expenses                                                      52,710
   Inventories                                                        5,736,748
                                                                   ------------
     Total current assets                                            20,266,763
                                                                   ------------

PLANT AND EQUIPMENT, net                                              5,644,073
                                                                   ------------

OTHER ASSETS:
   Intangible asset, net                                              7,463,958
   Long term notes receivable                                           799,200
   Long term other receivables - related parties                      1,251,792
   Restricted cash                                                    1,165,632
   Other assets                                                          12,021
                                                                   ------------
     Total other assets                                              10,692,603
                                                                   ------------

       Total assets                                                $ 36,603,439
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                $  5,482,616
   Accounts payable - related parties                                 2,011,103
   Short-term loans                                                   3,981,120
   Other payables                                                       990,457
   Other payables - related parties                                   1,184,209
   Investment payable to Erye's original shareholders                   430,000
   Customer deposits                                                    998,725
   Notes payable                                                      2,046,720
   Short-term convertible notes payable                                    --
   Taxes payable                                                        664,632
   Dividends payable                                                    187,200
   Other accrued liabilities                                            142,466
                                                                   ------------
     Total current liabilities                                       18,119,248
                                                                   ------------

LONG TERM LIABILITIES:
   Long term debt                                                       605,249
   Long term debt - related parties                                     288,930
                                                                   ------------
     Total long term liabilities                                        894,179
                                                                   ------------

     Total liabilities                                               19,013,427
                                                                   ------------

MINORITY INTEREST                                                     4,609,273
                                                                   ------------

SHAREHOLDERS' EQUITY:
   Preferred stock, $0.01 par value, 10,000,000 shares authorized;
     1,152,500 shares Issued and outstanding as of March 31, 2006        11,525
   Common stock, $0.01 par value, 200,000,000 shares authorized;
     36,848,399 shares issued and outstanding as of March 31,2006       368,484
   Paid-in capital                                                   10,898,299
   Capital receivable                                                  (252,471)
   Deferred compensation                                                (24,000)
   Statutory reserves                                                   548,894
   Retained earnings                                                  1,155,952
   Accumulated other comprehensive income                               274,056
                                                                   ------------
     Total shareholders' equity                                      12,980,739
                                                                   ------------

       Total liabilities and shareholders' equity                  $ 36,603,439
                                                                   ============

The accompanying notes are an integral part of this statement.
See report of independent registered public accounting firm



                                       2
<PAGE>
<TABLE>
<CAPTION>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005




                                                               2006            2005
                                                           ------------    ------------
                                                            (Unaudited)     (Unaudited)
                                                           ------------    ------------
<S>                                                        <C>             <C>
REVENUES                                                   $  7,140,509    $  1,988,508

COST OF GOODS SOLD                                            5,558,683       1,099,067
                                                           ------------    ------------

GROSS PROFIT                                                  1,581,826         889,441
                                                           ------------    ------------

OPERATING EXPENSES
    Research and development expenses                           258,075            --
    Selling, general and administrative expenses                785,834         357,368
                                                           ------------    ------------
       Total Operating Expenses                               1,043,909         357,368
                                                           ------------    ------------

INCOME  FROM OPERATIONS                                         537,917         532,073
                                                           ------------    ------------

OTHER INCOME (EXPENSE)
    Interest income ( expenses)                                 (77,789)        (37,277)
    Other income (expenses)                                     (19,573)            178
                                                           ------------    ------------
       Total Other Income (expenses)                            (97,362)        (37,099)
                                                           ------------    ------------

INCOME BEFORE INCOME TAXES                                      440,555         494,974

PROVISION FOR INCOME TAXES                                         --              --
                                                           ------------    ------------

INCOME BEFORE MINORITY INTEREST                                 440,555         494,974

MINORITY INTEREST                                               246,563          87,307
                                                           ------------    ------------

NET INCOME                                                      193,992         407,667

OTHER COMPREHENSIVE INCOME (LOSS):
    Foreign currency translation adjustment                     117,967            --
                                                           ------------    ------------

COMPREHENSIVE INCOME (LOSS)                                $    311,959    $    407,667
                                                           ============    ============

NET INCOME PER SHARE - BASIC AND DILUTED                   $       0.01    $       0.02
                                                           ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC       30,267,875      24,523,757
                                                           ============    ============

WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED     31,420,375      24,523,757
                                                           ============    ============
</TABLE>


The accompanying notes are an integral part of this statement.
See report of independent registered public accounting firm


                                       3
<PAGE>
<TABLE>
<CAPTION>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005


                                                         Number of        Common         Preferred       Paid-in         Capital
                                                          Shares          Stock            Stock         Capital        Receivable
                                                       ------------    ------------    ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>             <C>             <C>
BALANCE, December 31, 2004, Audited                    $ 24,358,757    $    243,588    $       --      $  1,363,601    $       --
  Shares issued for services                                 65,043             650            --            96,350            --
  Common shares issued for lab use right                    300,000           3,000            --           297,000            --
  Net income                                                   --              --              --              --              --
  Statutory reserves                                           --              --              --              --              --
  Foreign currency translation adjustments                     --              --              --              --              --
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, March 31, 2005, Unaudited                       24,723,800         247,238            --         1,756,951            --
  Shares issued for Erye acquisition                      3,300,000          33,000            --         1,617,000            --
  Adjustment for shares issued for Hengyi acquisition          --              --              --          (667,974)           --
  adjustment for shares issued for lab use right               --              --              --          (270,000)           --
  Common shares issued for services                         592,916           5,929            --           136,786            --
  Capital receivable                                           --              --              --              --          (252,471)
  Deferred compensation                                        --              --              --              --              --
  Preferred shares issued                                 1,152,500            --            11,525         999,444            --
  Net income                                                   --              --              --              --              --
  Statutory reserves                                           --              --              --              --              --
  Foreign currency translation adjustments                     --              --              --              --              --
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, December 31, 2005, Audited                      29,769,216         286,167          11,525       3,572,207        (252,471)
  Common shares issued for cash                           7,831,863          78,319            --         6,905,090            --
  Common shares issued for note conversion                  399,820           3,998            --           421,002            --
  Net income                                                   --              --              --              --              --
  Statutory reserves                                           --              --              --              --              --
  Dividends paid to preferred stock shareholders               --              --              --              --              --
  Foreign currency translation adjustments                     --              --              --              --              --
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, March 31, 2006, Unaudited                     $ 38,000,899    $    368,484    $     11,525    $ 10,898,299    $   (252,471)
                                                       ============    ============    ============    ============    ============

                                                                                                        Accumulated
                                                                      Unappropriated                       Other
                                                         Deferred        Retained        Statutory     Comprehensive
                                                       Compensation      Earnings        Reserves      Income (Loss)      Totals
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, December 31, 2004, Audited                    $       --      $    530,861    $     60,750    $     (3,339)   $  2,195,461
  Shares issued for services                                   --              --              --              --            97,000
  Common shares issued for lab use right                       --              --              --              --           300,000
  Net income                                                   --           407,667            --              --           407,667
  Statutory reserves                                           --              --              --              --              --
  Foreign currency translation adjustments                     --              --              --              --              --
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, March 31, 2005, Unaudited                             --           938,528          60,750          (3,339)      3,000,128
  Shares issued for Erye acquisition                           --              --              --              --         1,650,000
  Adjustment for shares issued for Hengyi acquisition          --              --              --              --          (667,974)
  adjustment for shares issued for lab use right               --              --              --              --          (270,000)
  Common shares issued for services                            --              --              --              --           142,715
  Capital receivable                                           --              --              --              --          (252,471)
  Deferred compensation                                     (24,000)           --              --              --           (24,000)
  Preferred shares issued                                      --              --              --              --         1,010,969
  Net income                                                   --           519,929            --              --           519,929
  Statutory reserves                                           --          (383,873)        383,873            --              --
  Foreign currency translation adjustments                     --              --              --           159,428         159,428
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, December 31, 2005, Audited                         (24,000)      1,074,584         444,623         156,089       5,268,724
  Common shares issued for cash                                --              --              --              --         6,983,409
  Common shares issued for note conversion                     --              --              --              --           425,000
  Net income                                                   --           193,992            --              --           193,992
  Statutory reserves                                           --          (104,584)        104,271            --              (313)
  Dividends paid to preferred stock shareholders               --            (8,040)           --              --            (8,040)
  Foreign currency translation adjustments                     --              --              --           117,967         117,967
                                                       ------------    ------------    ------------    ------------    ------------
BALANCE, March 31, 2006, Unaudited                     $    (24,000)   $  1,155,952    $    548,894    $    274,056    $ 12,980,739
                                                       ============    ============    ============    ============    ============
</TABLE>


The accompanying notes are an integral part of this statement.
See report of independent registered public accounting firm


                                       4
<PAGE>
<TABLE>
<CAPTION>

            CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005

                                                                   2006           2005
                                                               -----------    -----------
                                                               (Unaudited)    (Unaudited)
                                                               -----------    -----------
<S>                                                            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                 $   193,992    $   407,667
    Adjustments to reconcile net income to cash
     provided by (used in) operating activities:
       Depreciation and amortization                               236,265         34,471
       Minority interest                                           246,563        290,345
    Change in operating assets and liabilities:
     (Increase) decrease in assets:
       Accounts receivable                                      (1,143,389)     1,860,389
       Other receivables and prepayments                          (142,532)    (1,022,646)
       Other receivables - related parties                         415,341           --
       Long term other receivables - related parties            (1,246,576)          --
       Advances to suppliers                                       314,276           --
       Other assets                                                   --         (315,298)
       Inventories                                                (919,185)       (70,338)
       Restricted cash                                             171,506           --
     Increase (decrease) in liabilities:
       Accounts payable                                             39,505     (2,564,952)
       Accounts payable - related parties                        1,761,322           --
       Other payables and accrued liabilities                      175,743        875,219
       Other payables - related parties                            980,671           --
       Customer deposits                                           249,679         53,601
       Taxes payable                                              (323,464)        (1,477)
                                                               -----------    -----------
         Net cash provided by (used in) operating activities     1,009,717       (453,019)
                                                               -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of intangible asset                                  (347,984)          --
    Purchase of property and equipment                            (489,430)       (23,279)
    Payments for long-term loans receivable                       (797,120)          --
                                                               -----------    -----------
         Net cash used in investing activities                  (1,634,534)       (23,279)
                                                               -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of preferred stock                         --          397,000
    Proceeds from issuance of common stock                       7,408,409           --
    Proceeds (payments) on loans payable                          (323,128)       156,962
    Proceeds (payments) from short-term convertible notes         (425,000)       500,000
    Proceeds from long-term debts - related parties               (128,945)          --
                                                               -----------    -----------
         Net cash provided by financing activities               6,531,336      1,053,962
                                                               -----------    -----------

EFFECT OF EXCHANGE RATE ON CASH                                     52,640           --
                                                               -----------    -----------

INCREASE IN CASH                                                 5,959,159        577,664

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

CASH, end of period                                            $ 6,985,765    $ 1,044,700
                                                               ===========    ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes                                     $      --      $      --
                                                               ===========    ===========

Cash paid for interest expense                                 $    77,789    $    37,277
                                                               ===========    ===========
</TABLE>





The accompanying notes are an integral part of this statement.
See report of independent registered public accounting firm

                                       5
<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.  The detail  information  of accounting  for this  transaction  is
disclosed on Note 11 - Business Combinations.

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 11 - 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  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.  Since this transaction has been in
the process of evaluation, the final determination of this merger

See report of independent registered public accounting firm

                                       6
<PAGE>

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

Note 1- ORGANIZATION AND OPERATIONS , (continued)

transaction has not reasonably reached a conclusion; the financial statements of
Tianyin were not included in the consolidated financial statements for the three
months ended March 31, 2006.

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 three months ended March 31, 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).

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.

See report of independent registered public accounting firm

                                       7
<PAGE>

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

Note 2-    SIGNIFICANT ACCOUNTING POLICIES, (continued)

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.

Patent and Development Costs

The patent and development  costs represent  patented  pharmaceutical  formulas,
which have obtained official  registration  certificate or official approval for
clinical trials.  No amortization is provided as it is held for sale. 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,  and
otherwise when events changes in circumstances  indicate that the carrying value
may not be recoverable. Research and Development Costs

Research  and  development  costs  of  pharmaceutical  formulas  for  contracted
projects are expensed when incurred.


See report of independent registered public accounting firm

                                       8
<PAGE>

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

Note 2-    SIGNIFICANT ACCOUNTING POLICIES, (continued)

Research and Development Costs, (continued)

Research costs of pharmaceutical  formulas held for sale are capitalized whereas
the  development   cost  are  expensed  until  the  project  attains   technical
feasibility (i.e. obtained official approval for clinical trials), and then such
development costs are capitalized.

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 March 31, 2006  amounted to  $6,985,765  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

For fixed-price refundable new drug contracts, the Company recognizes revenue on
a milestone  basis.  Progress  payments  received/receivables  are recognized as
revenue  only  if the  specified  milestone  is  achieved  and  accepted  by the
customer,  the payment is not  refundable  and continued  performance  of future
research and development services related to the milestone are not required. For
sales of patented  pharmaceutical  formulas, the Company recognizes revenue upon
the delivery of the patented formulas.

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


See report of independent registered public accounting firm


                                       9
<PAGE>

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

Note 2-    SIGNIFICANT ACCOUNTING POLICIES, (continued)

Use of Estimates, (continued)

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.

Translation  adjustments resulting from this process are included in accumulated
other comprehensive income in the consolidated statement of shareholders' equity
and  amounted to $117,967  and $0 for the three  months ended March 31, 2006 and
2005,  respectively.  The balance  sheet amounts with the exception of equity at
March 31, 2006 were  translated at 8.01 RMB to $1.00 USD as compared to 8.26 RMB
at March 31, 2005. The equity  accounts were stated at their  historical  rates.
The average  translation  rate of 8.05 RMB for the three  months ended March 31,
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.


See report of independent registered public accounting firm


                                       10
<PAGE>

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


Note 2-    SIGNIFICANT ACCOUNTING POLICIES, (continued)

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 March 31, 2006, the Company's  issued and  outstanding  shares of Series A
convertible preferred stock was 1,152,500.  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  differences between Basic and Diluted EPS
for the three months ended March 31, 2006 and 2005. The number of shares used in
computing  diluted  earnings per share for the three months ended March 31, 2006
and 2005 amounted to  31,420,375,  which  included  1,152,500  weighted  average
number of convertible preferred stock, and 24,523,757,  respectively. The number
of shares used in computing  basic earnings per share for the three months ended
March 31, 2006 and 2005 were 30,267,875 and 24,523,757,  respectively. Basic and
Diluted  earnings  per share for the three  months ended March 31, 2006 and 2005
amounted to 0.01 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.

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.


See report of independent registered public accounting firm

                                       11
<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'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.

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.

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


See report of independent registered public accounting firm


                                       12
<PAGE>

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



Note 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest expense paid amounted to $77,789 and $37,277 for the three months ended
March 31, 2006 and 2005, respectively.

No income tax payments were paid for the three months ended March 31, 2006 and
2005.

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 consist of the following as of March 31, 2006:

Accounts receivable                                                  $6,638,416
Allowance for doubtful accounts                                        (528,708)
                                                                     ----------
Accounts receivable, net                                             $6,109,708
                                                                     ==========

For the three  months  ended March 31, 2006 , the  Company  recognized  doubtful
accounts  receivable  of $528,708  relating to sales.  The Company  continues to
pursue payment, due to the uncertainty of collection, the Company recorded a bad
debt allowance for the accounts.

Note 5-    INVENTORIES

Inventories consisted of the following at March 31, 2006:

                                                                        2006
                                                                     ----------
Raw Materials                                                        $1,363,809
Packaging Suppliers                                                     126,533
Sundry Suppliers                                                          7,167
Work in Process                                                         527,133
Finished Goods                                                        3,712,106
                                                                     ----------
                                                                     $5,736,748
                                                                     ==========


See report of independent registered public accounting firm


                                       13
<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 March 31, 2006:

                                                                 March 31, 2006
                                                                 --------------
Plant                                                            $    3,467,801
Office Equipment                                                        126,893
Machinery                                                             6,648,019
Automobiles                                                             157,525
Construction in Progress                                                294,143
                                                                 --------------
Total Plant & Equipment                                              10,694,381
Less: Accumulated Depreciation                                        5,050,308
                                                                 --------------
                                                                 $    5,644,073
                                                                 ==============

Depreciation  expense  for the three  months  ended  March 31, 2006 and 2005 was
$211,835 and $34,471, respectively.

Note 7-    OTHER ASSETS

Intangible Assets - Land use rights

                                                                  March 31,2006
                                                                  -------------
Hengyi    Cost of land use right                                      1,522,560
          Less: Accumulated amortization
                                                                        (93,891)
                                                                  -------------
                                                                      1,428,669
                                                                  -------------

Erye    Cost of land use right                                        6,359,764
        Less: Accumulated amortization                                 (324,475)
                                                                  -------------
                                                                      6,035,289
                                                                  -------------

Total intangible assets, net                                          7,463,958
                                                                  =============


Amortization  expense  for the three  months  ended  March 31, 2006 and 2005 was
$24,430 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 March 31, 2006:

Depositor                 Name of Bank                   Amount
---------            -----------------------           ----------
Hengyi               Taicang Chengxiang Bank           $  129,792

Erye                 Hua Xia Bank, Suzhou               1,035,840
                                                       ----------

Total                                                  $1,165,632
                                                       ==========

See report of independent registered public accounting firm


                                       14
<PAGE>

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


Note 7-    OTHER ASSETS, (continued)

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 March
31, 2006, the total amount of the long term notes receivable was 799,200.

Note 8- RELATED PARTIES TRANSACTIONS

Other Receivables - Related Parties

Subsidiary          Amount           Due From
-----------------   --------------   ----------------------------------

Erye                $      202,176   Erye Jingmao
Keyuan                      41,184   Shareholder of Keyuan
Sintofarm                   86,618   Shareholder of Sintofarm
CBC                        162,460   Advance to Shareholders
                    --------------
Total               $      492,438
                    ==============

As  of  March  31,  2006,  total  receivables  due  from  related  parties  were
$1,744,230.

Accounts Payable - Related Parties

Subsidiary          Amount           Due to
-----------------   --------------   ----------------------------------
                                     Erye  Jingmao,  Hainan  Kaiye, and
Erye                $    1,767,621   Suzhou Wanqing
Hengyi                      25,420   Suzhou Wanqing
Sintofarm                  218,062   Wujiang Hengyi
                    --------------
Total               $    2,011,103
                    ==============

As of March  31,  2006,  total  accounts  payable  due to  related  parties  was
$2,011,103.

Other Payable - Related Parties

Subsidiary        Amount           Due to                         Nature
---------------   ----------   ----------------------------   ------------------

Erye and Hengyi   $1,184,209   Erye Jingmao, Suzhou Wanqing   Purchase and sales


See report of independent registered public accounting firm


                                       15
<PAGE>

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


Note 8-  RELATED PARTIES TRANSACTIONS, (continued)

Long Term Other Receivables - Related Parties

Subsidiary             Amount          Due From
-----------------      -------------   ----------------------

Hengyi                 1,251,792       Shareholders of Hengyi

As of March 31, 2006,  total long term receivables due from related parties were
$1,251,792.

Long Term Debt - Related Parties


Subsidiary           Amount        Due to               Nature
------------------   -----------   ------------------   ------------------
Erye                 $   288,930   Erye Jingmao         Merger transaction
                     ===========

As of March 31, 2006, the Company's subsidiary Erye had a remaining  outstanding
payable to Erye Jingmao Limited  ("Jingmao") in the amount of $288,930.  Jingmao
acquired Erye's assets of $1,810,958 and assumed Erye's debt of $2,226,690.

Note 9-  PAYABLES

Notes Payable - $ 2,046,720

The Company's subsidiary Erye has $2,046,720 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.

Investment Payable to Erye's original shareholders

The amount of $430,000  was due to  shareholders  of Erye which  represents  the
remaining  amount due for the  acquisition of Erye. The total amount of $430,000
investment payable was interest free and has been paid in April 2006.

Dividends Payable

Subsidiary           Amount        Due to               Nature
------------------   -----------   ------------------   ------------------

Erye                 $   187,200   Erye shareholders    Dividends

In December  2005,  the Board of Erye  announced  to pay  dividends  for a total
amount of $187,200 which has been approved by the Company's Board of Directors.

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.


See report of independent registered public accounting firm


                                       16
<PAGE>

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



Note 10-   MINORITY INTEREST, (continued)

                                    Ownership                   Minority
            Equity of the               in                    Interest in
             Subsidiaries          Subsidiaries               Subsidiaries
                 as of       ------------------------   ------------------------
Subsidiary  March 31, 2006   Percentage      Amount     Percentage     Amount
----------  --------------   ----------   -----------   ----------   -----------
Erye        $    3,741,389     51.00%     $   998,440      49.00%    $ 2,742,949
Keyuan           1,397,515     90.00%       1,257,764      10.00%        139,752
Hengyi           3,524,378     75.76%       2,670,069      24.24%        854,309
Sintofarm        1,744,527     50.00%         872,264      50.00%        872,264
            --------------                -----------                -----------
Total       $   10,407,809                $ 5,798,536                $ 4,609,273
            ==============                ===========                ===========



Note 11-   STATUTORY RESERVES

According  to  Chinese  Corporation  Law,  a  company  incorporated  in China is
requested 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 March 31,
2006.

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

    2004                                           $ 60,750
    2005                                            383,873
    2006                                            104,271
                                                   --------
    Total                                          $548,894
                                                   ========

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  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 did not incur  income tax expense for the three  months  ended March
31, 2006 and 2005.

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.


See report of independent registered public accounting firm


                                       17
<PAGE>

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


      Note 12-    INCOME TAXES, (continued)

Corporation Income Tax (CIT)   , (continued)

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:

                 Income Tax 5 year preference Period and Tax Rate
                 Full Exemption Period                  Half-Reduction Period
                 -----------------------------    ------------------------------
Subsidiaries     Period         Tax Rate          Period         Tax Rate
--------------   -----------    --------------    -----------    ---------------
Nanjing Keyuan   2005-2006      0.00%             2007-2009      16.50%
Suzhou Hengyi    2005-2006      0.00%             2007-2009      16.50%
Suzhou Erye      2006-2007      0.00%             2008-2010      16.50%

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:

                                                       March 31,
                                                 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 three months ended
March 31, 2006 and 2005 amounted to $64,017 and $134,530,  respectively. The net
effect on earnings per share if the income tax had been applied  would  decrease
earnings   per  share  for  March  31,  2006  and  2005  to  $0.008  and  $0.01,
respectively.

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.


See report of independent registered public accounting firm


                                       18
<PAGE>

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


Note 13- LOANS

Long Term Bank Loans

The Company's  subsidiary Erye has a loan of $605,249 from Communication Bank of
China.  It is a long term roll-over loan with an annual interest rate of 5.742%.
This is a  government  guaranteed  loan as an  incentive  policy  to help  local
manufacturers to locate in their area. Erye has no plans to pay back the loan in
the near future.

Total  interest  expense for this loan for the three months ended March 31, 2006
and 2005 was $8,688 and $8,688, respectively.

Short Term Bank Loans

The  Company  has a total  amount of  US$3,981,120  in short term loans from two
different  banks in  China.  These  loans  mature  in one year or less and renew
automatically. The average interest rate is approximately 6.75%.

Interest  expense for the three months ended March 31, 2006 and 2005 was $67,181
and $28,589, respectively.

Note 14- COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office space and dormitory  facilities for its employees from
a third party.  Accordingly,  for the three months ended March 31, 2006 and 2005
the Company recognized rent expense of $6,738 and $3,515, respectively.

As of March 31,  2006,  the Company has  outstanding  commitments  in respect of
non-cancelable operating leases, which fall due as follows:

           2006                           $   20,213
           2007                               29,650
           2008                               32,610
           2009                               35,870
           Thereafter                         39,000



See report of independent registered public accounting firm


                                       19
<PAGE>

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


Note 15-   BUSINESS COMBINATIONS

Hengyi acquisition

On September 29, 2004, the Company signed a purchase agreement which was amended
on December 31, 2004 to acquire  approximately 76% ownership interest of Hengyi,
a Chinese company established in Kunshan City, Jiangsu Province, China.

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

                                         Acquired (Assumed)
    Item                Fair Value         by the Company
-----------------   ------------------   ------------------
Total Assets        $        6,652,372   $        5,570,201
Total Liabilities            4,538,210            3,438,175
                    ------------------   ------------------
Net Assets          $        2,114,162   $        2,132,026
                    ==================   ==================



The Board of Directors and management have evaluated Hengyi's assets acquired in
this  transaction;  and total  consideration  originally  paid by the Company to
acquire  approximately 76% ownership  interest of Hengyi. The Company originally
valued this  acquisition  at $1,600,000  in cash and 1,200,000  shares of common
stock  valued at $1.00 per share and  recorded  goodwill of $305,774 at December
31, 2004. However, the Company has reevaluated the common stock value based upon
the stock  trading  history in past year and  determined  that the common  stock
should be valued  less than $1.00 per share for the purpose of  determining  the
total  purchase price of the  acquisition.  On April 2, 2006, the board director
decided to amend the purchase  agreement  terms to be  $1,600,000  in cash to be
paid in  installments,  and 1,200,000 shares of common stock valued at $0.44 per
share,  which was in total amount of $2,128,000  effective as December 31, 2005.
This amendment  resulted in a write down of goodwill and equity.  As of December
31,  2005,  the Company has  contributed  $620,000  into  additional  registered
capital.  The  remaining  balance of $300,000  will be made by the end of April,
2006 and the balance of $680,000 will be paid in May, 2006.

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:


                                         Acquired (Assumed)
      Item               Fair Value        by the Company
-----------------   ------------------   ------------------
Total Assets        $       21,840,638   $       11,138,725
Total Liabilities           12,722,990            6,488,725
                    ------------------   ------------------
Net Assets          $        9,117,648   $        4,650,000
                    ==================   ==================



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 past year and
determined  that the common stock should be valued less than $1.00 per share for

See report of independent registered public accounting firm


                                       20
<PAGE>

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

Note 15- BUSINESS COMBINATIONS, (continued)

Erye acquisition, (continued)

the purpose of determining the total purchase price of the acquisition. On April
12, 2006,  the board  director  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
$2,200,000 in full by end of April, 2006.

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.

See report of independent registered public accounting firm


                                       21
<PAGE>

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


Note 16- SHAREHOLDERS' EQUITY, (continued)

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.

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.



See report of independent registered public accounting firm



                                       22
<PAGE>

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


Note 16- SHAREHOLDERS' EQUITY, (continued)

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.

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.  Please  refer to SB-2/A  filed on May 3,  2006 for the  selling
shareholder  listing  of the  amount  invested  and number of shares of Series A
Preferred stock owned by investors.

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.

See report of independent registered public accounting firm


                                       23
<PAGE>

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


Note 16- SHAREHOLDERS' EQUITY, (continued)

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.

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
will be issued to Ms. Smith in 2006.

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.


See report of independent registered public accounting firm


                                       24
<PAGE>

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

      Note 16-  SHAREHOLDERS' EQUITY, (continued)

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.

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 May 3, 2006, the Company filed Form SB-2/A,  a  pre-effective  amendment to a
SB-2 filed on March 24, 2006, with the Securities and Exchange Commission.

On May 16,  2006,  the Company has entered  into a  Conditional  Stock  Purchase
Agreement ("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.  Pursuant to the terms of the Agreement, the total
acquisition   consideration  plus  liability   assumptions  by  the  Company  is
approximately  $16  million.  As of December  31,  2005,  according to unaudited
estimates,  the net income of Enshi was  approximately  $5.1  million with total
assets of  approximately  $15  million  and net  assets at  approximately  $10.3
million.




                                       25
<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.

         Prior to the filing of this quarterly report, the Company has announced
the  entering  into a  Conditional  Purchase  Agreement  to acquire  100% of the
operation of Shenyang Enshi Pharmaceuticals Company. For detailed description of
the planned  transaction,  please  refer to the current  report filed on Form 8K
dated May 18, 2006.



                                       26
<PAGE>

CRITICAL ACCOUNTING POLICIES
----------------------------

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

REVENUE AND REVENUE RECOGNITION
-------------------------------

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

ACCOUNTS RECEIVABLE
-------------------

         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,  the  delaying  of  payment  caused  by  customer's
unpredicted  management or financial  trouble is  influencing  our financial and
future 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 MARCH 31, 2006 AS COMPARED TO THREE
MONTHS ENDED MARCH 31, 2005

         We acquired Suzhou Erye  Pharmaceutical  Co., Ltd. ("Erye") on June 11,
2005 and the operating result for the three months ended March 31, 2005 were not
included in our 10QSB  filed on May 15,  2005.  For  management  discussion  and
comparison  purposes,  in addition to the  discussion of the actual  performance
results using the actual figures reported in the 10QSB filed on May 15, 2005 for
the first quarter of 2005, a separate proforma consolidated statements of income
and other comprehensive  income for the period ended March 31, 2005 was prepared
as if the acquisition was effective January 1, 2005.

The following is our  discussion  comparing the current  actual results with the
actual results  reported for the first quarter of 2005 before the acquisition of
Erye:


                                       27
<PAGE>
<TABLE>
<CAPTION>

               STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                  FOR THE PERIOD ENDED MARCH 31, 2006 and 2005


                                                           Unaudited          2005
                                                              2006           10QSB
                                                          ------------    ------------
<S>                                                       <C>             <C>
REVENUES                                                  $  7,140,509    $  1,988,508

COST OF GOOD SOLD                                            5,558,683       1,099,067
                                                          ------------    ------------

GROSS PROFIT                                                 1,581,826         889,441
                                                          ------------    ------------

OPERATING EXPENSES
Research and development expenses                              258,075          23,074
Selling, general and administrative expenses                   785,834         334,294
                                                          ------------    ------------
 Total Operating Expenses                                    1,043,909         357,368
                                                          ------------    ------------

INCOME FROM OPERATIONS                                         537,917         532,074
                                                          ------------    ------------
OTHER INCOME (EXPENSE)
Interest income (expenses)                                     (77,789)        (37,277)
Other income (expenses)                                       (119,573)            178
                                                          ------------    ------------
 Total Other Income (expenses)                                 (97,362)        (37,099)
                                                          ------------    ------------

INCOME BEFORE INCOME TAXES                                     440,555         494,974

PROVISION FOR INCOME TAXES                                        --              --
                                                          ------------    ------------

INCOME BEFORE MINORITY INTEREST                                440,555         494,974

MINORITY INTEREST                                              246,563          87,307
                                                          ------------    ------------



                                       28
<PAGE>

NET INCOME                                                     193,992         407,667

OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment                        117,967            --
                                                          ------------    ------------
COMPREHENSIVE INCOME (LOSS):                              $    311,959    $    407,667
                                                          ============    ============

Net income per share - basic and diluted                  $       0.01    $       0.02
                                                          ============    ============

Weighted average number of shares outstanding - basic       30,267,875      24,523,757
                                                          ============    ============

Weighted average number of shares outstanding - diluted     31,420,375      24,523,757
                                                          ============    ============
</TABLE>

REVENUE.

         Revenue for the three  months  ended on March 31, 2006 was  $7,140,509,
while the revenue  for the three  months  ended  March 31, 2005 was  $1,988,508,
representing an approximately 259% increase. The increase is attributable mainly
to revenue  generated by Erye,  whose revenue was not included in the amount for
the reporting period of 2005.

COST OF GOODS SOLD

         Cost of goods  sold for the three  months  ended on March 31,  2006 was
$5,558,683 as compared to $1,099,067  for the three months ended March 31, 2005.
Cost of goods sold as a percentage of sales revenues was  approximately  78% for
the three months ended March 31, 2006 as compared to  approximately  55% for the
three  months  ended  March 31,  2005.  The  increase  of cost of goods  sold is
primarily attributable to the cost of goods sold by Erye..

GROSS PROFIT.

         Gross profit in the three  months  ended on March 31, 2006  amounted at
$1,581,826,  as compared to $889,441  for the three months ended March 31, 2005,
representing  approximately 78% increase.  The gross profit margin for the three
months  ended March 31, 2006 was 22% as  compared to  approximately  44% for the
three months ended March 31, 2005. The decrease in gross profit margin is mainly
due to Erye's low gross profit margin.

OPERATING EXPENSES

         Operating  expenses  for the three  months  ended  March  31,  2006 was
$1,043,909  as compared to $357,368  for the three  months ended March 31, 2005,
representing 192% increase. One reason for the increase is the expenses incurred
by Erye. Financing expenses,  auditing expense, legal expenses,  are also reason



                                       29
<PAGE>
<TABLE>
<CAPTION>

for  the  significant   increase  in  operating  expenses  due  to  the  private
placements,  and auditing activities.,  some of which are one time transactional
expenses.

R&D.

         Research and Development cost for the three months ended March 31, 2006
was  $258,075 as compared to $23,074 for the three  months ended March 31, 2005,
representing  a 1018%  increase.  The increase is mainly due to the research and
development activities conducted by Erye.

NET INCOME

         Net Income for the three  months  ended March 31, 2006 was  $193,992 as
compared to net income of $407,667  for the three  months  ended March 31, 2005,
representing  52.41% decrease.  The decrease of the net income of the Company is
mainly due to the significant increase of operating expenses.

         The  following is the unaudited  consolidated  statements of income and
other comprehensive  income for the period ended March 31, 2006 and the proforma
consolidated  statements of income and other comprehensive income for the period
ended March 31, 2005,  assuming the  acquisition  of Erye had been  effective on
January 1, 2005, for our discussion and comparison purposes:

               STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                  FOR THE PERIOD ENDED MARCH 31, 2006 and 2005


                                                           Unaudited       Proforma
                                                              2006            2005
                                                          ------------    ------------
<S>                                                       <C>                <C>
REVENUES                                                  $  7,140,509       7,172,626
                                                          ------------    ------------

COST OF GOOD SOLD                                            5,558,683       5,477,661
                                                          ------------    ------------

GROSS PROFIT                                                 1,581,826       1,694,965
                                                          ------------    ------------

OPERATING EXPENSES
Research and development expenses                              258,075         260,161
Selling, general and administrative expenses                   785,834         612,582
                                                          ------------    ------------
 Total Operating Expenses                                    1,043,909         872,743
                                                          ------------    ------------

INCOME FROM OPERATIONS                                         537,917         822,222
                                                          ------------    ------------

OTHER INCOME (EXPENSE)
Interest income ( expenses)                                    (77,789)        (37,277)



                                       30
<PAGE>

Other income (expenses)                                        (19,573)            178
                                                          ------------    ------------
 Total Other Income (expenses)                                 (97,362)        (37,099)
                                                          ------------    ------------

INCOME BEFORE INCOME TAXES                                     440,555         785,123

PROVISION FOR INCOME TAXES                                        --           103,530
                                                          ------------    ------------

INCOME BEFORE MINORITY INTEREST                                440,555         681,593

MINORITY INTEREST                                              246,563         178,750
                                                          ------------    ------------

NET INCOME                                                     193,992         502,843

OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment                        117,967            --
                                                          ------------    ------------

COMPREHENSIVE INCOME (LOSS)                               $    311,959         502,843
                                                          ============    ============

Net income per share - basic and diluted                  $       0.01    $       0.02
                                                          ============    ============

Weighted average number of shares outstanding - basic       30,267,875      24,523,757
                                                          ============    ============

Weighted average number of shares outstanding - diluted     31,790,652      24,523,757
                                                          ============    ============
</TABLE>

REVENUE.

         Revenue for the three  months  ended on March 31, 2006 was  $7,140,509,
while the revenue  for the three  months  ended  March 31, 2005 was  $7,172,626,
representing  approximately  0.45% decrease.  During the reporting  period,  the
Company  introduced and promoted a new product into the Chinese market.  For the
new product  promotion,  the Company sold the new product at lower price.  Thus,
the increase sales volume was offset by the decrease in sale price.  As the main
result,  the net sales amount is still in constant  with the same period of last
year.



                                       31
<PAGE>

COST OF GOODS SOLD

         Cost of goods  sold for the three  months  ended on March 31,  2006 was
$5,558,683 as compared to $5,477,661  for the three months ended March 31, 2005.
Cost of goods sold as a percentage of sales revenues was  approximately  78% for
the three months ended March 31, 2006 as compared to  approximately  76% for the
three months ended March 31, 2005. During the reporting period, the Company took
measures to eliminate  the effect of price rise of raw material due to ascending
oil price. Cost of goods sold maintained relatively constant during the period.

GROSS PROFIT.

         Gross profit in the three  months  ended on March 31, 2006  amounted at
$1,581,826, as compared to $1,694,965 for the three months ended March 31, 2005,
representing  approximately  7% decrease.  The gross profit margin for the three
months  ended March 31, 2006 was 22% as  compared to  approximately  24% for the
three months ended March 31, 2005.  Stable revenue and cost of good sold for the
reporting period generated a relatively constant gross profit margin.

OPERATING EXPENSES

         Operating  expenses  for the three  months  ended  March  31,  2006 was
$1,043,909  as compared to $872,743  for the three  months ended March 31, 2005,
representing 20% increase. Financing expenses, auditing expense, legal expenses,
and other professional expenses are the main reason for the significant increase
in operating  expenses due to the private  placements  and auditing  activities.
Some of these expenses are one time transactional expenses.

R&D.

         Research and Development cost for the three months ended March 31, 2006
was  $258,075 as compared to $260,161 for the three months ended March 31, 2005.
R&D cost as a percentage  of revenues was 3.61% for the three months ended March
31, 2006,  as compared to 3.63% for the three  months ended March 31, 2005.  The
Company  spent  relatively  larger  portion  of  revenue  on its R&D  activities
compared with the standard of Chinese  pharmaceutical  industry,  which was 2.8%
for the same period to achieve its strategic competitive advantage.

NET INCOME

         Net Income for the three  months  ended March 31, 2006 was  $193,992 as
compared to net income of $502,843  for the three  months  ended March 31, 2005,
representing  61.42% decrease.  The decrease of the net income of the Company is
mainly due to the significant increase of operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

         For the  three  months  ended  March 31,  2006,  net cash  provided  by
operating  activities was $1,009,717,  net cash used in investing activities was
$1,634,534,  and net cash provided by financing activities was $6,531,336.  Cash
and cash  equivalents  as of March  31,  2006 was  $6,985,765.  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.  Pursuant to various agreements entered by us in connection with the
private  placement  mentioned  above,  we are  required  to file  with the SEC a
registration  statement,  which  registers all the shares of common stock issued
under  these  placements,  including  the shares to which the Series A Preferred



                                       32
<PAGE>

Convertible Stock may be converted and the shares underlying the warrants issued
or  issuable  pursuant  to  these  placements.  In  addition,  pursuant  to  the
agreements, we are required to pay a penalty of 5% per month if the registration
statement  has not  become  effective  before  required  date.  We have  filed a
registration  statement on form SB-2  covering the shares issued and issuable on
April 30, 2006 and this  registration  statment has became  effective on May 11,
2006.

         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.  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.  At the end of
March 31, 2005,  the value of the Renminbi to the U.S.  dollar was translated at
8.06 RMB to $1.00 USD. 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.


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



                                       33
<PAGE>

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 is 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 first
quarter  of 2006  that has  materially  affected,  or is  reasonably  likely  to
materially affect, our internal control over financial reporting.


                           PART II - OTHER INFORMATION

ITEM 6.    EXHIBITS

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



                                       34
<PAGE>

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

10.1              Form of Securities  Purchase Agreement between the Company and
                  the  Purchasers  relating to the sales and  purchases  of $1.0
                  million  of  the  Company's  common  stock   (incorporated  by
                  reference  to Exhibit 4.1 to the Form 8-K/A filed with the SEC
                  on February 8, 2006)

10.2              Form of Registration  Rights  Agreement in connection with the
                  private  placement  of $1.0  million of the  Company's  common
                  stock  (incorporated  by  reference to Exhibit 4.2 to the Form
                  8-K/A filed with the SEC on February 8, 2006)

10.3              Form of common stock  purchase  warrant  issued in the private
                  placement  of  $1.0  million  of the  Company's  common  stock
                  (incorporated  by reference to Exhibit 4.3 to form 8-K/A filed
                  with the SEC on February 8, 2006)

10.4              Form of Securities  Purchase Agreement between the Company and
                  the  Purchasers  relating to the sales and  purchases  of $6.9
                  million  of  the  Company's  common  stock   (incorporated  by
                  reference  to  Exhibit  4.1to  Form 8-K filed  with the SEC on
                  March 14, 2006)

10.5              Form of Registration  Rights  Agreement in connection with the
                  private  placement  of $6.9  million of the  Company's  common
                  stock  (incorporated  by  reference to Exhibit 4.2 to the Form
                  8-K filed with the SEC on March 14, 2006)

10.6              Form of common stock purchase warrant issued on March 10, 2006
                  (incorporated  by  reference  to  Exhibit  4.3 to the Form 8-K
                  filed with the SEC on March 14, 2006)

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

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

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

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




                                       35
<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/ MAO Peng
                                     -------------------------------------------
                                     Name:  MAO Peng
                                     Title: Chairman and Chief Executive Officer
                                     Date: May 18, 2006


                                     By: /s/ HUNAG Chentai
                                     -------------------------------------------
                                     Name:  HUANG Chentai
                                     Title: Chief Financial Officer
                                     Date: May 18, 2006